8

Hung Out to Dry

By 2003, Citigroup was indisputably the world’s largest financial conglomerate. Yes, its reputation had suffered some setbacks—SEC investigations into Citigroup’s dealings with Enron and WorldCom, Inc., and an embarrassing settlement with regulators that had barred Sandy, as the New York Times reported, from “communicating with his firm’s stock analysts about the companies they cover unless a lawyer was present.” Back in the fall of 2002, under government scrutiny of the Enron and WorldCom dealings of our Salomon unit, Citigroup had reassigned Michael Carpenter, head of Citigroup’s corporate and investment bank, and later that same September, Citigroup had paid $215 million to settle allegations of deceptive lending against its First Capital subsidiary. In March, when Sandy was nominated to the board of the New York Stock Exchange, New York State attorney general Eliot Spitzer called it “an outrage,” and within days Sandy had withdrawn his name.

Sandy was seventy years old and he had no succession plan in place. The world waited and speculated about his next move. As head of a major business unit in the organization, and one that was performing above expectations, I felt secure. I might very well be at or near the top of Sandy’s yet to be revealed list of possible successors, as far as I knew. I was fifty-four years old.

Then, on July 16, 2003, Sandy announced that he was relinquishing his CEO position at the end of the year and naming Citigroup general counsel Charles Prince as his successor. I was caught off guard by the choice. We all were. The timing of Sandy’s departure, and the selection of Prince as his successor, flummoxed both the broader Wall Street community and those of us closest to the situation, members of his senior management team. Chuck was not a proven effective senior business manager. He wasn’t a leader. So why choose him? Maybe, the whispered speculation went, Attorney General Spitzer or the Securities and Exchange Commission was close to bringing charges against Sandy, and he had offered to step down as part of a deal to avoid such charges. Or, alternatively, maybe Sandy trusted Chuck more than anyone else in senior management to use company resources to protect and defend him from possible charges by Spitzer or the SEC, and to refuse any negotiated settlements that might imply or acknowledge any wrongdoing by Sandy. Chuck Prince, popular opinion concluded, would simply be a figurehead to placate regulators while Sandy continued running the company behind the scenes.

Sandy’s motive for naming Chuck might be explained in retrospect by a New York Times article regarding Hank Greenberg, CEO of American International Group, who was also under pressure from Spitzer at about the same time. The article, by Danny Hakim, headlined “Wall Street Titan Takes Aim at the Law That Sidelined Him” and dated April 16, 2018, read in part:

I viewed Chuck Prince as Sandy’s consiglier e. He was both the right-hand man who protected the boss’s back and also the court jester who organized and presided at Sandy’s unfailingly humorous birthday celebrations year after year. “Sandy will still be in charge,” I thought, “unofficially.” But that presented me with a quandary: I did not want to work for Prince, and I was mindful that a key ingredient in my career success had been that I had always avoided working for people with whom I was unlikely to form a strong personal bond. I thought hard about putting feelers out now for a position at another company. But I hesitated. I knew it would be difficult to secure external opportunities as interesting and stimulating as my position running one of Citigroup’s global businesses.

Adding to my inertia was the fact that Sandy and Chuck went to great lengths to convince us in senior management, especially Citigroup president Bob Willumstad himself, that Chuck and Bob would operate as a team. Three-quarters of the operations would report to Bob, they pointed out. Their reassurances were significant, because the senior business leaders, including myself, would report to Bob, who was universally held in high regard by the senior management organization. “I’ll give this new arrangement a year,” I decided. Maybe it would turn out to be positive. But my decision to stick around ultimately proved to be the biggest mistake of my career.

At the end of July 2003, Citigroup and J. P. Morgan Chase & Co. announced a $305 million settlement with the SEC and the Manhattan district attorney related to loans and trades made with Enron and Dynegy that were allegedly central to the frauds perpetrated by those companies. In September 2003 it was announced that Citigroup’s succession plan would be accelerated, and Chuck Prince would take over as CEO on October 1. Then in May 2004, Citigroup announced a $2.65 billion settlement with World-Com investors, which the New York Times termed “the second-largest ever in a securities class-action case.”

