Grasso sues NYSE, its chairman over pay

Big Board's ex-chief seeks $50 million for breach of contract, defamation

July 21, 2004|By Andrew Countryman | Andrew Countryman,CHICAGO TRIBUNE

CHICAGO - Richard A. Grasso, who was ousted last year as chairman of the New York Stock Exchange, struck back yesterday, suing the exchange for at least $50 million.

Grasso, who said he would donate any money received from the lawsuit to charity, claims the exchange breached his contracts from 1999 and 2003 and owes him severance and other payments because, he said, he was terminated without cause.

He also seeks damages for "the injury to his reputation and standing in the community, personal humiliation, mental anguish and suffering."

The suit, filed in U.S. District Court in New York, also names new NYSE Chairman John S. Reed, saying he made "false and defamatory statements" about Grasso to pressure him into relinquishing money awarded to him by the exchange.

"The exchange and Mr. Reed must be held accountable for their shameful conduct and the injury that they have caused to Mr. Grasso," the suit said.

Grasso had been hailed during his eight years as chairman for his success in expanding the exchange's business and helping markets restart after the Sept. 11 attacks. But opinion turned sharply after the NYSE disclosed in August that he had accumulated more than $139 million in deferred compensation.

He later agreed to forgo another $48 million to try to quell the uproar, but ultimately lost his job in September as controversy swirled over the size of the pay package and allegations of conflicts of interest on the exchange's former board.

Reed has been sharply critical of what he called the pay "excesses" under the NYSE's previous regime, telling regulators early in the year that "serious damage has been inflicted on the exchange by unreasonable compensation of the previous chairman and CEO."

The suit said Reed knew the statements were false or he recklessly disregarded the truth, making them "with willful intent, in bad faith, to damage the reputation of and vindictively disparage Mr. Grasso."

Grasso said the exchange also breached a portion of his contracts that prevented it from disparaging him, saying its actions have hurt his chances for future employment.

NYSE attorneys said they would "vigorously defend" the exchange against Grasso's claims.

"We believe these claims are entirely without any legal or factual merit whatsoever," said NYSE attorney Daniel K. Webb. Another exchange attorney, Michael M. York, disputed claims that Reed defamed Grasso.

Grasso also asked the court to dismiss a claim in a suit filed in May by New York State Attorney General Eliot Spitzer. That suit seeks to recover more than $100 million in payments made to Grasso, claiming they are not "reasonable" under the state's nonprofit law.

In his response, Grasso contested the claim by Spitzer that a total of $36.5 million in payments made in 1995 and 1999 were unlawful "loans," saying they were, in fact, disbursement of previously earned benefits.

Grasso's filing said the payments were made under contracts negotiated by exchange directors he calls "perhaps the most sophisticated group of financial executives on the planet."

The Chicago Tribune is a Tribune Publishing newspaper.

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