New York Attorney General Eliot Spitzer’s legal playbook for recovering some of the $140 million paid to former New York Stock Exchange Chairman Richard Grasso is likely to draw on state law applied to Adelphi University seven years ago.
Adelphi and the New York Stock exchange share an important characteristic that will guide Spitzer in the pursuit of Grasso’s bonanza: Both are not-for-profit corporations under New York state law.
“As a not-for-profit, (the NYSE) lives and exists within a different framework,” Spitzer said at a news conference on Monday announcing a civil lawsuit against Grasso. Compensation must be commensurate with services rendered, he added.
“You can’t pay the head of not-for-profit that much money — close to $200 million,” Spitzer said. Grasso has collected $140 million of an overall package that is valued at nearly $190 million. Spitzer said he will seek the return of more than $100 million.
Soon after Grasso’s pay package was disclosed late last summer, he resigned, ending a career at the exchange that began in 1968.
In the Adelphi case, the New York State Board of Regents removed all but one of the trustees overseeing the private university, based in Garden City, New York.
With the trustees removed, the president — who technically could not be removed by the regents — later left the school.
The Board of Regents said the trustees permitted then-university President Peter Diamandopoulos to pocket a “compensation package unparalleled among presidents of comparable universities in the face of plummeting student enrollment, rising tuition and fees, shrinking student services and course offerings.”
In their argument, the Regents cited New York state’s Not-for-Profit Corporation Law. Such entities, as stated in the document, have the power to hire executives and “fix their reasonable compensation … Such compensation shall be commensurate with services performed.”
Diamandopoulos, now a faculty member in the Boston University philosophy department, did not immediately return a call seeking comment. He is scheduled to teach History of Ancient Philosophy in the fall 2004 semester.