The Times followed up on May 16, 2004, with a feature article by Gretchen Morgenson and Timothy O’Brien, “When Citigroup Met World-Com,” detailing the numerous intricate relationships between Citigroup, WorldCom, and WorldCom CEO Bernard Ebbers’s personal finances. It also discussed the involvement of Sandy Weill, his son Marc Weill, CEO of corporate and investment banking Michael Carpenter, head of investment banking Eduardo Maestre, and Tom King, the head of telecommunications investment banking. “Besides [telecommunications analyst Jack B.] Grub-man, Eduardo Maestre, Citigroup’s head of investment banking, pursued WorldCom ardently,” concluded the article,

Inside Citigroup, these events further fueled the speculation that Chuck Prince’s appointment as CEO was motivated by Sandy’s desire for protection from charges. I kept my head down and focused on working with Bob Willumstad and interacting very little with Prince. On the few occasions when we did interact, I was friendly and respectful but not especially deferential. I was operating on the theory that Chuck was a harmless figurehead.

Then I was hit with an unexpected tidal wave of regulatory problems in two of my business units. A whistleblower letter to the SEC alleged Citi-group Asset Management (CAM) regulatory violations in 1999 when First Data Corp, which was both a Citigroup investment banking client and a service provider, sought to renew its 1999 transfer agent contract with CAM’s mutual funds business unit, using its banking client status to bring pressure within Citigroup for the contract to be renewed. I had insulated myself from that pressure by assigning CAM executive vice president Michael Yellin to conduct an objective business review of transfer agent alternatives, with a focus on quality and cost. I also had assigned global investment management and CAM general counsel Michael Rosenbaum to oversee vetting of legal issues, assisted by an experienced CAM assistant general counsel, Christine Sydor, who had worked with the mutual fund boards for many years. I had adopted a “tied score goes to the home team” posture, meaning that CAM would support renewal of the First Data contract only if it was objectively better or equal to the best alternatives available to the mutual funds business unit.

Prior to my arrival at Travelers Group in 1997, the asset management business had operated as a division within Smith Barney’s brokerage and investment banking business unit. Many asset management decisions had been subordinated to the priorities of the brokerage and investment banking businesses, which is why asset management had been placed in a mediocre contract in the first place with a second-tier transfer agent like First Data Corp. To create breathing room for my asset management team to exit or restructure the First Data contract, I had required this careful review of the contract and competitors, all without sparking open conflict with Smith Barney’s brokerage and investment banking senior executives.

Mike Yellin’s team had recommended, in the end, that we internalize the transfer agent function, using First Data on a subcontracting basis only, for certain transfer agent functions. The new contract documents had been vetted by CAM attorneys Rosenbaum and Sydor. It is noteworthy that the supervision and reporting for legal and compliance teams in all Citigroup business units were what we called “matrixed,” with one line of reporting to the business unit and a second line of reporting to the Citigroup corporate general counsel or chief compliance officer. This structure was intended to ensure independent and objective legal and compliance advice to the business units and visibility of important legal and compliance issues to the corporate general counsel or chief compliance officer. Rosenbaum and Sydor reported to me, and they also reported to Chuck Prince, who was corporate general counsel when the new transfer agency contract was executed in 1999.

The proposed transfer agency arrangements had been coordinated with the various mutual fund boards by Heath McLendon, a highly experienced and respected thirty-year veteran of working with the mutual fund boards, as well as by Lew Daidone, an experienced financial executive, and attorney Sydor. I was responsible for the transfer agent internalization decision, but I did not participate in the preparation or presentation of materials for the mutual fund boards, and I did not attend the mutual fund board meetings. The presentation materials were prepared by Mike Yellin’s team, including Lew Daidone, reviewed by Sydor and Rosenbaum, and presented by Yellin’s team with legal counsel Sydor present at each mutual fund board meeting.

