“The bitter dispute between the New York Stock Exchange and its former chairman, Richard A. Grasso, landed in court yesterday as the New York attorney general, Eliot Spitzer, filed a long-awaited civil suit demanding that Mr. Grasso repay more than $100 million of his ‘excessive; $139.5 million pay package,” writes Landon Thomas in today’s Wall Street Journal.

“The lawsuit sets the stage for what could be a dramatic trial, with powerful heads of Wall Street firms who served on the exchange’s board likely to be put in the uncomfortable position of having to testify publicly about how they came to approve a compensation package that some of them later disavowed.”

“The 52-page complaint filed in New York State Supreme Court by Mr. Spitzer paints a harsh picture of Mr. Grasso, citing new evidence for contending that he inflated his pay and deliberately misled his high-powered board about many details of his package to enhance his pay above and beyond a benchmark of comparable chief executives.”

“Although the other board members of the exchange voted for Mr. Grasso’s pay package, the suit is narrow in focus, naming only one other defendant — a former director, Kenneth G. Langone, who is a friend of Mr. Grasso and was the chairman of the compensation committee from June 1999 to June 2003, the years when Mr. Grasso’s annual pay peaked.”

“Mr. Grasso, who has vociferously defended his pay as fair given the success of the exchange during his tenure as chairman from 1995 until he was forced out last fall, said in a statement: ‘I’m disappointed that New York’s attorney general has chosen to intervene in what amounts to a commercial dispute between my former employer and me. I look forward to a complete vindication in court.’ “

“In what could help his case against Mr. Grasso, Mr. Spitzer also disclosed that Frank Z. Ashen, the internal compensation expert at the Big Board, had decided to cooperate with authorities, agreeing to pay back $1.3 million of compensation he received. Among the new evidence presented yesterday was a statement from Mr. Ashen, a 25-year employee at the exchange, that Mr. Grasso did not disclose to the board $18 million of bonus payments. Mr. Spitzer said that the cooperation of Mr. Ashen, who originally was going to be named as a defendant in the suit, was crucial in putting the case together.”

” ‘There is a simple reality here,’ Mr. Spitzer said. ‘Mr. Grasso was paid too much. He has the money in his checking account and he has an obligation to return it.’ Mr. Spitzer reiterated his assertions that Mr. Grasso’s pay was unreasonable for the head of a quasi-public institution like the stock exchange. Mr. Grasso’s total compensation was actually close to $200 million, Mr. Spitzer noted, including an additional $48 million in future compensation that Mr. Grasso agreed to forgo when he left the exchange.”

“The lawsuit also portrays a cozy relationship that existed between Wall Street and Mr. Grasso, at least until the details of his pay package became public. It contends, for example, that Mr. Grasso gave favorable treatment to Wall Street firms by not pursuing allegations of conflicts of interest involving research analysts during the period when the executives of those firms were approving his pay.”

“Mr. Grasso has contended that his pay package, which included not only his base pay and bonuses but deferred compensation and accumulated pension benefits, was not outsized compared with those of top executives of Wall Street firms. It was, however, much larger than the pay of the head of the Nasdaq stock market and other similar institutions.”

“Mr. Spitzer is suing Mr. Grasso under a New York State law that regulate not-for-profit organizations, which hold that the chief executive for a quasi-public institution can be held liable for being paid an unreasonable amount not “commensurate” with his official duties.”