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NY court dismisses more Grasso pay dispute claims

1/07/2008 - 17:59

By Bill Berkrot and Martha Graybow

NEW YORK (Reuters) - Former New York Stock Exchange chief Richard Grasso won another big victory on Tuesday in his efforts to keep his $187.5 million pay package, with a court throwing out state officials' remaining claims against him.

The state Supreme Court's appellate division, in a 3-1 vote, dismissed two legal claims against Grasso brought by the New York attorney general's office. The ruling follows a decision last week by the New York Court of Appeals, New York State's highest court, dismissing other parts of the lawsuit and could signal the end is near for the long-running litigation.

The appellate division said on Tuesday that claims seeking the return of more than $100 million of Grasso's pay -- a case brought under state law governing not-for-profit companies -- could not be pursued because the exchange is now a publicly traded, for-profit company.

"We conclude that the attorney general's authority to prosecute the causes of action seeking that relief lapsed with the merger," the court said in its 99-page written ruling that also threw out the lone claim against Kenneth Langone, a former NYSE director and head of its compensation committee.

A New York State appeals court in April had denied a bid by Langone to dismiss the lawsuit charging him with breaching his fiduciary duty.

"Unless a higher court disagrees, the Attorney General's case against Grasso is over," said Eric Rieder, head of the securities litigation and enforcement practice group at Bryan Cave. "That's their remedy, to seek to appeal to the New York State Court of Appeals."

Grasso, who ran the exchange for eight years, was sued by state officials in 2004 after an uproar over the size of his pay package.

The lawsuit was brought by the former state attorney general, Eliot Spitzer, and was inherited by Andrew Cuomo when he took office. Spitzer, known for his aggressive prosecutions of Wall Street and the financial industry, later became governor but resigned after being caught up in a prostitution scandal.

Cuomo has argued that Grasso's pay was unreasonable and that recouping the money is in the public's interest.

But the appeals court ruled that since prosecutors were only seeking the return of money and that the money would now benefit a for-profit corporation, that a ruling against Grasso no longer served the public interest.

"Supreme court erred in concluding that the Attorney General's authority to maintain these causes of action against Grasso and Langone was unaffected by the conversion of the Exchange into a for-profit entity," the ruling said.

"The motions to dismiss these causes on the ground that the Attorney General no longer has authority to maintain them should have been granted," the ruling said.

Alex Detrick, a spokesman for Cuomo, said: "We are reviewing the decision."

Grasso attorney Gerson Zweifach was not immediately available for comment.

(Editing by Andre Grenon, Phil Berlowitz)


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