Wachtell Lipton Rosen & Katz has been drawn into the controversy over the $187.5m pay package of former New York Stock Exchange (NYSE) boss Richard Grasso.
In a lawsuit filed last week (24 May) by New York Attorney General Eliot Spitzer, both Grasso and former NYSE compensation committee chairman Kenneth Lan-gone are being sued for violations of New York corporation law.
Wachtell is highlighted in the suit for playing a “significant role” in drafting the NYSE’s response to a Securities and Exchange Commission (SEC) request for more information about Grasso’s pay.
The suit claims that the response allegedly “mischaracterised” one of the schemes used to work out Grasso’s bonuses, the capital accumulation plan, as being effectively guaranteed rather than discretionary.
In a statement given as evidence, former NYSE human resources director Frank Ashen echoed the sentiment, adding that Wachtell “played a significant role in crafting and drafting” what became the final letter to the SEC.
Although Wachtell is not criticised, the elite New York firm’s advice looks likely to become one of the areas of focus as the controversy over Grasso’s payments comes to a head.
The complaint also mentions veteran Wachtell partner Martin Lipton’s role in advising Grasso, while also sitting on the NYSE special governance committee that was reviewing changes to executives’ compensation.
The case promises to be one of the highest profile of a string of rows over US governance standards in the wake of the collapse of energy giant Enron in 2001 and has been met with interest by New York securities lawyers.
One partner with a top 10 Wall Street firm commented: “Clearly, there is a question over how you can advise both Grasso and the NYSE, particularly on such a visible issue.”
Lipton was unavailable for comment.