NEW YORK - The New York Stock Exchange asked state and federal regulators Thursday to help it recover about $140-million in "unreasonable compensation" paid to its former chief executive and chairman Dick Grasso.
The NYSE's board of directors forwarded an internal report by former federal prosecutor Dan K. Webb to the Securities and Exchange Commission and New York Attorney General Eliot Spitzer, asking that they "pursue the matter both on our behalf and as part of your broader responsibilities."
The report examines the decisions that led to Grasso's ouster Sept. 17, when he stepped down amid a public furor following the NYSE's revelation that he'd been awarded $187.5-million in deferred compensation and retirement benefits.
In a letter accompanying the report, interim chairman and CEO John S. Reed said members of the NYSE board believe "serious damage has been inflicted on the exchange by unreasonable compensation of the previous chairman and CEO, and by failures of governance and fiduciary responsibility that led to the compensation excesses as well as other injuries."
Grasso attorney Kenneth Edgar was unavailable for comment.
Some of the board members who approved Grasso's pay package could also end up in court.
Spitzer said the attorney general's office would review the report and investigate alongside the SEC to see if legal action is warranted to recover part of Grasso's pay.
The SEC said it would determine whether Grasso's compensation violated federal securities laws or the exchange's rules.
Because the NYSE is a not-for-profit member organization, a legal argument could be made that paying its top executive such a large sum was an abuse of its resources. Regulators could file a lawsuit or negotiate a settlement with Grasso. Some of the board members who approved Grasso's pay package could also end up in court.
The involvement of regulators piqued the interest of exchange members, some of whom had thought it increasingly unlikely that Grasso could be forced to pay back any of the money he'd accepted. Most were outraged when they learned the extent of his compensation last fall.
Reed launched the investigation into Grasso's pay in September.
As part of the NYSE's changes, the exchange agreed to split the responsibilities of chairman and CEO, and to appoint a chief regulatory officer. The NYSE board was overhauled as well. None of the current members served when Grasso's lavish package was negotiated.
On Thursday, the board appointed former Nasdaq Stock Market president and deputy chairman Richard G. Ketchum to the new regulatory post, effective June 2. He could start sooner if Nasdaq releases him from a noncompete agreement.
Ketchum, 53, worked with the Nasdaq market and its regulatory unit, the National Association of Securities Dealers, for 12 years. Before that he spent 14 years with the SEC, including eight as director of the division of market regulation. Since June, Ketchum has been general counsel of Citigroup.
Marshall Carter, chairman of the NYSE board's regulatory oversight and budget committee, said Ketchum's base salary has been set at $600,000, with target bonus of $600,000.
