Spitzer to challenge Grasso in court

FORMER New York Stock Exchange chairman Dick Grasso looks likely to be the target of a lawsuit from market regulators, which could be launched as early as today.

Eliot Spitzer, the New York state attorney general, is widely expected to press charges claiming that Grasso's NYSE pay package of more than $180m (£101m) was inappropriate and unreasonable.

Spitzer was called in by John Reed, the current NYSE chairman, after the Exchange's own negotiations with Grasso to recover some of the money collapsed. Grasso is not only refusing to return any money but threatens to launch a lawsuit of his own to recover $40m that he claims the Exchange still owes him.

Spitzer may use a New York law that allows him to prosecute directors of not-for-profit organisations - as the Exchange is - who are deemed to have failed in their fiduciary duties.

The state law also requires pay for directors of not-for-profit organisations to be commensurate with their services. Spitzer is expected to argue that Grasso's pay went far beyond anything that was appropriate for the job.

Two other former NYSE directors, including Grasso's close friend Kenneth Langone, may also be targeted by Spitzer. But it looks increasingly likely that the big Wall Street investment bank executives who sat on the NYSE board when Grasso received his mammoth pay award will escape action.