Citigroup Announces Management Overhaul
Citigroup announced major management changes on Sunday that apparently are aimed at speeding up resolution of investigations into the bank’s handling of loans to Enron Corp. and of initial stock offerings.
Citigroup, the nation’s largest financial institution, said that Michael Carpenter has been removed as chairman and chief executive of the Global Corporate and Investment Bank unit, which operates the Salomon Smith Barney brokerage.
He will be replaced by Charles Prince, 52, who has been Citi’s chief operating officer.
Carpenter will head Citi’s Global Investment Group, which manages more than $100 billion in assets.
The changes were announced in a rare Sunday statement.
In the statement, Citigroup Chairman and Chief Executive Sanford I. Weill referred indirectly to the investigations underway, saying: “As a result of recent events, we have recognized that we need to reexamine our business practices and make appropriate changes.”
He added: “While important changes have already been made under Mike Carpenter’s leadership--including important reforms in research and structured finance--we are today announcing steps to accelerate this process of change and to assure that Citigroup is a leader in setting the standards for appropriate business conduct and corporate governance.”
In addition to the management changes, the bank also said that its board of directors approved the formation of a Business Practices Committee, reporting directly to Weill. Citi had announced last month that it planned to set up the committee.
Citigroup has faced a growing list of legal and regulatory challenges, including federal and state investigations of its handling of loans to energy trader Enron, which collapsed last year. Government officials have alleged that Enron used the financing to conceal its deepening debt.
There also have been allegations in Congress that Citi’s investment unit, Salomon Smith Barney, doled out shares of hot initial public offerings of stock to WorldCom Inc. executives in exchange for investment banking business. And, critics have charged, its analysts were not operating independently.
One of the nation’s leading bank analysts, Michael Mayo of Prudential Securities, last week downgraded the company’s shares to “sell” from “hold” and said Citigroup’s legal exposure could run as high as $10 billion.
In Sunday’s statement, Weill made no specific reference to the allegations. He said, however, that “there are certain industry practices that we should all be concerned about, and although we have found nothing illegal, looking back, we can see that certain of our activities do not reflect the way we believe business should be done. That should never be the case, and I am sorry for that.”
Citigroup said Prince has been with the company or its predecessor for 23 years. He previously was general counsel.