Five years later, a staffperson who had been terminated by CAM wrote a whistleblower letter to the SEC claiming that proper disclosures hadn’t been made to the mutual fund boards. When notified by the SEC, Citigroup’s general counsel initiated an investigation and determined that $17 million should be repaid to the mutual funds, which we reported to the SEC. In July of 2004, the SEC let us know that it was considering an investigation and enforcement action against Citigroup over the handling of this renegotiated contract. The Wall Street Journal ran a story, “Citigroup Inc.: SEC May Recommend Action Tied to In-House Disclosure,” which summarized a Citigroup regulatory filing:

While the announcement of this regulatory probe was embarrassing for my business unit, I did not feel any sense of personal vulnerability because I was confident that I had handled the situation properly. The alleged failure to disclose the transfer agent economics to the mutual fund boards was primarily a mistake in the board materials review comments from the CAM legal team to the business team. No information regarding the deal with First Data had been withheld from the legal team. There were no red flags raised by the CAM legal team to alert the business team that the board materials had inadequate disclosures, and there were no red flags raised by the CAM legal team to the Citigroup corporate general counsel regarding issues or concerns with the board disclosures. I think the CAM business and legal teams reasoned that since the mutual funds were going to pay lower costs in the proposed new arrangement than they had under the previous First Data contract, and since the total fees paid by the funds were clearly and accurately disclosed, the mutual funds had objectively benefited from the new contract and the mutual fund boards were receiving adequate disclosures. Under this line of reasoning, it wasn’t necessary to disclose the details of the revenue split between the new CAM internal transfer agent function and the new First Data subcontract to CAM. I believe that in a normal regulatory environment and with strong corporate support, this issue probably would have been settled with the SEC as a minor oversight which had not harmed the mutual funds. But in the overheated regulatory environment surrounding Citigroup in 2004, the alleged errors were magnified and distorted into yet another example of Citigroup’s “need to reform its corporate culture,” as the Wall Street Journal put it.

In September of 2004, the second regulatory storm hit. The Japanese banking authorities ordered us to close all Citigroup private banking operations in Japan. As the Wall Street Journal reported in an article titled “Japan Orders Citibank to Halt Private Banking,” by Andrew Morse and Mitchell Pacelle, it was the “harshest banking penalty in Japan since a Credit Suisse Group had its license pulled in 1999.” The article continued:

I was stunned by the severity of the Japanese regulatory sanctions. Several months earlier, Chuck Prince had retained Promontory Financial Group to conduct an independent review of the looming Japanese regulatory fiasco. I had argued to both Promontory and the internal Citigroup working group that was addressing the Japanese regulatory problem that many of the issues raised by the FSA were in areas where regulations were ambiguous, and the charges themselves were vague. “Failure to prevent transactions that may have been linked to money laundering” is very different from a factual finding that those transactions actually were linked to money laundering. “Routinely misled customers about the risk involved in financial products” is a charge that must be evaluated in terms of specific facts and circumstances, because it is not uncommon for customers who are unhappy with the outcomes of their investment decisions to claim that they were misled about the risk. “Tied loans to the purchase of specific investments” also has to be evaluated with regard to specific facts and circumstances, because many bank loans are intended to support customer purchases of new investments.

Most important, I argued that the record showed that I had been diligent in my management oversight. I had visited Japan three or four times each year since 1998, and my visits always included a half-day “business review” with each of my business units, including the private bank. Every private bank business review agenda included presentation and discussion of the most recent audit and compliance reports. The Japan private bank audit and compliance reports from Citigroup corporate internal audit had been “clean opinions” for the past several years, I pointed out, and had even recommended reducing the frequency of Japan private bank compliance audits. The matrixed reporting lines of the private bank compliance team to the Citigroup corporate head of compliance and the Citigroup corporate head of internal audit had not raised any red flags to alert either private bank management or me as sector business head to any issues in private bank compliance. It was inconsistent and ironic, I suggested, that Doug Peterson, the former head of Citigroup corporate internal audit, who issued the recent laudatory reports on Japan private bank compliance and controls and recommended reduced frequency of compliance audits, was the person whom Chuck Prince named as Citigroup Japan CEO in May 2004. The email records also showed clearly that my efforts to engage proactively with Japanese regulators in April 2004 regarding a corrective action plan had been blocked by the Citigroup country manager in Japan.

