Grasso Sues NYSE for $50 Million

NEW YORK, July 20--Former New York Stock Exchange chairman Dick Grasso struck back at the exchange this morning, filing a suit against the NYSE for at least $50 million for breach of contract and defamation of character.

Grasso also sought the dismissal of part of a lawsuit filed against him by New York Attorney General Eliot L. Spitzer. Spitzer went to court in May, demanding that the former NYSE chairman return over $100 million of the $139.5 million paid to him by the exchange last year.

Grasso, who became chairman in 1995, was forced to resign from the exchange last September when news of his compensation package outraged shareholder groups and federal regulators.

"We are confident as the case progresses the attorney general's claims will prove to have no merit and that Mr. Grasso is the only person entitled to any recovery in this matter," Eric Starkman, a spokesman for Grasso, said this morning.

In his May lawsuit, Spitzer said Grasso used threats and promises to bully exchange directors into awarding him enormous salary and benefits packages. Spitzer said the $139.5 million payment, which included deferred compensation and retirement benefits covering Grasso's eight years as chairman, violated New York law that requires pay for chief executives at not-for-profit organizations such as the exchange be "reasonable" and "commensurate with services performed."

Spitzer also sued former exchange compensation committee chairman Kenneth G. Langone, alleging that Langone crafted contracts that led to the payout while keeping other board members largely in the dark about details of Grasso's pay. Langone's response is expected by Friday.

Grasso today accused current NYSE Chairman John S. Reed of engaging in a "campaign of disparagement and defamation" against him by telling the press "not only that Mr. Grasso's compensation was the result of impropriety, but that Mr. Grasso was aware of the impropriety."

"Mr. Reed made each of these statements with willful intent, in bad faith, to damage the reputation of and vindictively disparage Mr. Grasso," the suit said. Grasso also claimed the exchange breached his contract by withholding "tens of millions of dollars." The suit said that Grasso's contracts of 1999 and 2003 contained a "non-disparagement clause" forbidding exchange executives from making any statement against Grasso if he left the NYSE.

The exchange this morning referred questions to a private attorney, Michael York. York told Bloomberg News that Grasso's suit is "without any factual and legal merit. . . . And if we go to trial on these claims we should prevail." A spokeswoman for Spitzer said the attorney general was reviewing Grasso's claims.

Grasso has said in the past that he would not seek any personal gain from a suit and in his filing today he promised to give any proceeds to charity.

The two sides are also arguing about where the case should be heard. Grasso last month filed a motion to move the case from state to federal court, arguing that his role as head of an organization regulated by the Securities and Exchange Commission merited a federal trial. Spitzer filed a motion Monday to have the case heard in state court, arguing that the principal claim in his suit is that Grasso's pay violated New York State not-for-profit law.