Grasso case "over" as court dismisses claims

1/07/2008 - 22:53

By Bill Berkrot and Martha Graybow

NEW YORK (Reuters) - Former New York Stock Exchange chief Richard Grasso won a knockout victory on Tuesday in his four-year fight to keep every last penny of his $187.5 million pay package, as an appeals court threw out the state's remaining claims against him.

The ruling, Grasso's second court victory in the past week, prompted New York Attorney General Andrew Cuomo to throw in the towel.

The New York Supreme Court's appellate division, in a 3-1 vote, dismissed two legal claims against Grasso brought by former Attorney General Eliot Spitzer in 2004.

The ruling follows a decision last week by the New York Court of Appeals, New York State's highest court, that dismissed other parts of the suit.

The appellate division said 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 called NYSE Euronext .

"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 a lone claim against Kenneth Langone, a former NYSE director and head of its compensation committee.

Cuomo declined to comment on the ruling, but spokesman Alex Detrick said: "We have reviewed the court's opinion and determined that an appeal would not be warranted. Thus, for all intents and purposes, the Grasso case is over."

NYSE Euronext spokesman Rich Adamonis said the ruling "recognizes the substantial and significant changes the NYSE has undergone since the case was brought."


Spitzer had become a political star in large part for his crusading prosecution of powerful Wall Street figures. He won election as governor by a landslide in 2007, but resigned in March after being caught up in a prostitution scandal.

The then attorney general sued Grasso in 2004 amid an uproar over the size of his pay package. Grasso, who ran the exchange for eight years and resigned in 2003, contended he did nothing wrong and never misled an NYSE board packed with some of Wall Street's most powerful executives.

A spokeswoman said Spitzer was traveling in Southeast Asia and was not available to comment.

For Grasso, the rulings mark the end of a legal nightmare.

Grasso "is gratified by the ruling of the Appellate Division. His devotion to the stock exchange never wavered, and neither did his faith that he would be vindicated by the courts," his lawyer said in a statement.

The New York Supreme Court decision also threw out a claim against Langone, a co-founder of Home Depot Inc . A New York State appeals court in April had denied his bid to dismiss the lawsuit, which charged him with breaching his fiduciary duty at the NYSE in connection with Grasso's pay package.

Langone was not available for comment.

Cuomo, who continued to press Spitzer's suit when he took over the office, argued Grasso's pay was unreasonable and that recouping the money was in the public's interest.

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

"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.

The sole dissenting judge, Angela Mazzarelli, argued that because the NYSE still has a not-for-profit subsidiary, the attorney general does have the power to enforce the not-for- profit corporation law.

(Additional reporting by Joseph A. Giannone and Phil Wahba)

(Editing by Andre Grenon, Phil Berlowitz, Gary Hill)

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