I also opined privately to Bob Willumstad during the independent review that he should consider the possibility that Japanese regulators were using ambiguous rules to punish the private bank for its rapid growth and success compared to its Japanese rivals. Citigroup’s private bank was the fastest-growing and most successful private bank in Japan, which had probably made it a target of complaints to the regulators from jealous and disgruntled Japanese competitors. And I also told Willumstad that he should consider the possibility that Japanese regulators were scapegoating a relatively small business unit—the private bank—as punishment for perceived regulatory abuses in Citigroup’s huge consumer finance business, which was being criticized in Japanese media for charging 29 percent annual interest rates in Japan; or punishment for Citigroup’s corporate and investment banking business, which was at the center of a securities-trading scandal in Japan; or punishment for Citigroup’s consumer bank, which had stirred Japanese regulatory ire by losing confidential Japanese customer records from a truck in Singapore; or punishment for an incident at Citigroup’s consumer bank in which a Japanese branch manager embezzled customer funds.

I suggested that Japanese regulators might be applying unusually harsh sanctions to a small business like the private bank in order to deliver a warning to Citigroup about its overall business operations in Japan while diplomatically avoiding direct attacks on the larger Citigroup businesses, which generated over $1 billion in earnings in Japan each year. My arguments were dismissed as alibis and rationalizations, which was highly frustrating. I believed that my business unit’s compliance practices were at least as strong as, if not stronger than, those at any other Citigroup business unit in Japan.

It was clear to me that Promontory Financial and its CEO Eugene Ludwig were planning to issue a harsh report. I surmised that they would issue the report they thought their client wanted, and it was clear that their client was Chuck Prince. And so I was pleasantly surprised when I was allowed to read the draft report the day before Citigroup’s October 2004 board meeting and did not find any severe criticism directed at me. In fact, the only mention of my name was in two footnotes which said that I had not followed up on my promise to Japanese regulators to deliver a corrective action plan addressing their draft regulatory findings. “To be fair, the Promontory report should also say that my efforts to deliver said corrective action plan were blocked by Citigroup’s country manager in Japan,” I pointed out to Willumstad. One thing I will never know is whether the Promontory report’s references to me were changed after I read the draft and made more pointed in the report to Citigroup’s board. It’s also possible, or even likely, that few or none of Citigroup’s board members actually read the Promontory report but instead simply accepted Chuck Prince’s characterization of its findings.

The Citigroup board met at corporate headquarters, at 399 Park Avenue, on October 19, 2004. I made a presentation to the board in the morning and attended an audit committee lunch meeting. I was waiting to present to a board committee at approximately 2:30 that afternoon when I was summoned to go to Chuck Prince’s office immediately. I was directed to the adjacent sitting room, where Prince and Bob Willumstad were waiting in easy chairs. I took a seat across from them, and Prince said, “We feel we’ve got to make some difficult decisions. We feel the best thing to do is separate the management responsible for this situation. The board has decided that you and Deryck Maughan and Peter Scaturro are being terminated. The announcement will be made at five pm today. I’m telling you now so that you will have an opportunity to speak to your people before the announcement. Michael Schlein [in Human Resources] will be available to inform you of the separation arrangements when you’re ready.” I was quiet for about thirty seconds, studying their faces and calming my emotions. Bob Willumstad was looking down and away, as if he was embarrassed and did not want to look me in the eye. Chuck Prince, by contrast, was looking directly at me. His face was very somber, but I thought I could see a glint of enjoyment in his eyes. I spoke quietly and calmly and said, “Chuck, how is this a fair thing to do?” He replied dismissively, “I’m not interested in getting into degrees of culpability.”

“Does Sandy know about this?” I asked.

