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NEW YORK � Attorneys for former New York Stock Exchange Chairman Richard Grasso argued Wednesday that Grasso had fulfilled his fiduciary duty to the exchange and should be allowed to keep his $187.5 million compensation package. “[He acted] as a reasonably prudent person would act,” Gerson Zweifach, a Washington D.C.-based partner at Williams & Connolly who represents Grasso, said in oral arguments before an Appellate Division, First Department, panel. It was the third argument in the Appellate Division related to the state’s challenge of Grasso’s compensation. Grasso asked the Appellate Division to reverse an Oct. 18, 2005, decision by Manhattan Supreme Court Justice Charles Ramos finding that Grasso breached his duties to the exchange. Justice Ramos said Grasso failed to keep the exchange’s compensation committee informed as his supplemental retirement fund grew from $36 million to $100 million in just three years. But attorneys for Grasso argued yesterday that the “all-star” members of the committee were provided with the necessary information and consultants. “If [members of the compensation committee] felt like they were . . . being hoodwinked . . . they would have spoken up,” Zweifach said. “This was a willful, sophisticated group.” At least one judge on Wednesday’s panel, however, expressed skepticism about this argument. “He has an independent fiduciary duty to the Stock Exchange,” said Justice Angela Mazzarelli. “[The] argument that the [exchange] board failed its fiduciary duty . . . doesn’t excuse Grasso.” Zweifach emphasized that Grasso was not present when the compensation committee deliberated about his salary. But Justice David Saxe commented that Grasso could have done more to ensure that the compensation process was executed in an ethical fashion. “The obligation was greater than removing himself from the process and appointing consultants,” Justice Saxe said. Avi Schick, who represented the state attorney general’s office, quoted several consultants who testified that the compensation committee was never made aware of how much Grasso stood to receive from his retirement plan. Schick recently stepped down as deputy attorney general to take a position as president of the Empire State Development Corp. and chief operating officer of its downstate operations. He said Grasso created and implemented a “template” for the committee’s deliberation of executives compensation. Schick said Grasso “led the discussions and presentations” involving other executives. But he said Grasso’s presentations did not include information about a supplemental executive retirement plan like the one he would later receive. Thus, Schick said, Grasso must have known that the discussions about his benefits would not include complete information about his benefits. As a result, he said, Grasso must return the money. “There has to be disgorgement,” Schick said. The state has claimed that Grasso owes about $112 million. Grasso also argued Wednesday that Justice Ramos erred in deciding issues of fact in granting partial summary judgment to the government. “It was inappropriate,” Zweifach said. Attorneys for Grasso and the government also disagreed about whether he had to repay what the government claims to be more than $6 million in loans. Grasso has insisted the payment was not a loan. Beth Bar is a reporter with the New York Law Journal, a Recorder affiliate.

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