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HURDLES AHEAD FOR SPITZER IN GRASSO CASE NEW YORK — The legal battle between New York Attorney General Eliot Spitzer and Richard Grasso, the former head of the New York Stock Exchange, will be fought in state, not federal, court a federal judge ruled Thursday. The decision by Southern District Judge Gerard Lynch in State v. Grasso rejected Grasso’s claim that federal laws pre-empted Spitzer from bringing a suit against a federally regulated entity like the exchange. Supreme Court Commercial Division Justice Charles Ramos will preside over the case first filed by Spitzer on behalf of the NYSE on May 24. The attorney general’s essential argument is that Grasso’s compensation package of $187.5 million was unreasonable under New York’s laws governing nonprofits and should be returned. It is a significant victory for Spitzer to have fended off Grasso’s move to change jurisdiction. Judge Lynch made it clear in his decision that the federal laws regulating the exchange do not prevent the attorney general from bringing an action based on state claims. This was a key defense presented by Grasso in his court filings. Lawyers and nonprofit experts, however, point out that Spitzer faces significant legal hurdles in showing that the former stock exchange CEO and chairman violated New York’s nonprofit laws. They note that the nonprofit laws are ambiguous about whether they cover all nonprofits or just traditional charities. — New York Law Journal N.Y. LAW APPLIES TO CALIFORNIA DRUG DEALER NEW YORK — New York correctly prosecuted a man for criminal possession of a controlled substance even though both he and the drugs were in California at the time of the arrest, New York’s Appellate Division, First Department, has ruled. Stating that the case was one of first impression, the panel found Criminal Procedure Law 20.20 to be controlling. That law states that a “person may be convicted in the criminal courts of this state of an offense [when] conduct occurred within this state sufficient to establish an element of such offense.” The elements of criminal possession consist of “merely the knowing and unlawful possession of four or more ounces of a narcotic drug,” wrote Justice David Saxe for the unanimous, five-judge panel in People v. Carvajal, 4350. “Such possession may be physical, or it may be constructive,” he said. Here, “there was ample evidence that regardless of where he was situated, defendant at all times exercised continued dominion and control over the drugs that were ultimately seized and the locations where the subject drugs were discovered, as well as over the employees who were found in possession of the drugs.” Alvaro Carvajal’s 1994 arrest capped a two-year sting involving one of the nation’s largest drug networks, a unit of the Cali Cartel that distributed up to 10,000 pounds of cocaine per month. The investigation uncovered a complex operation that transported cocaine from San Francisco to New York via a fleet of cars with hidden compartments. — New York Law Journal

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