Add Back the Legal Fees: Interesting juxtaposition of articles in today's Wall Street Journal.

Grasso Lawyers, NYSE Exchange Letters

By KATE KELLY
Staff Reporter of THE WALL STREET JOURNAL


The attorney representing former New York Stock Exchange chairman Dick Grasso has penned a strongly-worded letter to the Big Board, stating that he has no plans to return the $139.5 million retirement pay that forced his departure last fall, according to exchange representatives.

The letter, written by Williams & Connolly trial lawyer Brendan V. Sullivan, was first reported this morning by The Washington Post and the Financial Times. In it, according to published reports, Mr. Sullivan states that Mr. Grasso "has no intention of returning any portion of his compensation to the Exchange," and that "if the Exchange believes it has a valid claim, it should file it, rather than conducting a campaign through the press…in an attempt to pressure Mr. Grasso."

Mr. Sullivan's letter, which was sent yesterday, was in response to a Feb. 12 letter written by interim Big Board chairman John Reed, demanding that Mr. Grasso, who left under pressure last September amid an outcry over his compensation package, return $120 million of the nest egg to the exchange, according to the representatives. Mr. Reed wasn't immediately available for comment, and a spokesman for the Big Board had no comment.

The correspondence highlights the fact that despite referring its investigation of how Mr. Grasso's pay was set and given out to state and federal regulators last month, NYSE officials -- namely Mr. Reed -- are still working to take back some or all of Mr. Grasso's nearly $140 million compensation. On Jan. 8, the NYSE board voted to pass a report prepared by former prosecutor Dan K. Webb on Mr. Grasso's compensation on to both New York State Attorney General Eliot Spitzer and to the U.S. Securities and Exchange Commission to determine whether state not-for-profit laws (under which the NYSE is incorporated) or federal securities laws were violated.

At issue is not only the $139.5 million that Mr. Grasso received last year, but an additional $57.7 million he believes he is owed -- $48 million in future retirement pay that he was contractually slated to receive, and another $9.7 million in severance pay that would be due him if his ouster were deemed tantamount to being fired.

Until recently, NYSE officials had remained largely silent on the compensation flap, despite Mr. Reed's past statements that the pay flap was "an embarrassment" to the exchange that he would try to resolve. But earlier this week, in his first pointed comment on the Grasso pay dispute, newly-installed NYSE chief executive John Thain said that he would like the NYSE to obtain a "very substantial return" of the "excessive" payout made to Mr. Grasso. Mr. Thain has refused to elaborate on the NYSE's plans to take back any of the pay, beyond saying in previous meetings with reporters that the exchange would cooperate with the regulators who are involved.

Write to Kate Kelly at kate.kelly@wsj.com

Updated February 27, 2004 1:21 p.m.

AND:

Freddie Mac Paid Parseghian,
Ex-CEO, $19.4 Million for Job


DOW JONES NEWSWIRES

WASHINGTON -- Freddie Mac, the mortgage powerhouse under investigation for possible securities violations, paid Gregory Parseghian roughly $19.4 million in salary, cash bonuses, stock and other compensation for his six-month stint as chief executive of the company.

Mr. Parseghian stepped in as CEO in early June 2003, after Freddie's board forced out the company's top three executives amid an accounting scandal that resulted in a massive reaudit and net increase in earnings for 2000 through 2002 of $5.1 billion.


But the company's primary regulator, the Office of Federal Housing Enterprise Oversight, started calling for his removal in August after investigations revealed his involvement in many of the most egregious accounting abuses, while he ran the company's investment strategy.

New data released by the company Friday show that Freddie rewarded Mr. Parseghian and others handsomely for helping to steer the company out of its current crisis.

Richard Syron, who succeeded Mr. Parseghian in the top spot at the beginning of the year, was awarded $8.8 million in restricted stock and just over $100,000 in other compensation in 2003.

Freddie also disclosed that it has paid about $2.2 million in legal fees for current and former employees who have provided testimony in regard to the numerous lawsuits and federal investigations affecting the company and its executives.

Write to Dow Jones Newswires editors at djnews@dowjones.com

Updated February 27, 2004 11:16 a.m.


I think Grasso got ~139 Millions for 8 years; At Parseghian's rate over 8 years we're talking 310 millions. Again Grasso is working cheap!

The contributor wishes to point out that as of this posting he had no position in the shares of Mr Grasso. But wishes he did.

Thank You, Mr Grasso

Dick Grasso has just resigned as President and Chairman of the Board at The Exchange, aka New York Stock Exchange. He was shown the door because his board had compensated his superior stewardship with cash awards. Option awards were unavaliable given the corporate structure at NYSE. Had he been awarded an annual salary of single digit millions and options as is common in corporate America this tempest would not have materialized... just the same soup, different day. But in the brave new world of stock awards and cash his remunerative success, ~ 150 millions after forgiving another ~50 millions, Mr Grasso is a grasping ghoul fouling The Exchange and corporate culture.