“Sandy was part of the decision,” he said. Again, I breathed slowly and gathered myself. I looked at Prince and said quietly, “Why do you feel the need to do this? You’re probably ending my career. All you had to do was tell me that you are the new CEO and prefer to have your own team, and tell me I have six months to transition out of the company. There’s no need to conduct a public execution.”

“I’m doing it this way,” he replied coldly, “because I prefer to do it this way.” Bob glanced up at me briefly and then returned to looking down at the floor. I summoned all my willpower and self-control to remain calm. I did not want to give Prince the satisfaction of seeing the pain and anguish I was feeling. I said, “Okay. I need to call my wife and talk to my people,” and I returned to my office.

Once there, I called Addie. “There’s going be a press release at five pm announcing that I’ve been fired by Citigroup,” I told her. “I wanted you to hear it first from me.” She gasped and then was quiet for a moment. Then she said, obviously shocked, “What happened?”

“I’m going to meet briefly with my senior staff prior to the announcement,” I said, “and I’ll probably leave the office around five pm to come home. I’ll explain what’s happening when I get home.”

My senior direct reports had been asked to assemble in the conference room near my office. I told them, “I’ve been terminated from the company, and there will be a public announcement at five pm today. I want you to know that I’ve really enjoyed working with you and I’m proud of what we’ve accomplished together.” The staff reaction was stunned disbelief followed by an emotional outpouring. It took longer than I had expected to shake hands with everyone and say good-bye, and then I returned to my office to pack my personal items into cardboard banker boxes.

At 6:39 pm I sent the following email message to my senior staff around the world, had two boxes of papers, family photographs, and memorabilia sent down to my car, and left the Citigroup office:

My driver was waiting in the usual location on 54th Street just east of Park Avenue. The traffic was heavy so the drive took longer than usual. I didn’t want to talk. My mind was racing: “This isn’t a dream, this is real. You were just fired and your career is over. What a fool you are. You thought you were important. Big job. Big title. But you were nothing—they threw you out like an old dish-rag. What are you going to say to Addie? How are you going to explain this to your family?” My mind raced in circles, around and around and around.

Three days later, on October 23, 2004, another shoe dropped. I received, via a registered letter delivered to my house, a Wells notice—a warning letter from the SEC informing me that I could expect to face an imminent civil complaint from the commission. That same day, the New York Times ran a story by Thomas Landon Jr. about me headlined “S.E.C. Warns It May Act on Ex-Officer of Citigroup,” which read in part:

In the days following my departure from the office, I called three senior Citigroup board members to request that they conduct an independent board investigation, to ensure that the board understood all of the facts before locking in final decisions. I called Reuben Mark, CEO of Colgate Palmolive; Richard Parsons, CEO of AOL–Time Warner; and Frank Thomas, retired president of the Ford Foundation. Each of them took my call, but all three told me they supported the actions taken by CEO Chuck Prince. None of them seemed to want to hear what I had to say, and none of them wanted to conduct a board investigation. Finally, I called Sandy Weill. He said that he was sorry, but it was Chuck’s decision, and he, Sandy, had had nothing to do with it.

Citigroup allowed me to access my work email for several days after I was terminated, and I received a steady stream of messages. I was proud, again, that many of the messages echoed those I had received when I left TIAACREF and suggested, again, that many of the people who worked with me had been lifted by our interactions. I offer a few of those messages as examples of how my people expressed their feelings.

Also, a few days later, I received a small package from Thomas Pulling, one of my senior executives in CAM. It was a framed quotation from Theodore Roosevelt, which read:

I appreciated this gesture from Tom and have kept this framed quotation in my office to this day.

At home there was that first strange Wednesday, October 20, with nowhere to go. I could have left the house, of course. I still had dozens of friends, hundreds of business associates, after all. Emails and notes of support and affection were still pouring in for me. But I was essentially alone—more alone than I’d ever felt before. I woke up at my normal time, 5:30 in the morning. (My usual routine had me up at 5:30, picked up by my driver at 6:30, and at my Citigroup office on Park Avenue by 7:30.) In my closet, my dark suits and white shirts hung in a long row. I reached instead for something more casual, the kind of thing I usually saved for the weekends, chinos and a blue oxford shirt. Addie, who normally slept through my early morning routine, was awake in our bed, propped up a little on her pillows, watching me in the dim room. In her yellow silk nightgown, with her slim arms resting at her sides, she looked as beautiful as I’d ever seen her, but more worried, too. “I’m going downstairs to my office,” I said to her.

