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US: N.Y.S.E. Executive Tells of Altering Documents to Hide Grasso's Full Payout

by Jenny AndersonThe New York Times
April 7th, 2006

A senior human resources executive at the New York Stock Exchange has told lawyers that she altered documents, at the request of her boss, to hide the full amount of compensation earned by Richard A. Grasso, the former chief executive of the exchange, a transcript of her deposition says.

The executive, Dale B. Bernstein, who in 2003 was executive vice president for human resources, said that she was instructed by her boss, Frank Z. Ashen, to hide, in an Excel spreadsheet, two columns of data that provided additional detail about Mr. Grasso's 1999, 2000 and 2001 compensation. She said she hid the columns with the bonus and total compensation information in documents that were provided to the compensation committee, but included that information in documents given to the finance department, which had to make the appropriate bookkeeping entries.

"I clicked 'hide column,' " she said in the deposition, which was provided by a person close to the case.

Her deposition suggests that Ms. Bernstein will be an important witness for Eliot Spitzer, the New York attorney general, in his lawsuit against Mr. Grasso, Kenneth G. Langone and the exchange itself. The lawsuit contends that Mr. Grasso's $139.5 million pay package violated New York's not-for-profit laws and contends that information provided to the exchange's board was "materially incomplete, inaccurate and misleading."

Ms. Bernstein, through a spokesman at NYSE Group, declined to comment.

The case rests on whether the board, filled with Wall Street luminaries and leading corporate executives, was fully aware of the compensation package it approved. Mr. Grasso and Mr. Langone have said the board was fully informed about the compensation and cite witnesses saying as much.

Yet at least one former N.Y.S.E. executive, Charles J. Bocklet Jr., a former vice chairman of the exchange who once owned his own specialist business, has testified otherwise.

A trial of the lawsuit, which was filed in May 2004, is scheduled to begin on Oct. 30.

Yesterday, Justice Charles E. Ramos of the New York State Supreme Court in Manhattan denied the New York Stock Exchange's request to delay the trial because of scheduling conflicts. He also denied a request by Mr. Grasso's lawyers to depose Mr. Spitzer and implored the two sides to settle the case.

"It's not going to do anyone any good to try this case," Justice Ramos said, according to Bloomberg News.

Mr. Spitzer's lawsuit contends that the board was not aware of $18 million in bonus award money, called the "capital accumulation plan," or CAP.

Ms. Bernstein testified that at the request of Mr. Ashen, she hid the columns with those CAP payments, and the total compensation that would have included it. Ms. Bernstein testified that she would have preferred not hiding the columns, but was comforted that the CAP awards were disclosed in the footnotes.

When queried if she would have included the data, she said the decision "was not mine to make."

In a motion to dismiss the civil charges against him, Mr. Langone's lawyers argue that the very documents Ms. Bernstein helped prepare � the ones lacking the CAP bonus � were taken out of context because the board was fully aware of how the CAP program functioned.

Mr. Langone's motion points to a footnote, below the chart without the columns of bonus data, which states, "In 1999, Mr. Grasso will receive 50 percent of his variable compensation in the capital accumulation plan."

The motion argues that the board approved Mr. Grasso's participation in the CAP plan in 1999 and was reminded of it at various meetings, including the February 2000 board meeting and an April 2001 board meeting.

The motion also notes that the document Ms. Bernstein prepared that lacks the columns was not distributed to the full board.

"This 'failure to disclose' is best understood as a 'failure to remind' the board of its own earlier 1999 decision to grant Grasso this very compensation," Mr. Langone's motion said.

In 2001, a worksheet that details Mr. Grasso's compensation, again without the CAP and total compensation columns, includes a slightly different footnote, indicating "Mr. Grasso will also receive a capital accumulation award equal to 50 percent of variable compensation."

Mr. Langone's motion includes comments from a number of board members, reflecting that they understood the CAP program and did not need the columns to understand what the footnote meant. Both Mel Karmazin, the former president of Viacom and current chief executive of Sirius Satellite Radio, and David H. Komansky, the former chief executive of Merrill Lynch, testified that "also" meant in addition to, and they were clear about the amount of money at stake.

"Ms. Bernstein's deposition testimony confirms what every other witness has said � no one was misled about the compensation," said Jim McCarthy, a spokesman for Mr. Langone.

"While Ms. Bernstein may have preferred certain charts to be formatted differently, she clearly testified that no one on the board � including Mr. Langone � had anything to do with the formatting of charts and that the information provided to the compensation committee and the board was accurate."

Mr. Bocklet, a former vice chairman of the exchange, testified differently in his deposition. He said he believed the CAP awards were included in the "total" amounts presented to him.

For example, in 2000 he believed that Mr. Grasso was to receive $15 million, the amount indicated in the worksheet for that year in the "total cash compensation" column. He thought the number included the CAP money.

"That's the number I voted on, that's the number I believed he was getting," Mr. Bocklet said in the deposition, which was provided by the same person. "And as I sit here today, I don't recant it."

Mr. Bocklet could not be reached last night for comment.

Mr. Grasso received $26.8 million in 2000, including $6.8 million in CAP awards and a $5 million bonus.

Mr. Bocklet testified that he and Mr. Grasso were friends whose families visited each other.

Despite that friendship, Mr. Bocklet recounted Mr. Grasso confronting him about his compensation. During a meeting with Mr. Ashen, the former head of human resources at the exchange, Mr. Bocklet said he made a face about a proposed $5 million bonus for Mr. Grasso. Soon afterward, Mr. Grasso called him into his office, which was across the hall. "I walked in and he asked me if I had trouble with the bonus, the money or something."

Mr. Bocklet said he was embarrassed.

"Quickly I felt the bottom drop out. I said, 'Oops.' I said, 'Well, I hope you are happy with it.' "



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