Citigroup offloads its $100 million man
Bank sells unit whose leader was ensnared in bonus controversy
Could a bank that received $45 billion in bailout funds really get away with paying one employee $100 million? The very idea was outrageous to investors and taxpayers. Yet Hall was reportedly demanding the bonus, since it had been contractually promised to him if he performed well over the year.
The whole debacle became an ongoing problem for Citigroup, and so the bank decided to sell Hall's energy-trading group to Occidental Petroleum (OXY) for an undisclosed amount.
But in saying goodbye to Hall, Citigroup loses one of its most profitable segments. Hall's group, Phibro, has been made money since 1997 and over the last five years averaged $371 million in annual earnings. Numbers like that are why Hall gets promised a $100 million bonus.
Why sell it? Citigroup had little choice, an analyst tells The Wall Street Journal. Perhaps the nail in Phibro's coffin came when Citigroup's chief executive admitted last month that a $100 million bonus was too high for a bank employee.
After the CEO says something like that, the bank couldn't go through with the payment without looking foolish.
There was another reason to dump Phibro. Federal regulators are working on rules that could severely crimp speculative oil trading, the Journal reported. Phibro might have been hindered under those rules, but would have more freedom at an oil producer like Occidental.
And what about Phibro's $100 million man? Occidental now says that "significant portions of current and future bonuses" will be deferred and paid out in future years.
In other words, everyone is doing everything they can to sweep the bonus controversy under the rug.
Then later, when no one is paying attention, Hall will get the money he is owed.
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The solid report comes a month after the retailer closed all of its Canadian operations.
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