Ex-chief of NYSE fights suit's transfer

Grasso lawyers ask judge to keep case to recoup his pay in federal court

September 01, 2004|By BLOOMBERG NEWS

NEW YORK - Former New York Stock Exchange Chief Executive Richard Grasso asked a federal court yesterday not to return New York Attorney General Eliot Spitzer's suit against him to state court.

Spitzer sued Grasso on June 17 to recover at least $100 million of Grasso's pay. The attorney general claimed in court papers that Grasso was paid about $190 million during his eight years as NYSE chairman and chief executive.

Grasso's lawyers oppose the move, contending yesterday in court papers that the lawsuit, which alleges improper compensation, involves both the amount of Grasso's pay and the "process by which the compensation was awarded."

Allegations that Grasso improperly influenced NYSE's compensation committee and board of directors involve questions of U.S. law that should be heard by a federal court, Grasso's lead lawyer, Brendan Sullivan, told the court in a 36-page response to Spitzer's transfer request.

Grasso resigned as head of the world's largest stock market on Sept. 17. Spitzer's estimate of his compensation during his tenure as head of NYSE includes $140 million that Grasso received in August 2003, a windfall that caused some exchange members and investors to call for his ouster. The dispute doesn't include $48 million that Grasso turned down in September as he was trying to keep his job. Spitzer spokesman Darren Dopp declined comment on Grasso's transfer motion until he can review it.

Spitzer, 45, claimed in his suit that Grasso, 58, manipulated the NYSE's board into granting him a pay package that violated state law governing not-for-profit organizations such as the exchange. Spitzer also sued Ken Langone, chairman of the NYSE compensation committee from June 1999 to June 2003.

Langone's lawyer Gary Naftalis filed a motion yesterday joining Grasso in opposing the transfer to state court.

A second motion by Grasso filed yesterday opposed the NYSE's request to dismiss his claims against the exchange. In July, Grasso sued the NYSE and his successor John Reed, accusing the exchange of violating his employment contract by not paying him millions of dollars more owed to him. He also said Reed defamed him by complaining that the flap surrounding Grasso's pay embarrassed the NYSE.

Michael York, a spokesman for the exchange, didn't immediately return a call seeking comment.

Spitzer's July 20 motion to move the case back to state court said federal courts have jurisdiction over the NYSE only with regard to its regulatory or self-policing function. Federal courts should not hear a case "when the action relates to traditional internal corporate affairs, such as the payment of compensation to corporate directors and officers," according to the transfer request.

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