Appointed President and COO in 1988 under Bill Donaldson the current head of the SEC , he was named to the Chairmanship in 1996 upon Donaldson's departure. For 7 years it was his show. And what a show it was. Bull and bear markets of monumental scale, rapid technological change and the concomitant competitive threats, major scandals involving member firms as well as floor members, the exposure of corruption at the highest levels of American corporate culture, and war. Had the NYSE made missteps at any one of these junctures the financial costs alone to the institution would have been measured in orders of magnitude to Mr Grasso's compensation. Can it be reasonably asserted that the institution was uninjured, unscratched through just dumb luck? His stewardship not only saved centimillions in potential fines to the institution he saved the day time and again and as a result there is still an NYSE.

Could this sad outcome be laid at the feet of the same board that granted the compensation? Could they fear the former Chairman, Grasso's old boss who now heads the SEC? Do they cringe in the face of a guy they paid ten cents on the dollar to when compared to Mr Grasso's paycheck?

Forget Mr Donaldson. Grasso's the guy who knows where all the bodies are buried and Elliot Spitzer is on the prowl.

28 Pages of National Security:

Princess Haifa, wife of the Prince Bandar, Saudi Ambassador to Washington for two decades, donates $130,000 to some woman named Ibrahim who she's never met who's married to some guy named Basnan who it turns out is a Saudi double agent. Omar al Bayoumi, a Saudi official of the Saudi Civil Aviation Authority and Basnan's bud, befriends two evildoers, Almidhar and Alhamzi, gets them an apartment next to his and fronts them a couple month's rent with money sent by the Princess to Basnan's wife. It's worth noting that the Saudi double, Basnan, neglects to tell his FBI handlers any of this. Almidhar and Alhamzi land AA 77 on the Pentagon. Basnan meets with Saudi Interior Minister Prince Nayef in Houston in April 2002 while Crown Prince Abdullah is eating barbecue down at Crawford Texas with President Bush. While all this is old news it was awhile before anybody in the media reminded us that Princess Haifa was bankrolling al-Bayoumi and Basnan. The Weekly Standard was first but it took a few days. So this is the likely contents of the 28 page redaction by the Bush administration of the Congressional Report on 9/11. Reason given: National Security. Most everyone has decided that all this reflects negatively on Bush and the accomodation with the House of Saud and Reagan/Bush in 1982 which passed for energy policy that he inherited. He's just covering his backside, yadayadayada.

Wrong.

The revelations stricken from the Conressional Report on 9/11 are truly embarassing to all concerned. To paraphrase a colleague: They know we know, we know they know we know.... So why the concern? Fact is there's a civil war underway in Saudi Arabia that is being fought between essentially centrist Crown Prince Abdullah and fundamentalists under Interior Minister Prince Nayef. Prince Abdullah doesn't need the heat of the stricken revelations just at the moment he attempts to turn the Interior Misisters flank. Our President is inclined to support Prince Abdullah but would be unable to do so just in case the intelligence connection between the Saudi Interior Ministry and AA Flight 77 became undeniable.

Were the putch underway sub rosa in Saudi Arabia to break out into the open, financial markets here and abroad could roil sufficiently to snuff the nascent recovery underway globally.

Think Iran, 1979.

Child Soldiers: Central to the following argument is the following equation: A 12 year old Liberian is more mature than an 18 year old American. In terms of self sufficiency, political sophistication, and emotional maturity the child soldiers of the third world are less children than adults. The 18 year olds volunteering for our armed services are more children than adults. If child soldiers are a bad idea let's clean our own house first. Our troops could easily comprise adults in middle age with no loss in effectiveness and with concrete advantages to the armed services and our nation. I refuse to submit my children to the fray until I'm dead and gone in the service of my nation and freedom. A test of the merits of armed conflict should include the willingness of those who support that conflict to risk their personal safety in its prosecution. After the 50 somethings then sacrifice the 40 somethings and so on down. Let elders lead by example. And let children work to prevent armed conflict and the loss of their parents assisted by adults who know the difference between imperial adventure and just war.

Donald Regan is dead. In his eighties, this former Chairman of Merrill Lynch and Ronald Reagan's Treasury Secretary and Chief of Staff, lost none of the clarity of thought he demonstrated as he and his president moved decisively to reduce federal income taxes from nosebleed levels ( top rate > 70% ). In a bald act of copyright infringement I retransmit here Mr Regan's editorial published in the WSJ after his passing. May he find peace.

A Reaganomic 'GPS'

By DONALD T. REGAN

The recent debate over President Bush's tax proposal had so many echoes of the Reagan era that I could almost recite the parts of the various players from memory. Amid all the clamor, few have stepped back -- as President Reagan did in 1981 -- and asked three basic questions: Where are we, where do we need to go, and how are we going to get there? Unfortunately, we have no GPS that could pinpoint where we are and how to navigate from here to there.