I tried to think how to soothe the pain my family was suffering. How could the brutal events that were unfolding occur in the elite corporate business world, they must have wondered? As long as they could remember, I had been the master of my own fate, it seemed, always excelling, always calm, always prepared. My constant watchword to the children was self-discipline, and mastery of the self had seemed to be enough to reach any height, achieve any dream. I knew they were probably embarrassed and humiliated by the constant stream of negative news stories and the questions from their friends and acquaintances. I knew they were probably apprehensive about what might happen to me, and how all our lives might be affected. I suspected that they wondered, but would not ask, whether perhaps I had indeed done something unethical.

I reassured Addie and our close relatives and the kids as best I could that I hadn’t done anything improper, let alone illegal, and everything would eventually work out, but it would take some time to get through this. “I need,” I told them, “quiet time to meditate and pray and think.”

Addie was afraid. She couldn’t conceive how a decision like this could be made at Citigroup without Sandy’s blessing. And if the decision did have his blessing, it meant that Sandy must have thought I’d done something terribly wrong. I must be facing potentially severe legal and financial punishments by the SEC, Addie concluded.

To their credit, Sandy Weill’s wife, Joan, and Bob Willumstad’s wife, Carol, were among the Citigroup spouses who called Addie to express their horror at what had been done to me. The messages from company insiders that I was not deserving of the treatment I received were somewhat reassuring to Addie.

Most important, I turned to my faith for comfort. Despite how alone I felt those first few hours and days, in fact I knew I was never alone; none of us ever is. God was with me. One of my daily prayers, which stood me in good stead during this period, said in part, “I affirm my belief, my Father, that all things work together for good to those who love Thee … And I will not walk in fear because I know that Thou hast not given me the spirit of fear, but rather the spirit of power and of love and of sound mind.”

I spent the next two weeks meditating and praying, trying to understand what good could possibly come from being suddenly and summarily fired from a job I had loved and done well in, in the context of my prayer affirming my faith that “all things work together for good to those who love Thee.” It was difficult to fathom how any good could possibly come from such a calamity. Everything that I was as a man—a success, a proven manager, an excellent provider for my family, a Wall Street leader, a straight shooter with the highest ethical standards for myself and those around me, competent, careful, diligent, principled—all those things seemed to have been thrown in the mud, spat upon. Nothing like this combination of being fired and simultaneously abandoned to face SEC charges alone, without company protection, had ever happened before to another Citigroup senior executive, but now it was happening to me. Why? I prayed for healing for my family’s pain, and for my own pain. And I prayed for the strength to pick myself up and move forward.

In the months following my firing in October 2004, Citigroup’s public relations machinery tried to bury me in negative publicity while attributing noble motivations to Chuck Prince for his actions. It started with Citigroup providing the Wall Street Journal with selected portions of the confidential Promontory report, which led to a major article by Mitchell Pacelle, Martin Fackler, and Andrew Morse on December 22, 2004, headlined “Mission Control: For Citigroup, Scandal in Japan Shows Dangers of Global Sprawl; Obsession with Bottom Line and Bickering Executives Created a ‘Perfect Storm’; A Scathing Internal Report,” which cast the Japan unit fiasco as a result of ethics failings. “Mr. Prince has declined repeatedly to comment on the dismissals,” read the article on the topic of my firing, “but he has been vocal about steps he is taking to prevent another disaster. Compliance officers, for example, no longer answer to business heads … but report up an independent chain of command directly to the head risk officer in New York. Mr. Prince says he plans to revamp employee training to focus on ethics.”

