Grasso's Clipping
Payback's a ... Spitzer

1. The Richard Don't Always Get Richer

Dick Grasso says he looks forward to his day in court. We're not sosure he should.

Grasso, the former chairman and CEO of the New York Stock Exchange,was responding to a lawsuit filed Monday by New York State AttorneyGeneral Eliot Spitzer. Among other allegations in the civil suit,Spitzer accuses that Grasso was wildly overpaid, in violation of NewYork's Not-for-Profit Law, that directors were misled about the sizeof Grasso's pay package, and that Grasso's dual role as a regulatorand an NYSE employee created a conflict of interest -- an incentivethat gave NYSE board members incentive to overpay him, lest they fallon his bad side.

Breaking a long silence, Grasso fought back in a lengthy opinionpiece published in The Wall Street Journal Tuesday. Maybe itwas a tight deadline he was working under, but not everything Grassowrote made sense.

Like this:

"Mr. Spitzer charges that the Board was somehow misled or uninformed-- even though it was the Board that approved each of my contractsthat set forth exactly how I would be compensated and it was theBoard that approved my compensation every year."

Uh, this may seem like an obvious point, Dick, but you can be on anorganization's board and be misled. If you don't believe me, thereare a bunch of former

Tyco

(TYC)

,

Enron

and WorldCom directors I'd love tointroduce you to.

But the funniest aspect of Grasso's defense is that the board knewwhat it was getting into. "The men and women who set my compensationknew exactly what they were doing," he writes. The board, he says,had "eyes open to every dollar I had earned and been awarded."

Eyes open, maybe. But we at the lab doubt that they, or any other MBAon Wall Street, could have figured out exactly what Grasso had earned.

See, we leafed through some of the relevant documents last year, andrefreshed our memories this week. But Grasso's compensation is stilla mess to us. There's the Incentive Compensation Plan, the Long TermIncentive Plan, the Capital Accumulation Plan, the SupplementalExecutive Retirement Plan, and the Supplemental Executive SavingsPlan. There are the vesting dates, the Comparator Group, theChairman's Award, and the bit about how the incremental $1 millionICP could result in a $6.8 million boost to SERP. Yeah, right.

If anything, the presentations of Grasso's pay seem designed to sowconfusion, not clarify.

So if you ask us, we're not so sure that Grasso's name will be clearedin a court of law. No matter how much money he ends up holding onto,we suspect that the more the murky details of Grasso's pay come tolight, the more his reputation will be tarnished, not varnished.

2. To Email BB&T or Not to Email BB&T

Imagine you've decided you don't want to get any speeding tickets. Which of the following strategies should you employ?

1. Be sure to drive no faster than the posted speed limit.

2. Lock your car in the garage and never drive again.

Well, if you chose answer No. 2, it appears you have a future at the financial services firm

BB&T

(BBT) - Get Report

.

Email Emissions Reduced
Don't hit send

See, according to a source inside the North Carolina-based operator of banks and brokerages, some top executives at the firm -- for example, the president and chief investment officer of BB&T Asset Management -- aren't permitted to send any email. Receive email, yes, but send it, no.

We don't know what BB&T's reasoning might be here, but we suspect the alleged restrictions have something to do with a desire to ensure that top-level executives never end up sending emails that might result in embarrassment for the firm and/or litigation -- say, something on par with ex-Credit Suisse First Boston banker Frank Quattrone's now-infamous "clean up those files" email.

A BB&T spokeswoman said the only executive who would be able to comment on the reported restrictions was on vacation.

"It makes you wonder why they would implement such a policy," writes our source, who requested anonymity in the hopes of not getting fired. "Is it because they figure they have something to hide? Or do they have a lack of confidence in the brains of their executives that they must try to save them from incriminating themselves?"

We don't have the answer to that. But we know the people who do: some top executives at BB&T. If you'd like to shed some light here, send us an email. From your home account, if necessary.

Homeland Securities
What about wash sales?

3. Mace's Spray and Wash

If you were looking for a way to invest in the homeland security phenomenon, would you invest in a chain of car washes?

Of course not. But that's what people did this week in the wake of the recent chatter about a domestic terrorism threat. Along with other security-themed stocks, Mace Security International (MACE) popped 32% Wednesday, echoing an earlier security-themed spike in April.

The problem, of course, is that Mace -- which sells the eponymous Mace pepper spray and surveillance products -- is as much of a security company as Tony Randall was a kung-fu master. In the latest quarter, 15% of its revenue, or $1.9 million in sales, came from security products. None of that security money made it to the company's $706,000 operating income line for the quarter.

We won't delve too much deeper into the other reasons not to invest in the company, such as the extensively disclosed related party transactions.

Let's just say that on Wall Street, hope springs eternal. As do momentum plays of dubious merit.

4. More to Tell at Nortel

On April 28,

Nortel Networks

(NT)

dumped President and CEO Frank Dunn "for cause."

This week, nearly four weeks later, Nortel revealed that Dunn had resigned from the company's board of directors May 21.

Hmmm. First Dunn gets canned, presumably for reasons associated with the ongoing investigations and restatements of Nortel's books. Then, 23 days later, he resigns from Nortel's board.

Which gets us thinking: Those must have been some pretty fun 23 days of small talk around the boardroom table.

"Hey, Frank, how are things going?"

"Oh, great, except for the part where all of you canned me April 28."

A Nortel spokeswoman says Dunn didn't participate in any business of the board following his termination as CEO. She won't tell us anything else, such as how often the board met between April 28 and May 21, or -- assuming Dunn was invited to attend these meetings -- how warmly that invitation was extended.

5. Child's Play in the Resume

When it comes to company filings, we at the lab like to read the fine print. It nearly always pays off.

This week's evidence: A passage in the recently filed proxy statement of

Quepasa

, the bubble-era operator of a Spanish language portal that is now in the business of Spanish pay-per-click marketing.

In the biography of Quepasa Chairman and CEO Jeffrey Peterson, there's a biographical note that caught the eye of a loyal research lab correspondent, who pointed it out to us.

The 31-year-old CEO, according to the proxy statement, "has been involved in the programming and operations of computers and digital communications for over 20 years."

Hmm. Thirty-one years old, more than 20 years of computing -- are we supposed to believe that the guy was programming computers when he was 10 years old? We called Peterson just to check if we had a typo here.

Sure enough, Peterson confessed that the implication that he had started programming computers when he was 10 years old was a little off. In fact, he says, he was 6.

What happened, says Peterson, was that when he was a tyke, he lived across the street from a boy whose father ran the computer lab at the University of California at Santa Barbara. The two kids used to hang out at the lab, he says. And back in those days, if you were fiddling around with, say, the DEC PDP-11 computer in the lab -- a pretty hot piece of equipment back then, but primitive by today's standards -- well, you were pretty much programming.

"It's a heck of a claim to be able to make," says Peterson, "and I'm glad to be one of the few people who can make it with a straight face."

There's what we found when we read the fine print this time: further evidence of our misspent youth.

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