Associating With Richard Grasso Meant Accumulating Much Affluence

By RODERICK BOYD, Staff Reporter of the Sun | February 3, 2005

In the late 1990s through 2002, it appears that some of the best jobs in New York were connected to former New York Stock Exchange CEO Richard Grasso, according to a report prepared for the NYSE's board by Chicago law firm Winston & Strawn. For example, the report noted that his personal assistant averaged $240,000 in compensation from 2000-03; his two drivers were paid $130,000 each. The report said that the assistant and the drivers were each paid two to three times more than market value.

This was on top of what the report alleged was almost $150 million in excess compensation paid to Mr. Grasso, an amount so large that the report said it had "a detrimental effect on the NYSE" diminishing its reputation.

The so-called "Webb Report," named after its primary author, former federal prosecutor Dan Webb, was released yesterday, after a State Supreme Court judge rejected the NYSE's claim that it was protected under attorney client privilege last week. An NYSE spokesman did not return a call.

Mr. Grasso's compensation has been the centerpiece of a suit filed in May by New York State Attorney General Eliot Spitzer designed to recover $100 million of the pay. Mr. Grasso has aggressively fought back to clear his name, filing suits against both the NYSE and its former interim chairman, John Reed.

Mr. Grasso's spokesman, the president of Starkman & Associates, Eric Starkman, said, in part, "The Webb Report does answer the question 'Why didn't the NYSE bring this lawsuit, instead of hiding behind the attorney general?' The answer is that, of course, the NYSE could not very well blame its own directors for the actions described by its lawyer."

The issue of Mr. Grasso's compensation could not have come at a more inopportune time in the NYSE's history. The Big Board has seen its share of stock trading in NYSE-listed companies drop as Internet-based exchanges like Archipelago and Liquidnet grab market share. The exchange's ability as a regulator of the company's listing their shares has also been called into question. Moreover, the costs associated with the numerous lawsuits springing up from the matter are hurting profits, as the NYSE partially blamed its third-quarter loss - its first in three years - on legal costs.

Discussing Mr. Grasso's pay in regards to that of the NYSE executives immediately below him in the exchange's structure, the report concluded, "This large disparity between Mr. Grasso's compensation and that of his fellow senior executives exceeded any normal or reasonable relationship."

The primary way Mr. Grasso was able to obtain pay levels unheard of in the nonprofit sector was his "uncapped" pension plan, according to the report. Whereas most pension plans have a limit on benefits, Mr. Grasso's did not. His contract was constructed so that as his compensation grew, so did the NYSE's obligatory contribution to the plan. The report concluded that under the most optimistic assessments, he should have been entitled to no more than a lump sum $25 million package. Under his NYSE contract, his pension plan was worth between $101.4 million and $113.6 million.