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Report: Grasso pressured floor trader

/ Source: The Associated Press

Ousted New York Stock Exchange Chairman Dick Grasso pressured a floor-trading firm to buy more shares in American International Group Inc. after the insurer’s chairman complained to him, according to a newspaper report.

Grasso made the suggestion to the firm after receiving written complaints from AIG Chairman Maurice Greenberg, a previous NYSE director, The Wall Street Journal reported in Friday editions, citing unnamed sources familiar with the matter.

Greenberg was a member of the NYSE’s compensation committee that determined Grasso’s $187.5 million pay package. Outrage over the size of the compensation led to resignation two weeks ago.

Greenberg complained in an Oct. 23, 2002 letter to Grasso about Goldman Sachs Group Inc.’s Spear, Leeds & Kellogg unit, the “specialist” assigned to facilitate trading in AIG, the Journal said.

On multiple occasions following Greenberg’s complaints, Grasso went to the trading floor and suggested that Spear increase its buying of AIG shares, the Journal said.

The Journal said buying the additional shares resulted in roughly $14 million in trading losses for Spear in the past few years.

Grasso declined to comment through a representative, the Journal said.

Greenberg told the Journal that for years he has criticized the NYSE specialist system, which assigns firms to match buy and sell orders from investors. The specialist firms use their own money to buy shares when buyers and sellers do not agree on a price.

“If I think the specialist is not doing the job he should be doing in buying stock when the stock is under pressure ... then I’m going to complain,” Greenberg told the Journal, adding that it would be wrong to “read something sinister” into his actions.

A spokesman for Goldman Sachs told the Journal that Spear believed it had acted appropriately in the situation.