The 1981 tax debate occurred when the economy had serious ills. It was entangled in a strange phenomenon known as stagflation -- a combination of slow growth and inflation that could not be accounted for by the dominant Keynesian economic theory of the time. Keynesian economists believed that slow growth -- or no growth -- was the cure for inflation, but somehow both were happening at the same time. Tax cuts, it was feared, would only create more deficits, stimulate more inflation and raise interest rates -- already in the high teens -- further into the stratosphere.

Ronald Reagan, however, was not troubled by this state of affairs. To answer the question of where we were, he recognized that growth was held back by high tax rates and excessive regulation. As for where we needed to go, his answer was that the first priority was economic growth; other problems would take care of themselves as long as the Federal Reserve maintained a steady and moderate rate of monetary expansion. And his policy for how we were going to get there was breathtakingly simple -- the government was going to get off the back of the American people by taxing and regulating less.

The opponents of Mr. Reagan's program were saying many of the same things they said in response to the Bush tax cut proposal: We can't cut taxes, it will increase inflation and raise interest rates; deficits are already too high; tax cuts will only deprive the government of the revenues it requires to meet the many needs of the American people.

Thanks to President Reagan, we know a lot more today, although it seems that many in Congress didn't get the memo. We know that tax cuts spur economic growth by improving incentives to work and invest and by making more money available for new ventures and small business, where the real job growth occurs in our economy. There are many examples of this in recent history, from the Kennedy tax cuts of 1962, through the Reagan cuts of 1981 and 1986. We also know that deficits do not cause inflation or cause interest rates to rise. Although the deficits during the Reagan period were higher (as a percentage of gross domestic product) than the deficits projected today, interest rates declined after the Reagan tax plan was adopted.

As I interpret Mr. Bush's tax program, I think I see that he has tried to answer the same three questions that President Reagan always kept in mind -- even though the economic problems he faces are different. We are not in a period of inflation. Quite the opposite; inflation and interest rates are at historic lows. We are, however, in the midst of a slow economic recovery, in which jobs are not coming back as quickly as we might have hoped. In fact, the whole economy is changing right before our eyes, and will continue to change. Unskilled or semiskilled jobs are going overseas, and jobs involving knowledge and skill -- technology, specialized services, finance, health care, energy, entertainment and communications -- are the growth areas here at home.

The Bush tax program is ideally suited to address this new economy. Whereas Mr. Reagan saw generalized economic growth as essential, the Bush plan has both a stimulative component to start the engine and a long-term component to advance the process of moving our economy into the new areas of future growth. That's what the dividend tax cut and the cut in the capital gains rate are all about. As companies increasingly pay out dividends, and pay less of a penalty for making profits, investors will have funds to invest in new ventures. Our economy, already the most dynamic in the world, will continue to change and grow in response to the growing skills of the American people, particularly in the service sector.

President Bush should also aim to extend his tax-relief vision beyond financial transactions such as dividends and capital gains. In a knowledge economy, education and learning are real factors of production. Americans who add to their knowledge and skills are, then, adding to the stock of the nation's productive assets. The president's next tax bill should recognize this with tax credits for individuals that match the investment tax credits that have been available to business. That's a program that assesses where we are, where we need to go, and how we are going to get there.

Mullah Ashcroft testified before the Senate Judiciary Committee yesterday. No doubt fresh from a prayer meeting in his office at Justice, the Mullah stated that: "No major terror attack has occurred on American soil since September 11th." While outlining the specific accomplishments in the fight against the evildoers he pointed to the following: "Over 1,000 new and redirected FBI agents dedicated to counter-terrorism and counter-intelligence; 250 new Assistant U.S. Attorneys; and 32 new Joint Terrorism Task Forces".

These guys are good, but do they have email yet?

Few remember the nuclear physicist, Lee Wen Ho, Ph.D. who was taken down by the FBI as a spy for the PRC while at Los Alamos. Lee really did download files onto his notebook and take them home to work on (former CIA head Woolsey kept classified files on his home computer after leaving government service; not a problem). After nine months in solitary confinement (with the light on) FBI dropped 58 of 59 felony counts, Lee copped to one felony and was released for time served. The Mullah wouldn't comment on the investigation and prosecution of Lee since "There are lots of times, especially in international intelligence security matters, when we don't release things because it's not in the national interest to do so,".

No fooling. If folks understood just how lame the security services are as a group there would be so much fear and loathing and gnashing of teeth that national security would indeed be at risk.

Don't be late for prayers.

Iraq conquered. Administration hawks push regime change in Iran and support direct military action there just in case the nuclear program at Natanz is not decomissioned. The force of this logic is staggering. Since Saudi Arabia rulers began their putsch six months ago of the most militant mullahs, just under 2000 of the 80,000 religious leaders have been fired. Officially they've been sent for "reeducation". This is the opening salvo in an as yet undeclared civil war in the kingdom. And should any in the ruling faction favor accommodation with the mullahs, the bellicose approach to Iran by the coalition will so inflame the militant mullahs that there will be no accommodation possible in Saudi Arabia. The more beligerent the coalition towards Iran the more impetus for an otherwise divided and/or uncommitted Saudi ruling class to exterminate militant Islam in their own backyard. It's a survival thing. Priceless.