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• May 24 (Bloomberg) -- New York Attorney General Eliot Spitzer sued Richard Grasso, the former New York Stock Exchange chief, to recoup ``well over $100 million'' of unjustified pay.
  
  The suit named Grasso, 57, and Ken Langone, the 68-year-old investment banker and friend of Grasso who chaired the NYSE's compensation committee from 1999 to 2003. Frank Ashen, 59, the exchange's former head of human resources, agreed to pay $1.3 million to settle Spitzer's allegations that he provided inaccurate information to the board on Grasso's pay.
  
  ``This case demonstrates everything that can go wrong in setting executive compensation,'' Spitzer said in a statement. ``The lack of proper information, the stifling of internal debate, the failure of board members to conduct proper inquiry and the unabashed pursuit of personal gain resulted in a wholly inappropriate and illegal compensation package.''
  
  The lawsuit accused Grasso of manipulating guidelines used to set his compensation, which culminated in a $139.5 million payout last August. It said the compensation formula was ``flawed and under Grasso's control.'' Spitzer, 44, must prove that Grasso and Ashen colluded to withhold information from the board, said Warren Neel, executive director of the Center for Corporate Governance at the University of Tennessee.
  
  Difficult to Prove
  
  William McLucas, a former SEC enforcement chief, said Spitzer's case against Grasso may prove difficult to win in court.
  
  ``The question whether his compensation violated some law or rule is a far harder challenge for the attorney general's office than the simple issue of whether people now think he made too much money,'' said McLucas, a partner at the Wilmer Cutler Pickering LLP law firm in Washington.
  
  The suit, which also names the NYSE as a defendant, asks a state court judge to rescind the pay package and to determine a ``reasonable'' level of compensation for Grasso. The exchange was named because it failed to abide by state laws governing not-for- profits such as the New York Stock Exchange.
  
  In another settlement, Mercer Human Resources Inc. said it will return fees that it charged the NYSE in 2003.
  
  `Misled'
  
  Spitzer's suit said the NYSE's board of directors was ``misled'' on aspects of Grasso's compensation contract, which itself was ``flawed.'' The board wasn't aware of $18 million in a so-called capital accumulation plan, a bonus award for Grasso in 1999 through 2001, for example.
  
  A comparison between Grasso's pay and that of top executives at large corporations was inappropriate, Spitzer said.
  
  ``The investigation found that Grasso, in effect, set his own performance targets, which he easily exceeded,'' the suit said. Grasso's dual role as a regulator and an employee of the exchange, moreover, raised conflict-of-interest concerns.