ELIOT Spitzer looks like he is finally getting ready to throw some counter-punches at Dick Grasso.
Whether you like him or hate him, everyone would agree that the New York State attorney general is usually nobody’s punching bag.
But that’s exactly what Spitzer has been looking like as lawyers for Grasso make endless motions in court in an apparent effort to delay the civil suit against the former head of the New York Stock Exchange long enough so that it becomes a political problem for Spitzer in next November’s gubernatorial election.
Spitzer is running for governor as a Democrat and has been making a headline hog of himself.
And the fact that he didn’t include Carl McCall, the head of his own party in the state, in the Grasso lawsuit leaves this legal matter an open wound.
McCall was in charge of the NYSE compensation committee that, in Spitzer’s view, paid Grasso too much to head up a not-for-profit organization.
Last week Grasso and co-defendant Ken Langone asked a New York State court to allow them to depose Spitzer, a highly unusual move that the attorney general is vigorously fighting.
But it’s another deposition – his own – that Grasso should really be worrying about.
Spitzer’s staffers are scheduled to question Grasso on March 6 and – according to a source – the attorney general’s office a few months ago started seeking documents that could bring into question the way business was conducted at the NYSE.
The source says that Spitzer’s team inquired about testimony given in the so-called floor traders case of the late 1990s.
In that case, a group of people who were trading stock on the floor of the NYSE, including the top guy from a firm called Oakford Securities, were tried and convicted by federal prosecutors of illegal activities.
Specifically, they were accused of a practice called “flipping.” Because these floor brokers had an unfair advantage in the middle of the NYSE action, they weren’t allowed to trade quickly in order to gain the small differential – in this case eighths of a dollar – that only they could enjoy.
The floor brokers were also accused and convicted of sharing profits with their customers.
The Securities and Exchange Commission had ruled that such profit arrangements were illegal because they tempted the floor brokers to make trades in which they had a stake.
Here’s the fun part for Grasso.
There was testimony during the floor brokers case that higher-ups at the NYSE – of which Grasso was the highest – knew about this trading and allowed it, if not outright approved it.
A source says Spitzer’s team requested vital depositions from this case. The court reporting firm that transcribed those depositions – Pirozzi and Hillman – refused to say whether Spitzer had been in contact.
Spitzer’s people wouldn’t comment either, but last week they weren’t acting very flustered by Grasso’s legal moves.
As I mentioned in this column a few weeks ago, Spitzer thinks that an event that happened in a case against Richard Scrushy of HealthSouth Corp. is pertinent to the Grasso situation.
In the HealthSouth case a court ruled that Scrushy, the company founder, had to repay $47.8 million in bonuses that he didn’t earn.
And the court made that ruling despite Scrushy’s exoneration of any wrongdoing.
Spitzer is trying to recover much of the $190 million in compensation that Grasso received from the NYSE, mostly in his latter years as chairman.
I’m only guessing here. And I’m not a lawyer.
But aside from simply trying to embarrass Grasso during the deposition, Spitzer’s office might try to show that he mismanaged the exchange and, therefore, like Scrushy, didn’t really deserve the compensation he received.
This is all, of course, about leverage.
Spitzer will try to make Grasso as uncomfortable as possible during his deposition in hopes that the former NYSE head will cave in and accept a settlement.
But if Spitzer has gotten the documents from the Oakford case and uses them just right, he could feel his leverage is too good to just result in a settlement.