Grasso Sues NYSE in $50-Million Pay Claim

Richard Grasso, who was forced out of the New York Stock Exchange amid the furor over his outsize pay package, sued the exchange Tuesday to recover $50 million that he claims he is owed.

Grasso also accused John S. Reed, his successor as NYSE chairman, of slander, saying Reed repeatedly defamed him in media interviews despite a clause in Grasso’s employment agreement prohibiting the exchange from disparaging him publicly.

Grasso’s suit is the latest volley in a fierce clash that pits him against the NYSE and New York Atty. Gen. Eliot Spitzer.

Spitzer sued Grasso in May, alleging in a civil suit that Grasso used deception and intimidation to take home at least $100 million more in pay than he was entitled to during his eight years running the Big Board. Spitzer claimed that Grasso stacked the NYSE board with allies and then misled them about his pay.

Spitzer asserts that Grasso was paid $190 million while NYSE chief, an amount that he says violates New York’s law governing compensation rates at not-for-profit corporations.

In his 48-page filing Tuesday, Grasso both denied Spitzer’s allegations and lodged a breach-of-contract claim against the NYSE.

“We are confident that as the case progresses, the attorney general’s claims will prove to have no merit, and Mr. Grasso [will be] the only person entitled to any recovery in this matter,” said Eric Starkman, a spokesman for Grasso.

Grasso aimed his sharpest attack at Reed, a former Wall Street executive who stepped in as chairman after Grasso’s ouster in September. Grasso accused Reed of spitefully attacking him in “a one-sided war of words.”

Michael York, a lawyer for the NYSE and Reed, rejected that idea.

“We’ve been able to find no claim that has any factual or legal basis,” he said. “None whatsoever.”

Legal experts doubted that Grasso would prevail in his defamation claim, saying he would have to clear a high hurdle by proving that Reed had malicious intent.

Reed, for example, called Grasso’s pay an “embarrassment.” Given the size of his salary, Reed’s comment sounds more like an understatement, said John Coffee, a Columbia University law professor.

Nevertheless, the defamation allegation signaled that Grasso was bracing for a drawn-out showdown against Spitzer.

Grasso earlier filed a motion moving the case to federal court. Spitzer asked a federal judge Monday to move the suit back to state court.