Grasso tells his side of NYSE story, and it's not pretty

— -- Four years after being ousted as chairman and CEO of the New York Stock Exchange because of a dispute over how much he was paid, Dick Grasso finally gets to tell his side of the story.

King of the Club by Charles Gasparino describes Grasso's rise from humble beginnings in Queens to the apex of Wall Street.

For those who don't recall the events of September 2003, Grasso was forced to resign after the NYSE nyx revealed he would receive a one-time pay package of more than $187 million.

The public was outraged over the size of his salary and benefits, since Grasso was supposedly running a not-for-profit institution. Several board members claimed they didn't know the magnitude of his compensation package.

In the years since, Grasso has been fighting the New York attorney general, who said his pay violated the law governing pay packages at not-for-profits. It mandates that pay be "fair and reasonable."

Grasso also has been fighting to restore his image in the media. After 9/11, Grasso was hailed for getting the New York Stock Exchange up and running in less than a week.

But after the pay fiasco, Grasso was portrayed as a greedy, imperious character who turned a public trust, the NYSE, into a vehicle for his own enrichment and self-aggrandizement.

Now, Grasso, his former public relations chief Robert Zito and other supporters have reached out to writer Gasparino to set the record straight.

Here's the surprise: Grasso still emerges from his own version of the story as a greedy, imperious character who turned the NYSE into a vehicle for his own enrichment and self-aggrandizement.

The story of Grasso's career should be inspiring — a rags-to-riches tale of a kid from Queens who takes a job in the listings department of the NYSE and works his way to the top.

But in this book, the story of Grasso's rise isn't uplifting. It's almost vengeful. Early on, Gasparino writes, Grasso had a chip on his shoulder — against his absentee father, against privileged kids who didn't have to fight on the front lines in Vietnam (not that Grasso was anywhere near the front lines himself), against the blue-blooded WASPs who enjoyed a privileged position on Wall Street.

By 1990, when NYSE chairman and CEO John Phelan decides to retire, Grasso feels the top job should rightfully go to him. But he's passed over, he believes, because of his Italian ethnicity.

Instead, the board hands the plum job to William Donaldson, Grasso's polar opposite in terms of background, temperament and education.

Educated at Yale and Harvard Business School, Donaldson was a founder of research firm Donaldson Lufkin & Jenrette. After taking DLJ public, he became wealthy enough to leave his job and join the Nixon administration. When Yale created its own school of management, Donaldson was named dean.

Grasso's version of his relationship with Donaldson (as related by Gasparino) shows how ruthless he could be in achieving his goals. At first, Donaldson seems like the perfect boss, because he delegates all NYSE operations to Grasso.

But eventually Grasso turns on Donaldson, undercutting him behind his back and playing childish tricks designed to humiliate him.

Gasparino airs every thread of dirty laundry Grasso and Zito make available about Donaldson, from an affair with a colleague at the Yale School of Management (which resulted in a child), to the emotional eulogies delivered by Donaldson's two grown children after their mother's death.

After the chapter on how Grasso eventually replaced Donaldson as NYSE head, I hadn't learned much about Donaldson but knew a heck of a lot more about Grasso.

Throughout the book, people who disagree with Grasso are belittled mercilessly. This includes Arthur Levitt, former chairman of the Securities and Exchange Commission; Hank Paulson, Treasury secretary and former CEO of Goldman Sachs gs who helped engineer Grasso's ouster from the Big Board; and Michael LaBranche, a specialist on the floor of the exchange, who led a trader revolt against Grasso.

Other enemies include New York Gov. Eliot Spitzer who, as attorney general, filed a lawsuit against Grasso over his pay, and John Reed, former Citicorp c CEO who replaced Grasso as chairman of the exchange and ordered a study of how the compensation committee bungled its job.

Even Madeleine Albright, who plays a cameo role as an NYSE board member voting to oust Grasso, comes in for abuse. A passage about the former secretary of State neatly sums up the entire book: "Grasso had selected her to give gravitas to the board, someone who didn't think like a Wall Street guy. But what he received instead was the worst of both worlds: a board member he couldn't trust and who he believed hadn't a clue about what she was doing."

Grasso's story and the insider account of his fall are interesting reading. But if there's something missing, it's the bigger picture of what happened to the NYSE. According to the book, Grasso fought mightily to preserve the special open-auction system of trading at the Big Board, and he linked his survival as CEO with that of the exchange.

But in the four years since he was pushed out, the NYSE has become a public company, embraced electronic trading and expanded around the world.

The new CEO, John Thain, has transformed the business for the better: Seats on the exchange were translated into shares of the new public company and are worth far more today than under Grasso.

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