(FORTUNE Magazine) – "Be careful what you wish for," the warning goes--and that's a lesson right now being painfully learned by the old directors of the New York Stock Exchange. This was a celebrity board, including CEOs like Bill Harrison, Stan O'Neal, and Mel Karmazin, and many directors were deeply embarrassed by last year's revelations about chairman Dick Grasso's extraordinary compensation. So in September they ejected Grasso and brought in former Citigroup CEO John Reed to clean up. And--imagine this!--Reed took the message seriously.

Within weeks he was talking about a "malfunction of the board," and he proceeded to ask for the resignations of all but two directors (the ones spared had been on the board only briefly). Meanwhile he commissioned Chicago attorney and former prosecutor Dan Webb to find out exactly how this compensation horror show happened. And when the Webb Report came in, Reed turned it over to the Securities and Exchange Commission and New York attorney general Eliot Spitzer, implicitly suggesting that they consider litigation against former board members and Grasso.

So, ugh! Today, with subpoenas from the SEC already issued to some former directors and more probably coming, there is, says one, "a lot of anger out there directed at John Reed." Never mind that he appears to be doing pretty much what he was asked to do.

Reed, though, has his own small embarrassment to deal with. He came in saying that henceforth there would certainly and positively be transparency at the exchange. But then he got the Webb Report and declined to release it. The only reason he has so far hinted at has been lame: There are things in there that might embarrass certain people. So ... that's a problem? Even some of the directors who figure they're fingered in the report are mad because they don't know precisely what they're being blamed for.

It is hard to see how Grasso can be successfully sued over his compensation. After all, he had contracts, and there are no laws prohibiting greed. Suits against the board, though, could conceivably be launched by Spitzer under the New York statute governing the exchange, the Not-for-Profit Corporation Law. This law calls on such corporations to pay "reasonable" compensation that is "commensurate for services performed." It also says that a director may be sued for "the neglect of ... management and disposition of corporate assets committed to his charge."

Whether Grasso's compensation was "reasonable" is a matter of opinion. There are some former directors who still declare adamantly that he deserved all he was paid. Most of the world probably thinks differently, and FORTUNE would be on that side. One reason for our opinion is that the exchange, after initially dribbling out information last fall, went on to release 1,200 pages of dense copy that illuminated just how remarkable Grasso's pay was. Indeed, we think we can give you a picture of what he got that beats anything you've so far read.

The fact is that Grasso's pay package had built-in "multipliers" that boggle the mind and that the exchange never yearned to make crystal clear. Start, though, with basics: He had a salary that stayed steady at $1.4 million a year and a bonus that leaped from $1.6 million in 1996, his first full year as boss, to a peak of $16.1 million in 2001.

That in itself is certainly tasty. But then the first multiplier kicked in, delivering an additional amount equal to 50% of the bonus--or $8,050,000 in 2001--to a Capital Accumulation Plan (CAP). This money did not go to Grasso in cash, but was held for him by the exchange until it was vested, all the while paying 8% interest. When vested, the money went into a trust that Grasso could invest in a selection of mutual funds.

Next came the second multiplier, a truly extraordinary phenomenon that was tied to the exchange's Supplemental Executive Retirement Plan (SERP). Grasso's pension was to be figured off the average of his three best consecutive years of compensation, meaning in this case salary and bonus combined (though in one year only 85% of the bonus was to be counted). From 1999 through 2001, which were to be the three years figured in, the relevant average was $12 million. And of this Grasso was to get--ready?--70% as his annual pension. So that meant he would upon retirement get $8.4 million every year!

But suppose now that Grasso didn't wait until retirement to start getting his pension, but instead withdrew an actuarily computed lump sum for amounts he'd already earned. That's what the exchange board permitted him to do three times. Such withdrawals are rare in corporate America, partly because pensions are viewed as a "retention factor" for keeping valued executives working. Grasso, in any case, was allowed in 1995 to take out $6.6 million in cash and in 1999 to transfer $30 million to a savings account held for him by the exchange. Then, in 2003--when the great brawl about his compensation occurred--the board agreed he could take out another $51.6 million of pension money. That's the biggest chunk of the $139.5 million figure that has become rather loosely famous as "what Grasso got paid in 2003." The remainder of the $139.5 million was various monies he had squirreled away at the exchange, including CAP awards, a special $5 million bonus he'd received in 2000, large amounts of deferred compensation, and savings accounts being held by the exchange. There was also another $5 million special bonus in 2001, but that was paid then to Grasso in cash.

Did the board understand the enormous complexities that were sending Grasso's pay to the sky? Clearly some people, and maybe most, did not--which may make them fools rather than knaves. One former director, in fact, refers to this body as being a "jerk-off board" that didn't pay a whole lot of attention to anything. All the CEOs, of course, were very busy elsewhere and were indeed impeded in their exchange work by the fact that Grasso would not allow anyone to attend a board meeting telephonically. Grasso's pay was probably--and shamefully--a semi-mystery to most. One former director remembers that in 2002, when he first learned how much Grasso was paid, he said, "Holy s--t," except, he adds, "my language was a lot stronger than that."

The director who certainly knew the most was Kenneth Langone, chairman of investment bank Invemed and chairman of the board's compensation committee from 1999 until last year. Langone (who has served on the compensation committee of GE in the past) believes staunchly that executives doing outstanding work should get high pay--and he, like many, counted Grasso, a workaholic whose life was the exchange, among those. Langone bonded with Grasso after Sept. 11 (both were working to supply equipment to ground-zero rescuers), and he is also one of the people with whom Grasso sometimes dined at his favorite New York City restaurant, Rao's on 114th Street. At Rao's, by the way, one regular bar patron, known as Louie Lump Lump, recently shot and killed another customer with whom he got irritated.

And Grasso? Now 56, he's at his home in Locust Valley, on Long Island, waiting for this bizarre tale--and we don't mean the murder--to play out. --Carol J. Loomis