Wall Street titans will continue to try to rewrite history, whitewashing their role in the malfeasance that led to the greatest economic cataclysm of the past 75 years. One recent example is a story told by Home Depot founder Kenneth Langone on July 26 in Bloomberg Businessweek about the case brought by the New York attorney general's office, when I was the attorney general, to recover more $100 million dollars in excess pay that was given to Dick Grasso, then the CEO of the New York Stock Exchange, a not-for-profit entity.
Langone would have you believe that the attorney general’s office brought the case because of "the evil of personal ambition blinding [Spitzer] to his responsibilities."
But facts matter, so let's get to the facts surrounding the case. Here is the report on Grasso’s compensation that John Reed, former co-CEO of Citigroup and the chair of the New York Stock Exchange, brought to me when I was attorney general. The report, done by Dan Webb—a former U.S. attorney in Chicago and one of the most respected prosecutors in the nation—concluded that Grasso was overpaid by at least $144 million dollars, because of "multiple flaws in the compensation and benefits process." Who was on the board and the very committee that gave Grasso this grotesque overpayment? The CEOs of the very companies that Grasso was supposed to regulate! Coincidence? Of course not.
Reed asked me, pursuant to the attorney general’s office's jurisdiction over not-for-profits, to pursue the matter. A judge entered summary judgment in our favor, concluding that Grasso had to repay tens of millions of dollars.
Despite all this, because the NYSE—after we had filed the lawsuit—had converted to become a for-profit entity, the defendants claimed the attorney general's office lost jurisdiction to seek recovery of the money. In a horrendous decision, a midlevel appellate court found for them on that issue—even though it was factually wrong. Here is what the dissenting judge, Judge Mazzarelli, wrote: "On its face, this argument is meritless."
She is correct. The majority decision was flawed legally and factually. Judge Mazzarelli made the correct point that there was a not-for-profit entity remaining on whose behalf the attorney general's office was still suing. We still had jurisdiction.
The attorney general's office had an automatic appeal of the decision: It chose not to make it. Perhaps the then-attorney general should be asked why not.
But let's be clear, the report accepted by the NYSE board, and by the trial court found Grasso was grotesquely overpaid by tens of millions of dollars, by a not-for-profit entity.
So Mr. Langone, you may not like these facts, but they are facts. Correcting the outrageous level of CEO compensation is critical to restoring sanity and trust to our economy.