Former Exchange Chairman Denies Spitzer's "Air Grasso" Charges

The charge that the New York Stock Exchange's embattled former Chairman Dick Grasso used the exchange's jet improperly has been raised by the headline-hungry New York state Attorney General, Elliot Spitzer. 

Spitzer, widely expected to run for Governor, is suing Grasso for violating New York laws relative to non-profit entities, and demanding that Grasso disgorge $100 million.

The two men have been fighting this battle all week -- largely in the pages of the New York Post. There seems to be personal enmity between the lean, bald, grandstanding Spitzer and the blocky, shaven-headed, combative Grasso.

Not surprisingly, the sides have relatively few points of agreement; they even state Grasso's compensation differently, with his partisans claiming it's around $140 million and Spitzer's calling it "almost $200 million." (The Webb Report, the result of an NYSE investigation into Grasso's finances, reportedly sets the number at $190 million plus).

Along with other charges, unrelated to the jet, Spitzer charges, specifically, that the plane was used to fly Spitzer's son, unaccompanied, to Switzerland in January, 2003, and that it was used several times by Grasso, friends and family members for Florida vacations in that same year.

Grasso's spokesman counters that the document showing Richard Grasso Jr. (or "Little Dick Grasso," as the Post calls him) as the only passenger on the round-trip flight is wrong, and that using the jet for the Florida vacations was justified by security concerns, concerns raised by a Grasso employee.

Grasso may not have actually travelled on one of the NYSE's two jets, Gulfstream IV  N465QS (1463), and Citation X N939QS (750-0193); the Exchange is a NetJets participant, and you get the plane that's available when you need it, which may or may not be your "own."

The legality of a corporate jet's use depends on the type of corporation. In closely held companies, it becomes a perk for the owners or bosses, and that may be perfectly legal. In public companies, it may be a breach of fiduciary responsibility -- it's the stockholders' jet, not the CEO's, however attached to it he may become. 
In non-profits, personal use could also be a violation of the non-profit's charter or of laws controlling such entities, which vary among the states. In any case, it may be a taxable benefit when used for personal purposes, which would need to be enumerated as part of the recipient's compensation -- in the case of an American like Grasso, on his W-2 form. This benefit is normally construed to be worth only the value of first class air tickets, so the tax structure is already skewed to benefit bizjet users.

Spitzer is charging that even under this advantageous scheme, by which the four jet flights together should have been reimbursed or charged as compensation at about $35,000, Grasso stiffed the stock board -- and the tax man. Grasso denies all the charges.

Spitzer has demanded Grasso's tax returns for the years in which he headed NYSE; Grasso has resisted, although so far the court rulings have gone Spitzer's way.

Grasso has been playing hardball in return, including filing suit against the Exchange for more money, against his successor John Reed for defamation (this suit was dismissed this week), and against former New York comptroller and NYSE board member H. Carl McCall, with the bizarre claim that Grasso's high compensation was McCall's fault.

FMI: www.nyse.com