Two articles, one in the New York Times and one in the Wall Street Journal, made it clear that Citigroup intended to settle the SEC charges and exclude me from the settlement. Citigroup provided information for the New York Times story on January 22, 2005, headlined “Citigroup Warns of S.E.C. Action.” It read in part:

Citigroup began negotiating to settle the SEC investigation with regard to possible charges against Citigroup but did not include my attorneys in the settlement negotiations, an unusual omission. Citigroup’s settlement, which included no admission or denial of guilt, was announced on June 5, 2005: the company would pay $208 million. The Wall Street Journal article noted that “the settlement relates to [Citigroup’s] 1999 decision to set up an internal transfer agent to service its Smith Barney family of mutual funds,” and that the SEC claimed Citigroup had “reaped nearly $100 million in profit at the funds’ expense.” The article also announced to the world that I, personally, was still under a cloud of suspicion (and probable threat of SEC charges): “Citigroup disclosed last fall that its asset-management arm; its former chief, Thomas W. Jones; two other former employees; and an unnamed current employee, had received so-called Wells notices from the SEC, indicating possible enforcement actions against them. In announcing yesterday’s settlement, the SEC said its investigation was continuing with respect to the individuals involved.”

When I read about Citigroup’s settlement, I suspected immediately that someone had set me up. Someone must have instructed Citigroup’s legal counsel to initiate settlement discussions with the SEC on the transfer agency investigation, but to omit the usual and customary condition in all previous Citigroup regulatory settlements that any corporate settlement would also extend to and include all the senior executives who were potential targets of the investigation. If my suspicions were correct, if someone had indeed instructed counsel to omit that usual provision, it would have immediately stood out to the SEC, which probably would have interpreted it as signaling that Citigroup had conducted an internal investigation of the transfer agency allegations and concluded that I was at fault and therefore not deserving of company protection. This scenario would parallel the recent disclosure by Citigroup that Promontory had been retained to conduct an “independent investigation” of the Japan private bank situation and had concluded that I was one of those at fault, even though the Promontory report I was shown didn’t say that at all. If my suspicions were correct, it meant that someone was essentially painting a target on my back for the SEC.

During the entire ongoing firestorm of Citigroup’s corporate ethics scandals, which had begun with Enron and WorldCom in 2000 and swirled around Citigroup every year since, this was the first and only time that Citi-group entered into a regulatory settlement without including and protecting the senior executives of the affected business unit in the terms of the settlement. In every other case, Citigroup had crafted settlements, paid fines, and agreed to the usual and customary language of “neither admitted nor denied wrongdoing,” with the terms of settlement applying to both the company and the senior executives of the business unit under investigation. This was the only time that a Citigroup business unit head who had reported directly to Sandy Weill was excluded from the protections of a company regulatory settlement.

The Citigroup public relations machinery had been touting new CEO Chuck Prince’s determination to “clean up” company culture and “hold senior executives responsible for bad behavior.” I apparently had been selected to be Exhibit A in Chuck Prince’s culture cleanup. But the irony of making an example of me was that roughly 90 percent of Citigroup’s regulatory problems originated in the Global Corporate and Investment Banking business unit, roughly 9 percent originated in the Global Consumer Banking business unit, and perhaps 1 percent had originated in my Global Investment Management business unit.

My suspicions were corroborated by a Wall Street Journal article on August 9, 2005, which was headlined “Citigroup Ex-Officials Face Charges: SEC Civil Fraud Complaint Says Two Former Executives Mishandled Fund Discounts.” I focused on the two paragraphs:

This statement that I “resisted agreeing to any settlement that suggested [I] acted improperly” is essentially a declaration that Citigroup did not stand with me and insist on including me in its settlement without implication of wrongdoing. I was not given the option of participating in Citigroup’s SEC settlement on the same terms as Citigroup, “neither admitting nor denying wrongdoing,” and consistent with the treatment extended to Sandy Weill’s direct report business unit heads in all prior Citigroup regulatory settlements.

