Grasso gains ground in pay battle

FORMER New York Stock Exchange supremo Dick Grasso appears to be winning his battle to keep more of his $188m (£103.4m) pay package, with regulators now looking likely to settle out of court.

Insiders say Grasso has been threatening to call several of America's most senior chief executives to the witness stand if the matter goes to trial.

Executives such as Maurice Greenberg of American Insurance Group and Mel Karmazin of Viacom would be deeply embarrassed to have to give evidence in a trial as they were among many influential people who approved the payment to Grasso.

While they may have little influence over New York Attorney General-Eliot Spitzer, as the heads of some of the largest companies quoted on the Exchange they are in a strong position to influence interim NYSE head John Reed to use his influence to stop the matter going to court.

'I would think there's a lot of very influential people pressuring Reed to get this thing settled, keep it out of court and avoid a black eye,' said Thomas Fitzpatrick, a corporate defence lawyer who used to be a federal prosecutor.

The NYSE recently asked Spitzer and the Securities and Exchange Commission to investigate Grasso's pay and whether he could be forced to return some of it.

Spitzer, in particular, was thought likely to take legal action because he has jurisdiction over not-for-profit organisations in New York. But even he now says an out-of-court settlement appears most likely.

Spitzer and the SEC relied on a report compiled for the NYSE which said that, although Grasso appears to have manipulated the Exchange's compensation committee, there was no clear evidence that he broke any securities laws.

However, if prosecutors could show that the committee was not given the means to understand Grasso's contract properly, they might be able to prove the former chairman violated his duty to members.