Spitzer argued in his complaint that Grasso's contracts should be rescinded because directors were kept in the dark about the ballooning nature of Grasso's retirement accounts. He said Langone should be held liable for $18 million in payments to Grasso that Langone allegedly hid from other directors. And he said he would fight any attempt by Grasso to have the NYSE cover his legal fees.
The source close to Langone, meanwhile, said "a handful" of former NYSE directors had been calling to pledge their support, saying they were aware of every penny awarded to Grasso. Just which directors? The source would not say.
Grasso, for his part, pulled no punches in his 1,500-word op-ed piece, which appeared in the Wall Street Journal opposite an editorial generally favorable to the former NYSE chairman.
Of his promise to give countersuit proceeds to charity Grasso said, "I will derive considerable pleasure knowing that some public good ultimately resulted because of the immoral and dishonest behavior of those who forced my departure and besmirched my name."
He continued, "Those who thought they could break me with their repeated media leaks badly underestimated my character and resolve. I look forward to addressing them in court where they can no longer hide behind Spitzer's cloak."
Grasso addressed the broad points of Spitzer's lawsuit, saying directors who voted on his pay "knew exactly what they were doing."
New York state not-for-profit law, under which Spitzer filed suit, requires that executive pay be "reasonable" and "commensurate with services performed," a vague formulation that Grasso sought to attack.
Spitzer fired back, saying the assertion that directors acted with full knowledge was nonsense and that, in any case, they had no business paying the head of a quasi-regulatory, not-for-profit organization anything close to what the head of giant investment bank is paid.
"What makes this case overwhelming at this point is the acknowledgement by Frank Ashen [the former NYSE human resource director] and Bill Mischell [a former compensation consultant to the exchange] that evidence that flowed from the compensation committee to the board was flawed, misleading and incomplete," Spitzer said.
As the crossfire blazed, legal analysts continued to sift through the voluminous complaint.
Norman I. Silber, a law professor at Hofstra University and a leading expert in not-for-profit law, said he was struck by the level of detail the complaint goes into describing the alphabet soup of retirement plans (SERP, SESP, CAP, ICP) that led to the $139.5 million payout.
"I think [Spitzer] is trying to show that the pay was very complex and capable of being misrepresented to the compensation committee and the board," he said.
Silber said Spitzer's conflict of interest argument could be among his strongest. "It frequently happens that boards are composed of people well known to the chief executive," he said. "What is not routine is to have a board or a compensation committee that is composed of people, all of whom have career interests in organizations directly affected by the activities of the executive they supervise. That will make this case significantly easier" for Spitzer.
Silber also cited the last segment of the complaint, in which Spitzer describes the Aug. 7, 2003, board meeting at which directors voted to approve the $139.5 million payout. Spitzer says that the payment was not on the agenda for the meeting, that several directors who opposed the payment were not in attendance and that those who were there were not adequately prepared.
"New York has specific laws about notification" of board members about meeting agendas, Silber said.
Silber declined to speculate who would prevail but he said the case was certainly strong enough to survive a motion for dismissal. The case was assigned on Monday to State Supreme Court Judge Charles E. Ramos, Spitzer's office said.
Grasso has 30 days to respond to Spitzer's complaint. After that, discovery could drag on for months. Ramos will decide whether he will hear the case himself or empanel a jury. But both sides can request a jury trial and Spitzer is expected to do so, counting on public revulsion at Grasso's pay.