Spitzer Slaps Former NYSE Head Grasso with Pay Suit

Filing the suit against Grasso was New York Attorney General Eliot Spitzer, who demanded Grasso return more than $100 million of the approximately $140 million he received, the Wall Street Journal reported. The suit also asks a judge “to rescind the pay package and to determine a ‘reasonable’ level of compensation” for Grasso.

Also tapped as a defendant was Kenneth Langone, former head of the NYSE’s compensation committee. A NYSE spokesman told the Journal: “We are supportive of Attorney General Spitzer’s efforts in this matter. As a named party, it would be inappropriate to comment further.”

Spitzer, a key figure in the ongoing mutual fund market timing and late trading scandal being pursued by both federal and state authorities, maintained that the NYSE board of directors was given inaccurate and misleading information before it approved the Grasso contract.“This case demonstrates everything that can go wrong in setting executive compensation,” Spitzer said in a  statement . “The lack of proper information, the stifling of internal debate, the failure of board members to conduct proper inquiry and the unabashed pursuit of personal gain resulted in a wholly inappropriate and illegal compensation package.”

Spitzer’s move came after news earlier Monday that Frank Ashen, one of the key figures in the ongoing dispute over the Grasso pay package reached a deal with state regulators to settle charges that he played an inappropriate role in setting.

Spitzer also settled with Mercer Human Resource Consulting, which had provided analysis to the NYSE compensation committee when it was determining Grasso’s pay. Spitzer said both Ashen and Mercer “admitted providing information to the board that was inaccurate and incomplete.”

The  suit alleges that Grasso, along with other key figures in his pay-setting process, broke state not-for-profit corporation laws in determining that the former chairman should earn nearly $200 million in compensation and severance. In light of the last-minute deal, Ashen, who was the Big Board’s head of human resources during Grasso’s tenure there, will cooperate with regulators in pursuing their case, said a person familiar with the matter. Ashen will also return $1.3 million to the NYSE, the suit revealed.

It is unclear how much money the attorney general will argue was unreasonable; of his nearly $200 million retirement and deferred-compensation package, Grasso has received $139.5 million. Grasso was forced to resign as chairman and CEO of the NYSE last September after a public outcry over his compensation (See  NYSE Chairman Grasso Resigns ). In January, the NYSE asked Spitzer to look into Grasso’s pay and how it was amassed.

Grasso’s retirement-and-severance components totaled $197.2 million. Under his contract, he also could be owed $9.7 million in severance if his September departure – made at the behest of the NYSE’s directors – were to be considered a termination.