NEW YORK – Former New York Stock Exchange (search) chief Richard A. Grasso (search) lashed back at the exchange Tuesday, suing it for at least $50 million, claiming breach of contract and defamation on the part of current NYSE chairman John Reed (search).
In the countersuit, a copy of which was obtained by The Associated Press, Grasso claims the NYSE breached its contract with him by witholding "tens of millions of dollars" in additional salary, and by "maliciously disparaging him through Mr. Reed's false and defamatory statements."
Grasso is also seeking the dismissal of part of a lawsuit by state Attorney General Eliot Spitzer (search), who is seeking the return of the bulk of the $187.5 million compensation package that led to Grasso's resignation last September.
"This is one step in the process, and we are confident that as the case progresses, that the attorney general's claims will prove to have no merit and that Mr. Grasso is the only person entitled to any recovery in this matter," Grasso spokesman Eric Starkman said.
Grasso's lawsuit said his employment agreements in 1999 and 2003 contained a "nondisparagement" clause, in which the exchange and its executives agreed not to make any statements against Grasso should he leave his position. Grasso claims Reed disparaged him in the media in an attempt to pressure him into forgoing some $48 million in additional compensation and returning at least part of the money already given him.
"The Exchange, through its interim chairman, Mr. Reed, began a campaign of false and defamatory statements to the media, disparaging Mr. Grasso and causing harm to his reputation," Grasso's suit said. "Mr. Reed undertook this action in bad faith, with knowledge that what he was telling the media about Mr. Grasso's behavior and liability was false."
Grasso has repeatedly claimed he is not seeking personal gain from any countersuit, and said in the suit that he would donate any damages received to charity.
Grasso is also seeking dismissal of one claim within Spitzer's suit, dealing with $36.5 million that Spitzer claimed was an illegal loan, but that Grasso maintains was part of his contract. The dismissal petition said that even if the court decides the money was a loan, the NYSE was entitled to offer it because it is a board of trade, Starkman said.
Deputy attorney general Avi Schick told The Associated Press Grasso's failure to seek dismissal of the entire suit, a common legal tactic, was a huge concession to Spitzer's case.
"I think it's a testiment to the strength of our complaint and the evidence we've compiled," Schick said. "It's impossible for them to say there's no merit here."
Schick also criticized Grasso's statement that any damages would go to charity, calling it a legal tactic to ask a potential jury to look past the government's case.
"You read his counterclaim, you come away with the same thought as you came away with after reading our suit. He got paid a gross amount of money in an utterly complicated system that nobody could quite figure out," Schick said.
Dan K. Webb, an attorney for the NYSE, said the exchange would "vigorously defend" itself against Grasso's countersuit.
"We believe these claims are entirely without any legal or factual merit whatsoever," Webb said in a statement.
Spitzer sued Grasso and former compensation committee chairman Kenneth Langone (search) on May 24, claiming Grasso and Langone misled the NYSE board of directors about the former's pay package and, in some cases, bullying board members into approving it.
Spitzer is seeking more than $100 million in damages from Grasso, and $18 million from Langone — the amount Spitzer alleged that Langone hid from his fellow compensation committee members.
Grasso and Langone moved the case to U.S. District Court in June, claiming that the NYSE's status as a federally regulated entity mandated a federal trial. On Monday, Spitzer filed to have the case remanded back to a state court, since Grasso was accused of breaking the state's not-for-profit laws regarding fiduciary responsibility.
Langone's response to Spitzer's suit was expected no later than Friday, the court-imposed deadline for responses.