Reports: Ex-NYSE chief Grasso refused to testify in deposition on propping up AIG stock

Associated Press Worldstream
June 15, 2006


NEW YORK-Former New York Stock Exchange Chairman Richard A. Grasso invoked his Fifth Amendment rights more than 150 times in a deposition as federal regulators probed any possible attempts to prop up the stock price of American International Group Inc. in 2001, according to news reports.

In deposition transcripts obtained by The Wall Street Journal and The New York Times, Grasso repeatedly refused to answer questions on whether he aided in pressuring AIG's specialist firm, Spear Leeds & Kellogg Specialists LLC, to help keep the insurer's price higher while it attempted to purchase a rival firm.

The Fifth Amendment protects someone against self-incrimination.

The questions were part of a broader probe by the Securities and Exchange Commission into whether AIG and its former chairman, Maurice Greenberg, wanted its specialist firm, which manages buying and selling AIG stock on the floor of the NYSE, to take extra steps to prop up AIG stock, the two newspapers reported Thursday. The SEC deposed Grasso in June 2005.

Grasso's decision not to answer may have been a legal strategy designed to deprive regulators and prosecutors of any ammunition should the case go to court. It was not clear whether the SEC was probing Grasso's role in the AIG matter or simply had a broader inquiry into AIG. It was also unclear whether the investigation is still underway, the newspapers reported.

Greenberg left AIG last year after the SEC uncovered accounting irregularities at the company. AIG has settled actions brought by the SEC and New York Attorney General Eliot Spitzer, but that settlement, reached in February, did not include Greenberg.

In a second deposition with Spizter's investigators, this one in April of this year, Grasso was more forthcoming, saying that Greenberg was consistently unhappy with how AIG stock was managed at the NYSE. Grasso said he discussed AIG's stock with Spear Leeds, but did not encourage the specialist to buy up the stock, the newspapers reported.

An attorney for Grasso told The Wall Street Journal that Grasso did not try to pressure Spear Leeds into manipulating AIG's stock. A call to Grasso's lawyer was not immediately returned Thursday.

Separate from the AIG matter, Grasso is battling a suit filed by Spitzer over the former chairman's $189.5 million (150 million) pay package, which Spitzer claims was obtained in violation of his fiduciary duty under New York's not-for-profit law. The NYSE was a not-for-profit under Grasso's leadership, only becoming a for-profit company in March. Grasso left the exchange in 2003 as controversy over his pay grew.

Copyright 2006 The Associated Press



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