The State of New York vs. Richard Grasso
LINDA WERTHEIMER, host:
The deposition phase is underway in the State of New York versus Richard Grasso, former head of the New York Stock Exchange. And on Monday, in a related case, the State of New York will depose billionaire Ken Langone, a former director of the Exchange. At the heart of both cases is one legal, moral and ethical question. Can an executive make too much money?
In 2003 Mr. Grasso left the Exchange when it became public that he had a compensation package that paid him more than R$139 million. The State of New York wants Mr. Grasso to give most of the money back. The state maintains that the New York Stock Exchange is a nonprofit organization and that its Board of Directors was misled into paying so much. New York blames both Mr. Grasso and Mr. Langone, who headed the Exchange's Compensation Committee at the time. Joe Nocera is our friend from the business world, a columnist for the New York Times, and he joins us from New York. Hi, Joe.
Mr. JOE NOCERA (Columnist, New York Times): Hi, Linda.
WERTHEIMER: Now, this week, Mr. Grasso tried unsuccessfully to have the case thrown out of court. The fact that it was not, does that send a message that the state has a strong case?
Mr. NOCERA: I think the judge was basically saying let's litigate this if you really want to litigate it. You know, this has been a war ever since Eliot Spitzer was handed this case by the New York Stock Exchange.
WERTHEIMER: He is the Attorney General of the State of New York.
Mr. NOCERA: That's right, and he has been the driving force in trying to prosecute this. I've really never seen anything quite like it, to tell you the truth. There are two basic issues here. The first is, can somebody who runs something like the New York Stock Exchange, which is a not-for-profit, walk off with that kind of money? And Spitzer basically says you can't.
I think Spitzer has a pretty good chance of winning that case, given that it is a nonprofit. The second part of it is, did Mr. Langone and Mr. Grasso hide the size of this retirement amount, and were there sort of secret pockets of money that the board didn't really know about?
This is actually a much tougher case for Eliot Spitzer to make, because the truth of the matter is that the board, which was made of all these big shot Wall Street important guys, was pretty much asleep at the switch, and it's an embarrassment to them. So there have been a series of depositions with those people. And they sort of say, Yeah, I kind of knew this was going on. And Langone is using that to say, See, I'm innocent, I'm innocent, we didn't do anything wrong.
WERTHEIMER: New York's Attorney General Eliot Spitzer is also seeking $18 million dollar from Ken Langone. What's that about?
Mr. NOCERA: Well, it has to do with the deception. You know, because you were involved in the deception, you need to pay a penalty. Now, Ken Langone was a co-founder of Home Depot. And he is a big, blustery, volatile, foul-mouthed, but very interesting man. And he has taken this case and basically said, Eliot Spitzer is trying to ruin my reputation, and I have $1.4 billion and I'm going to use as much of that as I can both to win this case, and oh, by the way, Mr. Spitzer, I will try and fund your opponent when you're running for governor.
The war of words is just unbelievable, Linda, and that's the thing that's really kind of amazing about this. You can actually get Ken Langone on the phone and listen to him yell into the phone about how awful Eliot Spitzer is. And there's some allegation where Spitzer is supposed to have said at some party that he was going to drive a stake through Langone's heart, and Langone said something to the effect of, you know, it better be steel, because, you know, anything else is going to break. The whole thing is just ridiculous beyond belief.
WERTHIEMER: You've said in your column in the Times, in an open letter to Eliot Spitzer, that this case just simply isn't worth the trouble. Why do you think so?
Mr. NOCERA: Well, Eliot Spitzer has a track record of using high profile cases to change public policy. He did it with Wall Street; he did it in the insurance industry. He's done it a few other times. I think he got into the case because he thought, boy, I can use this case to wrestle with excessive executive compensation and do something substantial about it. It turns out that this case is an anomaly precisely because of the non-profit rule. And it's not going to change anything. You know, all it might do is cause one guy to give back some money. And the money Dick Grasso gives back is not going to go to shareholders or widows and orphans or worthy causes.
WERTHEIMER: Or even the State of New York.
Mr. NOCERA: Right. It's going to go to a bunch of millionaires. And so you wind of thinking, with all the things that an Attorney General has to deal with, this doesn't seem like the most important priority.
WERTHEIMER: Joe Nocera is our friend from the business world. He is a columnist for the New York Times. He joined us from New York. Joe, thank you.
Mr. NOCERA: Thanks for having me, Linda.