Wall Street: Grasso Likely to Keep Pay Package After Court Ruling

A four-year prosecution of the former New York Stock Exchange boss, Dick Grasso, collapsed yesterday as an appeal court ruled that the US authorities had no right to challenge the controversial Wall Street figure's pay package of $187.5m (£94m).

By a three-to-one ruling, a panel of judges in Manhattan dismissed the final two parts of a lawsuit which accused Grasso of plundering excessive remuneration from the exchange.

Originally brought in 2003, the case became a battle over excessive rewards on Wall Street and was fought furiously by Grasso and his allies in the financial services industry.

It was pioneered by New York's former attorney general, Eliot Spitzer, who sued Grasso for breaking a law barring "excessive" pay at not-for-profit institutions.

The appeal judges threw the case out because the exchange has since converted itself into a public company and merged with Europe's Euronext. They said by forcing Grasso to return the money, the state would merely be benefiting a for-profit private enterprise and that the matter therefore "vindicates no public purpose".

Spitzer's successor as attorney general, Andrew Cuomo, announced that he would not petition a higher court to overturn the decision, bringing down a final curtain on the dispute. "We have reviewed the court's opinion and determined that an appeal would not be warranted," said a statement from Cuomo's office.

A pugnacious, bald-headed figure with an appetite for confrontation, Grasso joined the NYSE as an $80-a-week clerk in the listings department in 1968. He worked his way through the ranks and became chairman in 1995.

Grasso won plaudits for guiding the exchange through the dotcom boom and for steadying nerves as trading shifted from manual transactions on to computers. He brought the exchange into the public eye by inviting celebrities to ring its opening bell in a televised ritual which quickly became a popular daily event.

But he faced vitriol when it emerged that the exchange had agreed to pay him a lump sum of $139.5m in 2003, plus an extra $48m over four years, in an arrangement to boost his retirement benefits.

Grasso was accused of hand-picking a friendly compensation committee who nodded through the deal without proper review and without benchmarking the package against those granted by similarly sized institutions.

As protests mounted, the California pension fund Calpers compared Grasso to a farmyard animal, saying: "We are trying to pull the pig from the trough."

Grasso was forced out of the job and Spitzer's case began a few months later.

In a terse statement yesterday, Grasso's lawyer, Gershon Zweifach, said his client was "gratified by the ruling".

A close ally of Grasso was more forthright. Ken Langone, who chaired the NYSE's compensation committee and was also targeted by Spitzer, said: "My reaction is 'I told you so'," Langone told Bloomberg News. "There was never a case here."

The law under which Grasso was prosecuted covers not-for-profit institutions such as hospitals, schools and charities. Critics of Spitzer's case argued that it was never drawn up with a Wall Street institution in mind and lawyers complained that the outcome had provided little clarification on the legal meaning of "excessive" remuneration.

For Spitzer, it was part of a campaign to rid Wall Street of cosy deals which attracted political popularity. Spitzer cracked down on biased analysts' research and investment banks and attempted to stamp out questionable trading by mutual funds. But after being elected governor of New York, Spitzer himself fell from grace this year when he resigned after federal investigators stumbled upon his use of a prostitution ring.