To put this in perspective, regulatory skirmishes related to other business units from that period cost Citigroup over $4 billion in fines and class action lawsuit settlements. This included a payment of $214 million for deceptive and abusive lending at Associates First Capital, a $150 million fine for improper vetting of Enron and Dynegy loans and trades, a $1 billion settlement of biased stock research charges, a $2.5 billion settlement with World-Com investors, and major investigations of Citigroup’s dealings in Europe and Argentina, leading to millions more in fines and settlement fees paid. In none of these cases was the affected business unit head excluded from Citi-group’s settlement terms, or required to admit any wrongdoing, or subjected to charges by the SEC.

Chuck Prince had become Citigroup CEO in late 2003, and he was the only executive with the authority to approve a regulatory settlement agreement that excluded the affected business unit head. I wondered how Sandy Weill rationalized the treatment I was receiving at the hands of his protégé. Had Sandy or anyone else pointed out to the Citigroup board the massive discrepancy between my treatment and that of all other Citigroup business unit heads? I wondered if the three black directors on Citigroup’s board thought about the raw deal the most senior black executive at Citigroup was getting on their watch. Would Mike Armstrong, who belonged to the Blind Brook Club, which was also my golf club, be able to look me in the eye the next time I saw him there? How could the Citigroup directors and their spouses, with whom Addie and I had interacted socially on many occasions, seemingly not care about what Citigroup was doing to me? The Citigroup board at that time included Michael Armstrong, retired chairman and CEO of AT&T; Alain Belda, chairman and CEO of Alcoa; George David, chairman and CEO of United Technologies; Ken Derr, retired chairman and CEO of Chevron; John Deutch, Institute Professor at Massachusetts Institute of Technology; Ann Jordan, wife of civil rights leader and investment banker Vernon Jordan; Reuben Mark, chairman and CEO of Colgate Palmolive; Anne Mulcahey, chairman and CEO of Xerox; Richard Parsons, chairman and CEO of AOL–Time Warner; Judith Rodin, president of the Rockefeller Foundation; Robert Rubin, former treasury secretary and chairman of Citigroup’s executive committee; Frank Thomas, former president of the Ford Foundation; and Sandy Weill, who was still the chairman of Citigroup’s board. These directors were all highly regarded and thought of themselves as good people. But I wondered if they gave any thought at all to the pain they were inflicting on me, and on my wife, and on my children.

They were parties to a level of brutality toward me that would previously have been unthinkable in any elite Wall Street firm, and had never been experienced by any of my white senior management peers at Citigroup. Somehow they must have rationalized that it was acceptable to inflict this fight for reputation, career, and solvency on me. I must have become invisible to them, I realized. I and my family just did not matter to them.

I thought the entire Citigroup board should be ashamed of themselves for their role in approving this betrayal, but most especially Sandy and the three black directors: Richard Parsons, Franklin Thomas, and Ann Dibble Jordan. Their participation lent legitimacy to what Chuck Prince was doing, and possibly even helped the other Citigroup directors rationalize that “it must be okay if Sandy and Ann and Frank and Dick aren’t objecting.”

Evil things happen in this world in part because those who think of themselves as good people are willing to stand by and let them happen. They may rationalize what is happening, or they may avert their eyes and pretend it isn’t really happening, or they may change the subject to avoid talking about it. (“Let’s get focused on the important issues that are facing this company and let’s move forward.”) Chuck Prince just might be the only person in the Citigroup power elite who took time to think carefully about what was transpiring.

Chuck Prince had for many years negotiated the details of every Citi-group or Travelers Group regulatory settlement agreement in his capacity as consigliere /general counsel for Sandy Weill. It is extremely unlikely, and thus inconceivable to me, that anybody other than Prince had exercised final executive decision authority for Citigroup in settling the Smith Barney transfer agency case with the SEC. If the Citigroup board members chose not to learn the details of the settlement, they were nonetheless implicit collaborators in the treatment I received. I also believe that Chuck did it because it was in the nature of his personality to enjoy this type of exercise of power directed against someone whom he did not like.

There’s an important lesson here for aspiring minority executives, public company boards of directors, and the broader business community. It is to understand that these kinds of immoral and cynical events can occur even at the highest levels of the largest and most respected companies in America.