Dick Grasso was more underhanded than many suspected – using spies, doctored records, rigged votes and intimidation to suck almost every penny of profit at the New York Stock Exchange, crusading New York Attorney General Eliot Spitzer charged yesterday.
Spitzer outlined a pattern of greed, bullying and conflicts of interest in a four-year secret plan by Grasso to award himself more than $187.5 million as he prepared to retire from the NYSE.
Spitzer said Grasso’s “unsavory, self-dealing and fraudulent” acts were especially troubling because they are a “template of a much larger problem throughout the corporate structure that must be confronted.”
Spitzer filed a suit seeking to reclaim for the NYSE as much as $120 million of Grasso’s controversial first payment of $139 million in compensation. Grasso said he would fight the suit and was “disappointed” Spitzer intervened in “what amounts to be a commercial dispute between my former employer and me. I look forward to complete vindication in court.”
Spitzer’s lawsuit and exhibits implied that Grasso personally shot down early attempts to crack down on Wall Street firms’ use of phony analyst research – just to win support for his big paychecks. Wall Street execs most vulnerable over research also sat on NYSE boards that approved more than $30 million of Grasso’s disputed pay.
Grasso held “enormous power” over the compensation committee members, picking them himself, and on occasion even confronted panel members who wouldn’t buckle under to Grasso’s straw boss on the pay panel, investor Ken Langone. Spitzer wants Langone to fork over at least $18 million in disputed Grasso pay that Langone allegedly pushed through the board for approval.
Langone denied all Spitzer’s allegations yesterday, saying he never misled anyone and that all pay data was “honestly and professionally prepared.”
Spitzer told a news conference that Grasso’s influence-peddling included making a personal phone call to NASD chief Robert Glauber to urge him to drop Langone from an NASD probe of Langone and his investment bank, Invemed.
The NASD said Spitzer’s claims about the phone call “were extremely misleading.” “Not a single word in the complaint was changed as a result of the call or after the call was received,” the NASD said in a statement. Langone already had been dropped from the suit prior to Grasso’s call, the NASD said.
Grasso had spies and ears everywhere. One compensation committee member, who balked in a private panel meeting at some of Grasso’s excessive 2000 pay, says he was stunned that Grasso confronted him so quickly. The director said he “was a little taken aback that there was an ear to the committees . . . and that my hesitancy was reported immediately.”
The director said he wound up approving the questionable pay out of fear of reprisal. He told investigators, “Thank God, I escaped that one. This man was also our regulator, and I’m a member of the [NYSE] . . . And when he’s kind of indirectly your supervisor or your regulator, you have to be careful.”
Grasso also let it be known he could fix problems for companies that had chiefs sitting on the compensation committee.
When Merrill Lynch had difficulty with a NYSE panel that had blocked the bank’s planned sale of its specialist unit, a firm executive complained directly to Grasso.
Grasso also kept what amounted to a friends-and-enemies list. Bear Stearns chief Jimmy Cayne told investigators his specialist division head had urged him for years to join the NYSE board because the Bear Stearns division “would get better treatment from the NYSE if Cayne were a member of the board.”
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Pay dirt
Attorney General Eliot Spitzer’s suit says Dick Grasso and his lieutenants misled and
intimidated New York Stock Exchange board members into paying him $189M.
How they allegedly did it:
* Squelching an NASD probe of pal and NYSE compensation committee chair Ken Langone.
* Having NYSE insiders doctor books to conceal bonuses from the board.
* Bullying pay panel members who balked at approving excessive pay by hinting at regulatory reprisals.
* Firing an outside law firm hired to probe pay deals.
* Rigging pay panel voting by helping panel members.
* Accepting $30.6M that was misrepresented to the board as being vested.
* Shooting down early attempts to probe fraudulent research at major banks because the firms’ bosses approved extra Grasso pay.
Source: Court documents