updated 12/23/2003 8:32:18 AM ET 2003-12-23T13:32:18

Some of the New York Stock Exchange's seatholders are calling for public disclosure of a report the exchange plans to give its new board this week on how ex-chairman Dick Grasso became Wall Street's $187.5 million man.

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The report may provide grounds for asking Grasso to repay some of his millions. It looks closely at what led the previous board to agree to Grasso's extraordinary employment contract.

The document being compiled by former federal prosecutor Dan K. Webb contains some details that might be considered "embarrassing," according to interim NYSE chairman John S. Reed, and might even support a legal action.

"What does that report show that none of us have seen?" asked Muriel Siebert, a seatholder since 1968 who runs a discount brokerage. "If it shows everything was above board, well the NYSE board made a mistake. But if there was any malfeasance to it, I think Dick Grasso owes us some money."

It's unclear whether the exchange will file suit to recoup funds or seek an out-of-court settlement with Grasso, who stepped down in September amid a public uproar over the size of his compensation package. Grasso may be considering litigation, too; he could be entitled to even more money under his contract if it's found he was fired without cause.

At stake is $139.5 million in retirement benefits paid to Grasso in a lump sum earlier this year, an additional $48 million in deferred compensation that Grasso said he would forgo but did not legally forfeit, plus another $10 million in severance pay.

An NYSE spokesman declined comment Monday, and calls to Grasso's attorney, Kenneth C. Edgar Jr., were not immediately returned.

Reed, a former co-CEO of Citigroup Inc., has said the NYSE directors would examine the Webb report over the holidays, and would discuss it at their Jan. 8 board meeting. He was not certain whether the report would be made public, but said in a recent interview with The New York Times that its contents might support legal action against Grasso or the NYSE's former directors.

Grasso, a 35-year NYSE veteran, had been well-regarded since taking the top post in 1995, but his massive pay sparked a fury on Wall Street. He's made few comments since he stepped down, but in the past has said he never played a role in determining his own compensation. In fact, he's never been shown to have committed any wrongdoing. If the contract was negotiated in good faith, some say the NYSE should abide by the terms.

"People were outraged about the amount, no doubt, but this is business," said Todd Clark, head of listed equity trading at Wells Fargo Securities. "If you make a deal, you gotta stick to it."

Clark and other traders said they thought the two sides would rather settle than face a prolonged court battle. No matter what the report shows, most believed some deal would be reached _ if only to satisfy the regulators who are closely watching the NYSE's new administration.

"It's not like it was anything underhanded, but it looks bad, it looks greedy and it was way too much money," said Neil Massa, an equity trader at John Hancock Funds. "He may wind up giving some back, but it will be more of a symbolic gesture."

Legal experts noted that it is far easier for an organization to resist paying out more money than it is to retrieve funds. Some speculated that Grasso and the NYSE might call it even in a settlement, with each side agreeing to drop pending litigation _ meaning Grasso could keep the $139.5 million he's already been paid.

Both sides may have incentive to fight, however. The NYSE's reconstituted board, which includes just two members of the previous panel, and its newly anointed CEO, former Goldman Sachs Group president John Thain, may be looking to prove they are serious about reform. And the former chairman may wish to fight for his severance pay to show he was wrongfully dismissed.

Under pressure from the regulators like the Securities and Exchange Commission, the exchange must "at least make it appear that they vigorously pursued this money," said Steve Thel, professor of securities at Fordham University Law School. "If they fail to sue it may convince regulators they've done nothing to change their ways," he said.

In order to pursue the funds in court, the NYSE would have to prove that it should not be bound to the contract because the process that produced it was flawed, Thel said.

How the NYSE chooses to handle the report will be a litmus test for the new administration, said Scott Harshbarger, a former Massachusetts attorney general. Whatever deal the two sides make should be negotiated publicly, and not left to insiders, he said.

"I don't see how a new board can move forward with credibility without addressing what led to their creation," Harshbarger said. "Thain's first act cannot be to exonerate the old board. He's got to be seen as an independent force. As much as he wants to get this behind them, I think for him to lead into the future, he's got to find out what happened here."

Most market watchers believed that if there is any sort of duel between Grasso and his former employer, it would likely end in a draw.

"They've got internal political pressure and also public pressure to take a stab at recovering some of the money," said Rob Hegarty, a securities markets specialist at the Tower Group. "Frankly, I think if Dick Grasso gives any of it back, he's going above and beyond what he's required to do. My guess is that he'll use that $48 million as a bargaining chip, ... and if NYSE is smart, they'll take it and call this issue closed."

Copyright 2003 The Associated Press. All rights reserved. This material may not be published, broadcast, rewritten or redistributed.

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