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Former New York Stock Exchange chief Richard A. Grasso countered the state attorney general’s lawsuit against him Tuesday by naming the exchange and current NYSE chairman John Reed in a $50 million countersuit. In the countersuit, a copy of which was obtained by The Associated Press, Grasso claims the NYSE breached its contract with him by withholding tens of millions of dollars in additional salary, and by “maliciously disparaging him through Mr. Reed’s false and defamatory statements.” Grasso is also seeking the dismissal of part of a lawsuit by Attorney General Eliot Spitzer, who is seeking the return of the bulk of the $187.5 million compensation package that led to Grasso’s resignation last September. “This is one step in the process, and we are confident that as the case progresses, that the attorney general’s claims will prove to have no merit and that Mr. Grasso is the only person entitled to any recovery in this matter,” Grasso spokesman Eric Starkman said. Grasso’s lawsuit said his employment agreements in 1999 and 2003 contained a “nondisparagement” clause, in which the exchange and its executives agreed not to make any statements against Grasso should he leave his position. Grasso claims Reed disparaged him in the media in an attempt to pressure him into foregoing some $48 million in additional compensation and returning at least part of the money already given him. “The exchange, through its interim chairman, Mr. Reed, began a campaign of false and defamatory statements to the media, disparaging Mr. Grasso and causing harm to his reputation,” Grasso’s suit said. “Mr. Reed undertook this action in bad faith, with knowledge that what he was telling the media about Mr. Grasso’s behavior and liability was false.” Grasso has repeatedly claimed he is not seeking personal gain from any countersuit, and said in the suit he would donate any damages received to charity. Grasso is also seeking dismissal of one claim within Spitzer’s suit, dealing with $36.5 million that Spitzer claimed was an illegal loan, but that Grasso maintains was part of his contract. The dismissal petition said that even if the court decides the money was a loan, the NYSE was entitled to offer it because it is a board of trade, Starkman said. Dan K. Webb, an attorney for the NYSE, said the exchange would “vigorously defend” itself against Grasso’s countersuit. “We believe these claims are entirely without any legal or factual merit whatsoever,” Webb said in a statement. Deputy attorney general Avi Schick told The Associated Press Grasso’s failure to seek dismissal of the entire suit, a common legal tactic, was a huge concession to Spitzer’s case. “I think it’s a testament to the strength of our complaint and the evidence we’ve compiled,” Schick said. “It’s impossible for them to say there’s no merit here.” Schick also criticized Grasso’s statement that any damages would go to charity, calling it a legal tactic to ask a potential jury to look past the government’s case. “You read his counterclaim, you come away with the same thought as you came away with after reading our suit. He got paid a gross amount of money in an utterly complicated system that nobody could quite figure out,” Schick said. Spitzer sued Grasso and former compensation committee chairman Kenneth Langone on May 24, claiming Grasso and Langone misled the NYSE board of directors about Grasso’s pay package and, in some cases, bullying board members into approving it. Spitzer is seeking more than $100 million in damages from Grasso, and $18 million from Langone — the amount Spitzer alleged that Langone hid from his fellow compensation committee members. Grasso and Langone moved the case to U.S. District Court in June, claiming the NYSE’s status as a federally regulated entity mandated a federal trial. On Monday, Spitzer filed to have the case remanded back to a state court, since Grasso was accused of breaking the state’s not-for-profit laws regarding fiduciary responsibility. Michael Zuppone, a civil litigator and partner at Paul Hastings, Janofsky and Walker, said Grasso’s response was “on par” with major civil cases. He added that the nondisparagement claim is relatively common in executive compensation packages at major companies. Zuppone disputed Schick’s contention that Grasso’s lack of a motion to dismiss the entire case added any validity to Spitzer’s complaints. “Grasso initiated removal to federal court, and Spitzer said just yesterday there is no federal question here,” Zuppone said. “Until you are settled on what court is going to have jurisdiction over the proceeding, it would be premature to have a motion to dismiss.” A spokesman for Langone, whose separate response to Spitzer’s lawsuit is due no later than Friday, said Grasso’s countersuit showed Spitzer’s case to be “flawed and misguided.” “Most people realize his case is tainted by politics, but if Mr. Spitzer thinks it will help his ambitions, he has underestimated New Yorkers, too,” Langone spokesman Jim McCarthy said. “Taxpayers would be right to ask why they are paying for Spitzer’s wrongheaded lawsuit, especially when they won’t gain a nickel how the case turns out.” Copyright 2004 Associated Press. All Rights Reserved. This material may not be published, broadcast, rewritten, or redistributed.

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