SEC Subpoenas Former NYSE Directors on Grasso Pay Package

The Securities and Exchange Commission has subpoenaed as many as 65 former New York Stock Exchange directors going back to 1995 for records about former NYSE Chairman Richard Grasso’s compensation package, people familiar with the investigation said.

Investigators are seeking information on how directors approved three contracts that resulted in a payment last year of $140 million to Grasso, who was ousted in September.

The subpoenas expand the SEC’s involvement in the Grasso compensation probe and ensnare some of the biggest names on Wall Street, including Bear Stearns Cos. Chief Executive James Cayne, Morgan Stanley CEO Philip Purcell and Lehman Bros. Holdings Inc. CEO Richard Fuld Jr.

New York Atty. Gen. Eliot Spitzer may go to court next month to seek the return of $120 million from Grasso, and is considering suing former NYSE directors who approved the pay package, people familiar with the situation said.

“The SEC wants to have a dragnet to bring in all these people to see what kind of pattern it can possibly find about poor corporate governance at the exchange,” said former Goldman Sachs partner Roy Smith, now a finance professor. “They don’t want Spitzer to make a case all by himself.”

Grasso, 57, in a letter last week to John S. Reed, the exchange’s interim chairman, said he wouldn’t return any money.

Among the information the subpoenas seek are memos, notes and letters discussing the pay agreements, the people said.