Grasso Ordered to Return NYSE Pay
STEVE INSKEEP, host:
The former chairman of the New York Stock Exchange has been order to pay back some of the compensation he received when he was chairman. A New York judge yesterday issued a ruling that criticized Richard Grasso for failing to explain the details of the pay package to the exchange's board. Grasso's attorneys will appeal. Yesterday's decision is expected to further delay a trial that will decide his role in the controversy. And we have more from NPR's Jim Zarroli.
JIM ZARROLI: Richard Grasso has insisted all along that even though his 2,003 pay package was big, nearly a $190 million in deferred pay and pension benefits, he didn't do anything wrong by accepting it. He says the pay was determined by the board outside his presence and that board members were briefed about the details by the compensation committee. But in his ruling, New York Supreme Court Justice Charles Ramos eviscerated that defense. He said some board members clearly did not understand how much Grasso was getting. Year after year, the judge said, the board made decisions to pay him without knowing his true compensation. He noted that one pension benefit given Grasso had mushroomed from 36 million to a $110 million in the space a few years, and Ramos said Grasso, as chairman of the exchange, had a fiduciary obligation to explain all of this to the board. He said any claims to the contrary were shocking. Henry Hu is a professor of law at the University of Texas.
Professor HENRY HU (University Of Texas): Here he's saying, well, gee, you got an amount of money involved that in one year represented, what, something like half of the income of the entire corporation? And that in this situation he really needed to disclose the various facts to the board early on.
ZARROLI: Justice Ramos also made clear that Grasso was not entitled to some of the money he received, and that he took some pension benefits before he should have. Ramos stopped short of ruling whether Grasso had done anything illegal, saying that would be determined at his upcoming trial. But he did order Grasso to return the money with interest, and he ordered an accounting of how much he owes. That could end up costing Grasso tens of millions of dollars. And New York Attorney General Eliot Spitzer, who brought the charges against Grasso, said yesterday that the former stock exchange chairman would probably have to return about $100 million.
Spitzer, who is running for New York governor, has said that any money returned will go into a stock exchange fund to educate investors. For Grasso, yesterday's ruling is a huge defeat. Again, Henry Hu of the University of Texas.
Mr. HU: This kind of decision can be appealed, but from the point of view of Grasso, this litigation was really not necessarily about the money but more his reputation, and the judge has said things here that Richard Grasso may be unhappy with.
ZARROLI: And Grasso lost out in other ways as well. The judge also struck down a series of motions Grasso had filed, including one claiming he'd been defamed by Exchange officials. In the past, Grasso has locked horns with Justice Ramos. His lawyers tried to get the judge to recluse himself from the case, noting that he had twice unsuccessfully sought a seat on the stock exchange's board. But Ramos refused the motion. He is expected to preside over Grasso's trial, which is supposed to begin sometime this fall.
Jim Zarroli, NPR News, New York.