The four-year legal battle over former NYSE Chairman Richard Grasso's $187.5 million compensation package ended Tuesday when a New York appeals court dismissed claims against him of excessive pay and the state's top prosecutor said the case was closed.
“We have reviewed the court's opinion and determined that an appeal would not be warranted,” Attorney General Andrew Cuomo's spokesman Alex Detrick said. “Thus, for all intents and purposes, the Grasso case is over.”
Cuomo's announcement came soon after the Appellate Division of State Supreme Court ruled the attorney general's authority to pursue two remaining claims against Grasso lapsed when the New York Stock Exchange changed in 2005 from a nonprofit to a for-profit corporation. Last week, the Court of Appeals, New York's highest court, dismissed four common law claims against the 2003 compensation package.
The midlevel court concluded Tuesday that seeking to recover money for two remaining claims under New York's Not-For-Profit Corporation Law would simply benefit the NYSE's private owners. The court also dismissed a claim against Home Depot founder Kenneth Langone, who was chairman of the exchange's compensation committee and was accused of misleading other NYSE board members about Grasso's pay.
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Justice James McGuire wrote that based on case law and the “evident purpose” of the not-for-profit law, the attorney general's authority to pursue the claims “lapsed” when the NYSE became a for-profit corporation. He wrote for the court majority.
In a lone dissent, Justice Angela Mazzarelli said the change in corporate status “has no effect whatsoever upon causes of action that were pending against the not-for-profit” when its status changed. Under the law, the attorney general also brings claims as the state's chief law enforcement officer, not as a surrogate for the corporation, she wrote.
First launched by then Attorney General Eliot Spitzer, the state sought to recover money paid to Grasso, alleging his compensation was excessive and constituted an unlawful transfer of NYSE assets and a breach of fiduciary duty at the NYSE.
The Court of Appeals concluded last week that the attorney general exceeded his authority with four claims that said the state can sue to protect the public interest. Instead, judges noted the NPCL contains specific provisions for addressing alleged fault by officers and directors.
“Mr. Grasso is gratified by the Appellate Division decision,” his attorney, Gershon Zweifach, said. He declined further comment.
Langone's attorney, Gary Naftalis, said they were pleased with the decision to dismiss the case against Langone. “We always believed that this was a case that should never have been brought,” he said.