New York Attorney General Eliot Spitzer sued former New York Stock Exchange chairman and chief executive officer Richard Grasso, a former NYSE director, and the exchange. By awarding Grasso an excessive compensation package, the parties violated the state’s not-for-profit corporate law, Spitzer charged.
The civil lawsuit was filed after a four-month investigation by Spitzer’s office determined that NYSE directors were misled about various aspects of the $187.5 million payment package the Exchange awarded Grasso.
In the suit, Spitzer asked a state court judge to rescind the pay package and to determine a “reasonable” level of compensation for Grasso. The suit, which names Grasso and Kenneth Langone, former chairman of the NYSE compensation committee, was filed Monday in State Supreme Court in Manhattan.
Grasso, who resigned last September, said he would fight a civil suit, according to the new service. “I look forward to complete vindication in court and fully expect that my fellow NYSE directors and I will be adjudicated to have acted completely in accord with our fiduciary responsibilities and always in the best interests of the exchange,” said Grasso in a release cited by Reuters.
The New York Stock Exchange was named in the suit because it failed to ensure compliance with the not-for-profit-law and made the excessive payments to Grasso, Spitzer’s office said in a press release. “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 asserted.
The attorney general alleges that the NYSE was misled about Grasso’s compensation contract, charging that incomplete and incorrect analyses were provided to board members. Spitzer also charged that the compensation formula that generated huge payments for Grasso was flawed and under Grasso’s control.
The compensation formula was inappropriately driven by a comparison with the salaries of top executives in the world’s largest corporations, according to the suit. The investigation also found that Grasso, in effect, set his own performance targets, which he easily exceeded. Further, the NYSE often disregarded its own formula and awarded Grasso funds that were well beyond what it indicated, Spitzer charged.