Even though the board of the NYSE approved Grasso’s pay, the ensuing media frenzy gave Paulson the opportunity to lead the charge calling for Grasso’s ouster. Grasso’s defense of the specialist system for trading stocks was in the way of Goldman Sach’s investment in computer trading.

After losing his dream job, things only got worse for Grasso. Eliot Spitzer, smelling blood in the water, filed a lawsuit against Grasso and Ken Langone–a NYSE board member and head of its compensation committee. Spitzer wanted Grasso to return $100 million to the exchange. Langone was charged with “deception on an $18 million piece of Grasso’s pay.”

Spitzer’s suit used a New York State law that requires executive compensation for non-profit organizations to be “reasonable” and “commensurate with duties performed”–the NYSE was a non-profit organization prior to 2005. 

Hoping for a quick settlement, Spitzer’s team geared up his public relations smear machine to try the case in the media, a strategy that served him well in the past.

Spitzer, however, misjudged the men he was trying to bully. Both Grasso and Langone were self-made men who cared about reputation and justice and refused to buckle under pressure. 

Spitzer was forced to continue the investigation, which “included 1,454 hours of depositions.” No tactic was too low for Spitzer: he attacked Grasso’s personal life, which had nothing to do with his pay.  He deposed Grasso’s secretary and inquired about an affair, and, during his nine-day deposition, Grasso was asked if he had a love child.

In October 2006, New York Supreme Court Justice Charles Ramos ruled from the bench, in a summary judgment, against Grasso for him to return $100 million to the stock exchange. Grasso has good grounds for appeal: “Ramos had given Grasso all the legal rights of a detainee at Guantanamo Bay.” 

It’s ironic that during his now infamous trip to Washington, D.C. to testify in Congress, Spitzer was on TV blaming the bond insurance crisis on regulators that were “bowing down to the ideology of Ayn Rand." Now it turns out that Spitzer, the crusader against capitalism could not regulate his own behavior.