For nearly five years, Richard A. Grasso was vilified for the riches he reaped while running the New York Stock Exchange.
But on Tuesday, a court ruled that Mr. Grasso could keep the $139.5 million he was paid.
Mr. Grasso, who symbolized for many the exuberance and excess of the now-faded bull market, won the final round in his long legal battle over the compensation he amassed during his eight years as head of the Big Board, when the New York State Supreme Court, Appellate Division threw out the remaining claims against him.
The 3-to-1 ruling brings to an end one of the ugliest fights in modern Wall Street history and hands a remarkable victory to Mr. Grasso against his antagonist, former attorney general — now former governor — Eliot Spitzer, who pressed the case against Mr. Grasso.
Mr. Spitzer’s successor as attorney general, Andrew M. Cuomo, said in a statement that he would not appeal the decision. “Thus, for all intents and purposes, the Grasso case is over,” the statement said.
A tireless cheerleader for the exchange, Mr. Grasso was lionized for his work in reopening it in the aftermath of 9/11.
But two years later he was forced out amid a furor over his pay, even though he maintained that the stock exchange’s directors, who included many Wall Street executives, approved his compensation. Mr. Grasso, who spent 35 years at the exchange, working his way up from a clerk to the chairman’s office, always insisted the fight was not about the money, but about his personal honor. He never showed any inclination to settle the case, despite pressure from Mr. Spitzer.
“Dick Grasso is gratified by the ruling of the appellate division,” said his lawyer, Gerson A. Zweifach, a partner at Williams & Connolly. “His devotion to the stock exchange never wavered, and neither did his faith that he would be vindicated by the courts.”
Mr. Grasso, in an interview on Tuesday with Bloomberg News, said, “Right now I’m going to turn to my family and we’re going to move on to the next chapter.” It is unclear, however, in light of his compensation, what Mr. Grasso’s legacy will be.
In Tuesday’s decision, the New York Supreme Court’s Appellate Division overturned a lower court’s ruling that Mr. Grasso hand over more than $100 million of his compensation.
The decision means the case was not decided on whether Mr. Grasso’s pay had been unreasonable but rather was thrown out because the exchange merged with Archipelago Holdings in 2006, becoming a public company. The appeals court concluded that the attorney general has no standing to sue Mr. Grasso since the exchange has been converted from a nonprofit entity to a for-profit corporation, negating the attorney general’s ability to sue on behalf of the public rather than for private shareholders.
The court also dismissed a single claim against Kenneth Langone, the co-founder of Home Depot and former head of the exchange’s compensation committee, who Mr. Spitzer said had misled the board.
“I have always stood firm for the decisions I made as a director of the N.Y.S.E. and I am glad this case has been resolved with my name and my integrity vindicated,” Mr. Langone said in a statement. “The previous attorney general’s waste of taxpayer resources on this matter ranks as one of the most misguided and irresponsible efforts in the history of that office.”
Mr. Langone said he, Mr. Grasso and the other directors of the exchange had spent $70 million defending themselves, costs that have been covered by insurance.
The end to the case stands in stark contrast to the initial uproar over Mr. Grasso’s pay, and the way Mr. Spitzer brought and pursued the case. The storm started in 2003, when Mr. Grasso’s compensation figure started to leak out. Quickly, the image of Mr. Grasso became a symbol of corporate greed.
Within the exchange, the issue surfaced when Mr. Grasso tried to cash out some of his retirement benefits in 2003. Some directors later said that Mr. Grasso had expressed concern that any future board would be less willing to give him the money, a charge Mr. Grasso has always denied. Whatever the case, the exchange’s compensation committee devised a contract to award him with an immediate lump sum payment of $139.5 million and an additional $48 million to be paid over four years for past and future work.
Some directors, including Henry M. Paulson Jr., then the head of Goldman Sachs, argued against paying out Mr. Grasso’s retirement benefits before retirement. Others, including Mr. Langone, said Mr. Grasso was entitled to money he had earned.
Ultimately, the board approved the payout to Mr. Grasso, who ran the exchange from 1995 until 2003. But when news of the additional $48 million surfaced, the directors demanded Mr. Grasso’s resignation. (Mr. Grasso never received that $48 million.)
Mr. Spitzer then sued Mr. Grasso, saying his pay had been unreasonable under New York’s nonprofit laws and that the amount had not been properly disclosed to directors. Under those laws, the attorney general is empowered to bring cases involving nonprofits on behalf of the public.
At the time, the case was explosive. Virtually none of the traders at the exchange had any sense of the magnitude of Mr. Grasso’s pay. Many were incensed that his pay soared when trading was becoming less profitable and fees were going up.
The case would unveil the inner workings of a board made up of a who’s who of Wall Street. Prosecutors deposed ranks of Wall Street heavyweights, including Mr. Paulson, who is now Treasury secretary, as well as former chief executives of Merrill Lynch, JPMorgan Chase and Bear Stearns, many of whom had conflicting reports about what they knew and did not know about Mr. Grasso’s pay.
“There was a very visceral and negative reaction from the public when the size of these compensation packages, Grasso and others, were disclosed,” said Carol M. Goodman employment litigator at Herrick Feinstein in New York. “The government responded by asking the courts to declare it was unreasonable, that there was a breakdown in corporate governance, that the compensation was not commensurate with the services rendered by the specific individuals.” The court has rejected those claims under the nonprofit law, Ms. Goodman said.
Mr. Cuomo’s decision to drop the case did not come as a complete surprise. Last week, the New York State Court of Appeals upheld a lower court ruling dismissing four of six counts brought by the attorney general.
“This ruling recognizes the substantial and significant changes the N.Y.S.E. has undergone since the case was brought,” said Richard Adamonis, a N.Y.S.E. Euronext spokesman.
