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Sunday, May 30, 2004

Richard Grasso, Eliot Spitzer, and the Ferengi Rules of Acquisition 

Even moderate Star Trek fans, such as TigerHawk and his extended family, love the Ferengi Rules of Acquisition, by which the Ferengi, a race of unscrupulous traders, govern their personal and commercial relationships. So apparently does Barron's, which has used the Ferengi Rules to explain Eliot Spitzer's ridiculous lawsuit against Richard Grasso, the former CEO of the New York Stock Exchange. You have to pay for the online version, but here's the relevant part:
Reviewing the Ferengi Rules of Acquisition on a convenient fan Website, we found that several of them offer advice particularly applicable to the characters in the continuing New York Stock Exchange melodrama that centers on ex-CEO Grasso's pay:

For the members of the board of the Stock Exchange: "The flimsier the product, the higher the price."

For Kenneth A. Langone, chairman of the NYSE board's compensation committee: "Never place friendship above profit."

For acting NYSE Chairman John Reed: "A deal is a deal, until a better one comes along."

For New York Attorney General Eliot Spitzer: "There's nothing more dangerous than an honest businessman."

For Richard A. Grasso himself: "Once you have their money, never give it back."

Well said. Grasso shouldn't give it back.

I am no huge fan of Richard Grasso, who managed to cut a great deal for himself with a board that probably was not as strong as it should have been, but Spitzer's lawsuit is as scary as it is offensive. His lawsuit is based on a very obscure law, and it reminds us once again that any prosecutor, any time, can find a law to undo a deal or prosecute somebody simply because the deal or the person becomes too unpopular. During Grasso's tenure as CEO, the value of the exchanges seats owned by Grasso's constituents, the members, more than tripled. Even if some members grumped about the revelations over his total compensation last fall, nobody has suggested - until Eliot Spitzer spent some time in the law library - that anything unlawful occurred. Even the Securities and Exchange Commission, which has a stake in the credibility of the New York Stock Exchange, has not found a basis to pursue Grasso. Now, eight months after Grasso's resignation, Spitzer brings a case based on New York's non-profit corporation statute. I hope he loses and Grasso doesn't have to "give it back," because if Spitzer wins or extracts a big settlement it will be yet another example of a prosecutor politician punishing somebody just because he has become unpopular.

2 Comments:

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