Judge Orders Grasso to Pay Back Money

Discussion in 'Wall St. News' started by range, Oct 19, 2006.

  1. range


    October 19, 2006

    Judge Orders Grasso to Pay Back Money


    In a damaging blow to efforts by Richard A. Grasso to keep a $139.5 million payout, a judge ruled today that Mr. Grasso, the former chairman of the New York Stock Exchange, would have to return a significant portion of his compensation package.

    In a stinging 72-page decision, the judge, Justice Charles E. Ramos of New York State Supreme Court in Manhattan, said Mr. Grasso had failed to disclose to his fellow directors the extent to which his soaring compensation had caused his pension and savings to balloon to more than $100 million.

    The ruling gives strong legal backing to the central claim brought against Mr. Grasso by Eliot Spitzer, the New York attorney general: that Mr. Grasso’s pay was unreasonably high under New York state not-for-profit law.

    Justice Ramos also ruled against Mr. Grasso’s claim that he was terminated and thus due an additional $95 million in severance pay. And he dismissed a countersuit for disparagement that Mr. Grasso had filed against his temporary successor, John S. Reed.

    In a statement, Mr. Spitzer’s office said that Mr. Grasso must now return more than $80 million.

    Mr. Grasso’s lawyer could not immediately be reached for comment.

    The decisions represent a devastating legal setback for Mr. Grasso, who for the last three years has fought tooth and nail to make the case that his board of top-flight corporate executives were well aware of all aspects of his pay and approved the package accordingly.

    The judge did not rule on Mr. Spitzer’s base contention, that Mr. Grasso’s pay was unreasonable. That matter is to be decided at a subsequent trial, although it is likely that Mr. Grasso’s lawyers will appeal these decisions, causing a further delay for a trial that had originally been slated for this fall. Mr. Grasso’s lawyers have already filed a motion asking that Justice Ramos be disqualified from presiding over the case.

    While having to return a significant portion of his pay package carries its own financial punishment, Mr. Grasso was handed a more resonant defeat in the judge’s sweeping rejection of his long-held claim that his board had been aware of his growing pay.

    In blunt language in which he referred to Mr. Grasso’s claim that he was unaware of his more than $100 million in pension benefits to be “shocking, “ Justice Ramos argued that Mr. Grasso violated his fiduciary duty as a director to keep his board fully apprised of how quickly his pension benefits were accumulating. “Mr. Grasso’s duty is to be fully informed and to see to it that the board was fully informed,” he wrote. “He failed in this duty.”

    From 1999 to 2002, as Mr. Grasso’s annual pay soared to a high of $31 million one year, while his supplemental executive retirement plan, or SERP, grew at an even faster clip, topping out at more than $100 million in 2003 when Mr. Grasso made the decision to withdraw the money.

    That decision — which, according to the depositions of his fellow directors, he made because he was fearful that another board would prevent such a withdrawal — set in motion the events that would lead to the public outcry over his pay and his eventual resignation.

    In the subsequent years, all the participants have been deposed over the matter, with many directors on the wider board contending that they had no idea of how fast Mr. Grasso’s retirement plan had grown.

    In his decision, Justice Ramos drew the crucial conclusion that Mr. Grasso did not inform members of his board about his escalating retirement plan.

    “Mr. Grasso’s failure to disclose the amount of his SERP thwarted the compensation committee from performing its duty,” Justice Ramos wrote. “Year after year, it made decisions to pay him without knowing his true compensation.”

    The judge also ruled that Mr. Grasso was in violation of his contract when he withdrew more than $35 million in accumulated pension savings in 1995 and 1999. Because he was not yet retired, Mr. Grasso should not have taken this money, the judge said, and he is now obligated to treat the payments as a loan and pay them back with interest.

  2. Give back $80,000,000?

    That's one POed Gnome!!! :p


  3. That's not too bad pay for ringing a bell twice a day.
  4. I do not understand WTF his problem is. Is he that caught up with his image that he will deny the scam that NYSE is, let alone his absurd compensation at the expense of mom & pop?

    Just take your millions and bounce from the country.

  5. He's already paid the tax on that payout. He'll be lucky to be solvent after the 80mm is disgorged. Beautiful.
  6. v Hmm, isn't ther some way to file an amended return.

    I never had to give back my millions so I would not know.

  7. Yeah, of course. Tongue in cheek. I pray the midget get's hit for tax evasion as well.
  8. Is IRS going to pay him back ? or perhaps tell him to earn 100 million some place else and then call it even? :)
  9. mss


    There may be other rules that apply here especially since the judge characterized some of the prior amounts received as loans. The general rule for these types of repayments of amounts that were received under a "claim of right," however, is that you do not amend prior returns. You treat the repayment as a deduction in the year paid. If he pays the $80,000,000 in a single year, chances are that would generate a net operating loss for the year of payment. Most of the excess loss could be carried back to the two years prior to the payment year and treated as a deduction in those years. To the extent he did not use up the full $80,000,000, the remainder could be carried forward as a deduction for a maximum of 20 years.

    If he does make the payment and the general rules apply, there is a good chance he will never get the full benefit of the deduction.
  10. bighog

    bighog Guest

    Grasso should be told to return the money, get a rug and then get lost.
    #10     Oct 20, 2006