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UD is...
"Salty." (Scott McLemee)
"Unvarnished." (Phi Beta Cons)
"Splendidly splenetic." (Culture Industry)
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(Rate Your Students)
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and Soltan isn't. For the life of me, I can't figure out her
politics, but she's pretty fabulous, so who gives a damn?"
(Tenured Radical)

Friday, October 20, 2006

His Asso's Grasso

UD stumbled on the groovy Richard Grasso story while reading up on the university presidency of John Diamandopoulos (in making a case against Grasso, ex-chairman of the New York Stock Exchange, Eliot Spitzer cited the precedent of Diamandopoulous) -- but ever since she got hold of Grasso -- who looks a little like Mussolini after he was strung up --













she's held on for dear life, sensing that in his rags to riches to rags saga lay hours of reading pleasure...


And to be sure today's update in the New York Times brought a wee smile to her face... Here are some excerpts, with a little commentary...


A New York judge ruled yesterday that Richard A. Grasso, a former chairman of the New York Stock Exchange, would have to return as much as $100 million he received as part of a fiercely contested $139.5 million payout.

The judge ... said that Mr. Grasso did not disclose to his fellow directors on the board of the exchange the extent to which his soaring compensation had caused his pension and savings to balloon in size and that he violated his contract by withdrawing $87 million before his retirement. Interest and money from a separate retirement account would raise the total.

The ruling was not the judge’s final word on the dispute — he did not directly address the central claim in the lawsuit brought by Eliot Spitzer, the New York attorney general, that Mr. Grasso’s compensation was unreasonable under the state’s not-for-profit law. [This is where Papa Doc Diamandopoulous came in handy.] But the ruling bolstered Mr. Spitzer’s main argument in support of that claim — that the exchange directors were not fully informed about Mr. Grasso’s compensation.

Whether his pay was reasonable or not is to be decided at a subsequent trial — one that would likely focus on the $80 million he was paid between 1999 and 2001. [Sounds reasonable.]

Mr. Grasso said yesterday that he would appeal, which would further delay a nonjury trial that had been scheduled to start last month.



In September 2003, Mr. Grasso was forced to resign as chairman of the New York Stock Exchange, the world’s largest stock market, amid an outcry over the disclosure of his $139.5 million compensation package, all of it tied to accrued pension and retirement savings. [$139.5 million. An amount that might excite the eye even of a Harvard fund manager.] John S. Reed, Mr. Grasso’s temporary successor, commissioned an inquiry into Mr. Grasso’s pay. That report was passed on to Mr. Spitzer, who sued in 2004. Since then the two sides have been embroiled in a drawn-out series of legal skirmishes.

The ruling is a major legal setback for Mr. Grasso, who for the last three years has battled to make the case that the exchange’s board was well aware of all aspects of his pay and approved the package accordingly.

Justice Ramos also ruled yesterday against Mr. Grasso’s claim that he was terminated and thus due an additional $95 million in severance pay. [Oh yeah, and I want an EXTRA $95 million.] And the judge dismissed a countersuit for disparagement that Mr. Grasso had filed against his temporary successor, Mr. Reed. [PLUS disparagement money from Reed.]



In his ruling, the judge was responding to several legal motions filed by Mr. Spitzer, claiming that Mr. Grasso violated his contract by withdrawing pension savings before his retirement and failed in his duty as chairman of the board by not keeping his fellow directors informed of his escalating pension.

Mr. Grasso said in a statement: “Today’s ruling is riddled with errors. One month ago, the Appellate Division told Justice Ramos not to try this case himself until the Appellate Division had decided important legal questions before them. Today, Justice Ramos somehow rejected the testimony of dozens of directors that they approved every dime they paid me [Dime. Quaint.], and decided that these men and women did not know what they were doing.”

Mr. Grasso said that he had instructed his lawyers to appeal and that he looked “forward to the jury trial that the state constitution promised me.”

For Mr. Spitzer, who leads his Republican opponent in the race for New York governor by a wide margin, the ruling is a welcome riposte to the criticisms he has faced that in place of winning in the courtroom he has bullied companies and executives into reaching settlements.

“I have maintained since the beginning that the principles at stake in this issue were clear and the facts were egregious,” Mr. Spitzer said in an interview yesterday. “At every turn the government perspective has been vindicated. The defendants have done nothing more than scream louder and louder and their arguments are vacuous and wrong.”

In his ruling, Justice Ramos said he wanted to reach a payment solution within the next 30 days.

In the unlikely event that Mr. Grasso follows the court judgment and writes a $100 million check [Oh all right I guess it's the decent thing... Here's a check for one hundred million dollars...], Mr. Spitzer would be expected to drop the case, as he could claim that he had received the amount he had originally asked Mr. Grasso to return. Mr. Grasso would still be a wealthy man, getting to keep tens of millions of dollars in compensation from his more than three decades at the exchange. [This is the part of stories like this one that always gets to me. I think it's a guy thing because I really don't understand. Grasso's no spring chicken. He could pay up, take the tens of million of dollars he'd get to keep, and enjoy a lifestyle in his latter years that would be the envy of Walter Benn Michaels. Why doesn't he do that?]

While having to return a significant portion of his pay package carries its own financial punishment, it is the judge’s sweeping rejection of Mr. Grasso’s long-held contention that the exchange board had been aware of his growing pay that represents a more resonant defeat.

Justice Ramos said it was “shocking” that the board could have been “unaware of a liability of over $100 million,” and he said that Mr. Grasso violated his fiduciary duty as a director to keep his board fully apprised of how quickly his pension benefits were accumulating. “Mr. Grasso’s duty is to be fully informed and to see to it that the board was fully informed,” he wrote. “He failed in this duty.”

Between 1999 and 2002, as Mr. Grasso’s annual pay soared to a high of $31 million, his pension plan, a supplemental executive retirement plan, or SERP, grew at an even faster clip, topping out at over $80 million in 2003, when Mr. Grasso made the decision to withdraw his funds. [Zoom zoom zoom zoom RUN]

That decision, which according to the depositions of several directors he made because he was fearful that another board would prevent such a withdrawal, set in motion the events that would lead to the public controversy over his pay and his eventual resignation. In the subsequent years, all the participants have been deposed over the matter, with many directors on the wider board claiming that they had no idea how fast Mr. Grasso’s SERP had grown. [What big SERPs you have! The better to eat you with, my dear...]

In his decision, Justice Ramos draws the crucial conclusion that Mr. Grasso did not inform members of his board about his escalating SERP. “Mr. Grasso’s failure to disclose the amount of his SERP thwarted the compensation committee from performing its duty,” he wrote. “Year after year, it made decisions to pay him without knowing his true compensation.” [Shades of Benjamin Ladner.]

At the crux of the judge’s ruling is his decision that Mr. Grasso must return the $87 million in pension savings that he withdrew from the exchange before he retired. And it also supports a similar argument made by directors like Henry M. Paulson Jr., the former Goldman Sachs chief and current Treasury secretary who led the campaign for Mr. Grasso’s ouster. In his decision, the judge said that the pension withdrawals that he made in 1995 and 1999, totaling $35 million, were unlawful transfers and should be recognized as loans.

Lawyers from Mr. Spitzer’s office calculate that Mr. Grasso would owe interest of about $15 million on that sum. Mr. Grasso will also be required to return money from a separate retirement account that is not yet vested.

That brings the total to close to $100 million, representing a significant portion of the $185 million he was paid as head of the stock exchange from 1995 to 2003.