Spitzer Plans More Nyse Charges

New York State Attorney General Eliot Spitzer is planning to file civil charges against at least two other New York Stock Exchange officials, in addition to former chairman Richard Grasso. NEWSWEEK has learned that Spitzer is targeting Kenneth Langone, a former NYSE board member who also heads his own brokerage firm, and Frank Ashen, the exchange's former head of compensation.

The charges, which are likely to be filed Monday unless a last-minute settlement is reached, will be the culmination of Spitzer's five-month investigation into Grasso's massive pay package.

People close to the inquiry say the New York Attorney General has gathered evidence that the three executives--Grasso, Langone and Ashen--may have misled the board about the terms of Grasso's contract, which led them to approve his $139.5 million pay package. Langone and Grasso had no immediate comment. Ashen could not be reached for comment.

Spitzer's goal in filing the charges is to force Grasso to return a chunk of his pay. Grasso has so far rebuffed attempts by Spitzer to persuade him to return as much as $50 million of the $139.5 million he received last year before he resigned from the exchange amid an avalanche of negative publicity over the size of the pay package.

After the controversy, the NYSE's new chairman, John Reed, launched an investigation of Grasso's pay deal and handed his initial findings to Spitzer, who has made a name for himself uncovering fraud and abuse on Wall Street. Since January, Spitzer has been investigating Grasso's compensation package under a New York state law that says the compensation for the heads of not-for-profit organizations like the NYSE must be "reasonable." Grasso maintains his pay package was reasonable. He says he spent his entire career at the exchange, had opportunities to work elsewhere and his pay deal was approved by the CEOs of some of Wall Street's biggest firms.

As the investigation draws to a close, Wall Street is bracing for a long war. Grasso says he's willing to fight it out to clear his name. As NEWSWEEK reported earlier, Grasso says he wants an apology from the exchange for destroying his reputation. He says he can show how NYSE officials were fully aware of the details, or should have been, when they approved his contract.

If the charges come down as expected, the Grasso camp is likely to argue that Spitzer's choice of targets reflects political favoritism. Former New York state comptroller H. Carl McCall, a prominent New York state Democrat, was head of the NYSE compensation committee that approved Grasso taking his $139.5 million package last year. But he is not likely to be charged, according to people familiar with the case. McCall, however, did give testimony to Spitzer's office and the SEC earlier in the week over the Grasso pay controversy, NEWSWEEK has learned. McCall, through a spokesman, had no comment.