CBSN

NY AG To Sue Ex NYSE Chief?

Dick Grasso, Chairman and CEO of the NYSE, attends a press conference in New York, Tuesday, Sept. 9, 2003. The New York Stock Exchange board of directors called an emergency meeting Wednesday, Sept. 17, 2003, and planned to ask Chairman Dick Grasso to resign, amid rising fury over his $140 million pay package, a source close to the board said.
AP
New York attorney general Eliot Spitzer's office is moving toward a lawsuit against former New York Stock Exchange chairman and chief executive Richard Grasso to recover his $187.5 million pay package, two sources familiar with the situation told The Associated Press Thursday.

Attempts at negotiation between Spitzer's office and Grasso's representatives have not been fruitful, the sources said, speaking on condition of anonymity. A spokesman for Grasso told The Associated Press, however, that there have been no talks whatsoever.

"There are no negotiations, nor have there been any negotiations," said Eric Starkman, a Grasso spokesman. "Mr. Grasso's position was clearly reflected in (attorney) Brendan Sullivan's Feb. 26 letter to (NYSE interim chairman) John Reed. Nothing has changed."

In that letter, responding to Reed's Feb. 12 demand that Grasso return $120 million of his compensation, Grasso said he felt his pay package was appropriate and would fight to keep it.

While attempts at discussion will continue, sources said, it is far more likely that Spitzer will file suit against Grasso to seek return of the money. That suit will not be filed until at least May, sources confirmed.

The New York Times first reported on the pending suit and an attempt at settlement in Thursday's editions. The Times reported that someone with ties to Grasso approached Spitzer's office, offering to have the former exchange chairman donate a fraction of his compensation package to an NYSE-sponsored charitable organization to settle the case.

That suggestion is not likely to be followed, sources said. In support of the lawsuit, Spitzer's office has subpoenaed former NYSE compensation committee members David Komansky, former CEO of Merrill Lynch, and Richard Fuld Jr., current CEO of Lehman Brothers. Both served on the NYSE board of directors and the committee from 1999 through 2001, when Grasso's pay was approved.

Spitzer spokeswoman Juanita Scarlett would not comment on the ongoing case, saying only that it is continuing. The NYSE had no comment on the matter.

Grasso resigned from the NYSE in September over his compensation package, which outraged Wall Street and regulators, many of whom believed it was excessive. The resulting furor prompted the exchange to overhaul its corporate governance practices, including how it compensates executives.

Because the NYSE is a not-for-profit member organization, an argument could be made that paying its top executive such a large sum was an abuse of its resources, which would likely be the suit's legal foundation. Members of the NYSE board at the time could also be held liable.