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Mary Altaffer/AP
Former NYSE Chairman Richard Grasso
Former NYSE Chairman Richard Grasso
New York Drops Case Against Grasso
July 03, 2008 10:13 AM
Former NYSE Chairman Richard Grasso will keep his $187.5 million compensation package after an appeals court dropped all remaining charges against him.
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Last Wednesday, an appeals court affirmed a lower court ruling that dismissed four of the six counts brought against former New York Stock Exchange Chairman Richard Grasso. On Tuesday, the Appellate Division of State Supreme Court dismissed the remaining two counts.
The case dates back to August 2003, when it was revealed that Grasso had been awarded a $139.5 million compensation package. The deal was heavily criticized in the media and soon the U.S. Securities and Exchange Commission asked Grasso to step down.
In May 2004, N.Y. Atty. Gen. Eliot Spitzer sued Grasso for the $139.5 million, plus $48 million in deferred compensation he was set to receive. Spitzer claimed that the pay was too much for the head of a not-for-profit organization.
Spitzer was celebrated by many for taking aim at greedy corporate culture, which was especially loathed at the time following accounting scandals at Texas energy company Enron.
In October 2006, N.Y. State Supreme Court Justice Charles Ramos ordered Grasso to return as much as $100 million, ruling that Grasso had withheld information about his compensation package from NYSE’s compensation committee.
Grasso’s legal fortunes began to change in May 2007, when an appeals court dismissed four of the six charges against him. The latest court decisions affirmed that ruling and dropped the remaining charges.
The case dates back to August 2003, when it was revealed that Grasso had been awarded a $139.5 million compensation package. The deal was heavily criticized in the media and soon the U.S. Securities and Exchange Commission asked Grasso to step down.
In May 2004, N.Y. Atty. Gen. Eliot Spitzer sued Grasso for the $139.5 million, plus $48 million in deferred compensation he was set to receive. Spitzer claimed that the pay was too much for the head of a not-for-profit organization.
Spitzer was celebrated by many for taking aim at greedy corporate culture, which was especially loathed at the time following accounting scandals at Texas energy company Enron.
In October 2006, N.Y. State Supreme Court Justice Charles Ramos ordered Grasso to return as much as $100 million, ruling that Grasso had withheld information about his compensation package from NYSE’s compensation committee.
Grasso’s legal fortunes began to change in May 2007, when an appeals court dismissed four of the six charges against him. The latest court decisions affirmed that ruling and dropped the remaining charges.
Headline Links: Grasso win court cases, Cuomo drops case
On June 25, the N.Y. State Court of Appeals affirmed a May 2007 lower court decision to dismiss four of the six original charges. He still faced with charges that he breached his fiduciary duty by not fully informing the board of his compensation, but those have now been dismissed as well.
Source: The New York Times
On July 2, the Appellate Division of State Supreme Court ruled that, because the NYSE was no longer a not-for-profit organization, the attorney general had no reason to pursue the case. “Prosecution by the Attorney General presents the for-profit owners of the Exchange with the possibility of a large money judgment whose provision would be paid for in full by New York taxpayers,” the court ruled. It dismissed the remaining two counts and, within hours, current AG Andrew Cuomo announced that he would drop the case.
Source: The Washington Post
Background: People v. Grasso
Grasso served as head of the NYSE beginning in 1995 and became a respected national figure while guiding the stock exchange after September 11. However, he received significant criticism when the NYSE revealed his compensation package to be worth nearly $140 million. Grasso asked the NYSE board for a vote of confidence, but it voted against him 13-7. He resigned on September 17.
Source: USA Today
On May 24, 2004, N.Y. Atty. Gen. Eliot Spitzer filed a lawsuit against Grasso for more than $100 million of his compensation package. Spitzer claimed that Grasso has too much influence over the compensation committee and withheld valuable information. “The lack of proper information, the stifling of internal debate, the failure of board members to conduct proper inquiry and the unabashed pursuit of personal gain resulted in a wholly inappropriate and illegal compensation package,” Spitzer said.
Source: The Guardian
On October 19, 2006, the N.Y. State Supreme Court Justice Charles Ramos ruled that Grasso had not properly informed the board about the size of his compensation package. The decision would have cost Grasso up to $100 million of his $139.5 million and would have forced him to relinquish his claim to the additional $48 million.
Source: The Washington Post
Grasso appealed and won a major victory in an appeals court on May 9, 2007. The court ruled that the attorney general had no authority over several important parts of the case, and dismissed four of the six counts against Grasso. The court reasoned that the case would “serve no legitimate public interest” because the money would revert back to the NYSE.
Source: New York Law Journal
Key Players: Grasso and Spitzer
Richard Grasso joined the NYSE as a clerk in 1968 and worked his way up to chairman in 1995. His hands-on and personable approach earned him many friends and helped to lift the public image of the exchange. He maintained close relationships with many of the executives on the board, which many point to as the basis for his enormous compensation package. As the public’s faith in Wall Street dwindled after a run of corporate scandals and his pay became public, Grasso became the face of corporate greed.
Source: Business Week
Eliot Spitzer became a popular attorney general for taking on powerful Wall Street executives, earning him the nickname “Sheriff of Wall Street.” In 2006, just weeks after Judge Ramos ruled in his favor in the Grasso case, Spitzer was elected governor of New York. The media lauded him for fighting for “the man on the street” and New York magazine dubbed him a “crusader for what’s right—not simply on a policy level but on a good-versus-evil level.” However, he had many failures as governor and a prostitution scandal forced him to resign in shame in 2008.
Source: findingDulcinea
A 2005 Vanity Fair article characterized the case as “an almost cartoonlike study in the physiognomy of good and evil: Spitzer, with his high forehead, striking blue eyes, and granite jaw, the personification of probity and reason, versus Grasso, a greedy, scowling villain, with a cue-ball pate and a lipless mouth set in a stubborn straight line.”
Source: Vanity Fair
© 2008 Dulcinea Media, Inc.
