STEVE INSKEEP, host:
Here's news of another executive who lost his job.
Three years ago, the New York Stock Exchange voted to give Chairman Richard Grasso a pay package that exceeded $130 million. This news came at a time when public anger about executive salaries was growing, and he was forced to resign.
Then, New York Attorney General Eliot Spitzer stepped in and filed charges against Grasso and Kenneth Langone, the former head of the board's compensation committee. And three years later, these two are about to stand trial.
NPR's Jim Zarroli spoke with Langone, who was fighting back against Spitzer's charges.
JIM ZARROLI: Earlier this year, the federal judge who's presiding over the case against Richard Grasso and Ken Langone expressed frustration that the case hasn't been settled.
Ken Langone says he is perfectly willing to settle.
Mr. KENNETH LANGONE (Former Director, New York Stock Exchange): I just want the attorney general to go on national television, like he did when he brought the charges, and apologize for what he said about me, and I'm done. The case is over.
ZARROLI: But there's little likelihood of that happening. The case against the two men stems from the enormous package of deferred compensation and pension benefits given to Grasso in September 2003. At the time, the exchange was a not-for-profit organization.
In 2004, New York Attorney General Eliot Spitzer accused the board of violating a state law requiring that pay for officers of not-for-profits be reasonable.
Mr. ELIOT SPITZER (Attorney General, New York): In other words, Mr. Grasso was taking close to 99 percent of the net income of the New York Stock Exchange and taking it in salary.
ZARROLI: Spitzer suggested that board members agreed to the pay because they were misled about the details by Grasso and Langone. He also said many were reluctant to ask questions because they served as executives of companies regulated by the exchange.
Until this case arose, Langone was best known as one of the founding investors of Home Depot. He's on the Forbes magazine list of the 400 wealthiest Americans. But Langone says he was largely anonymous until recently.
Mr. LANGONE: I used to be able to walk in restaurants and would be unnoticed. I wish I had a nickel every time when I go to a restaurant, how people come up to me and tell me how much they admire my courage, and we're proud of you standing up and I'm glad to know you or this or that or the other - people I don't know.
ZARROLI: What Langone has done is take on Spitzer in a way white-collar defendants rarely do. He was a major contributor to one of Spitzer's opponents in last month's primary race for New York governor.
In an interview in Fortune, Langone was quoted as saying: I'm nuts, I'm rich and boy, do I love a fight.
Sitting in his office on New York's Park Avenue now, Langone is more subdued, but his anger over the case is palpable. First, he says Richard Grasso may have gotten a lot of money, but he deserved it because he made the New York Stock Exchange more valuable as it was about to go public. He says Grasso expanded the number of listed companies on the exchange.
Mr. LANGONE: People say, are you nuts? No, I'm not nuts at all. I am proud of the work I did at the stock exchange. I'm proud of the way we did it. I'm excited about the fact that it's getting this intense scrutiny. And I'll stand by what we did. I think Dick Grasso earned every single penny we paid him.
ZARROLI: Langone says if the pay package was so unreasonable, it's not Grasso's fault, it's the board's.
Mr. LANGONE: We should have resigned. If there was something wrong there, we are the ones who did it.
ZARROLI: Langone points out that the board included former Secretary of State Madeleine Albright, former Viacom chairman Mel Karmazin and even Goldman Sachs' Hank Paulson, the current U.S. Treasury secretary. These were smart, capable people, he says. And if they didn't understand what they were voting on, they should have asked more questions.
Langone insists that board members will deny they were misled about the pay package. He released this pre-trial deposition in which his lawyer questions one board member - former Time Warner Chairman Gerald Levin.
(Soundbite of deposition recording)
Unidentified Man: Do you know of any occasion that Mr. Langone ever deceived a member or was unclear with a member of the compensation committee?
Mr. GERALD LEVIN (Former Board Member, New York Stock Exchange): No.
Unidentified Man: Or with the board of directors?
Mr. LEVIN: Not at all.
ZARROLI: Langone dismisses the case against him as an effort by Spitzer to win favor with voters. Spitzer scoffed at such comments as he was leaving a recent campaign event.
Mr. SPITZER: And let me just say this: crying politics is the last refuge of the guilty defendants.
ZARROLI: Spitzer's office declined to address Langone's remarks in any detail.
Joel Seligman is president of the University of Rochester and a well regarded expert on securities law. He says given the size of Grasso's pay package, it was reasonable for Spitzer to bring a case against him.
Mr. JOEL SELIGMAN (President, University of Rochester): On the other hand, this is an area where very few cases of this type have succeeded. The general philosophy of the courts has been that, by and large, when you're running a major enterprise, you're allowed to be paid well.
ZARROLI: Seligman says boards usually determine executive pay by looking at what officers of comparable organizations make. But he says that's difficult in this case because the New York Stock Exchange isn't like any other entity. Seligman says the case against the two men will be stronger if the state can prove there was an active effort to mislead board members.
The trial will proceed in two phases. First, the judge will decide whether Grasso's pay was reasonable. If he decides it wasn't, the case will go to a jury trial.
Jim Zarroli, NPR News, New York.
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