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.