Citigroup’s creator watches its decline, alone with his regrets

Citigroup’s creator watches its decline, alone with his regrets
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First Published: Sun, Jan 03 2010. 10 35 PM IST

Managerial problems: Sandy Weil, the former head of Citigroup. While Weil acknowledges some of his own mistakes for the Citi debacle, he holds his successors—John Reed and Charles Prince—responsible f
Managerial problems: Sandy Weil, the former head of Citigroup. While Weil acknowledges some of his own mistakes for the Citi debacle, he holds his successors—John Reed and Charles Prince—responsible f
Updated: Sun, Jan 03 2010. 10 35 PM IST
This is my final annual meeting as chairman,” says , standing near the window of his office, peering at a grainy photograph of him and his wife on stage at Carnegie Hall more than three years ago. They are smiling broadly, and behind them is a packed house of cheering Sandy WeillCitigroup Inc. shareholders. A huge banner dangling from the balcony reads “Thank You Sandy”.
After studying the photo for a few moments, Weill said quietly, “I thought the company was impregnable.”
He knows now, of course, that he was wrong.
Weill built his wealth, status and power by creating what was once the world’s largest bank. Now, as Citi struggles to regain its footing, Weill’s legacy has taken on a darker hue. Though he was once viewed as a brilliant deal maker, some critics now cast him as the architect of a shoddily constructed, unmanageable financial supermarket.
Managerial problems: Sandy Weil, the former head of Citigroup. While Weil acknowledges some of his own mistakes for the Citi debacle, he holds his successors—John Reed and Charles Prince—responsible for it. Hannelore Foerster/Bloomberg
Citi’s troubles are well chronicled: a failure to integrate its disparate parts worldwide or to keep tabs on risky investments and free-wheeling operations. These lapses led to billions of dollars in losses and multiple bailouts, and the government now owns a quarter of the company.
In its efforts to recover, Citi is dismantling itself, scrapping many of the assets that Weill threw together.
During a series of recent interviews, Weill spoke candidly about the loss, frustration and humiliation caused by Citi’s fall. “I feel incredibly sad,” he says.
While he acknowledges some of his own mistakes for the Citi debacle, he is also quick to give the back of his hand to his former co-chief executive officer, John Reed, and his successor, Charles Prince.
And Weill vigorously defends his record, rebutting critics who say that Citi was an unstable creation. Judah Kraushaar, a hedge fund manager and former banking analyst who worked with Weill on his autobiography, said that Citi’s problem wasn’t that it was unmanageable, but that it lacked enough good managers—and that Weill was a good manager.
“When he left, the company had all the hallmarks of how Sandy ran a business: it was lean; it didn’t have a bloated balance sheet,” says Kraushaar. “Had he picked a different successor things could have turned out very differently.”
At one point, Weill had hoped to return and help the company recover and to defend his legacy himself. But the bank no longer has a place or a need for its old chief executive. Now, Weill, 76, is trying to move on to a life without Citi.
“It’s never going to be the same company that it was,” Weill said one morning shortly before Christmas.
Sitting in his office on the 46th floor of the General Motors building in Manhattan, Weill is surrounded by reminders of a lifetime on Wall Street. The space is breathtaking with floor-to-ceiling windows and views stretching out over Central Park. One wall is devoted to framed magazine and newspaper articles chronicling his career.
Here, from this solitary perch, Sandy Weill has watched his banking colossus come undone.
“In the beginning, I felt that we should be able to weather that storm,” Weill says, recalling the late summer days of 2007, when the collapse of the subprime market brought Citi’s troubles to the surface. At this point, Weill believed that the company could be fixed, and he wanted to fix it.
Weill no longer had any official position at Citigroup, having retired as chief executive in 2003 and as chairman in 2006. But he was still hugely invested in the company. He owned at least 16 million shares in 2006, according to his last public filing as Citi chairman.
At the same time, Weill remained close with Citi employees, shareholders and board members. They had been keeping him up to date about events at the company.
“People were calling him all the time, trying to get him wound up, get him mad,” said Todd Thomson, the former head of wealth management at Citi. When Thomson was forced out in 2007, Weill was one of his first calls: “I unloaded to Sandy,” Thomson says.
For Weill, calls like these—coupled with the collapsing share price—burned; they made him want to act.
Starting in late 2007, he began approaching some members of Citi’s board about returning to help with its recovery. He tried first when the board was looking to replace Prince as chief executive, and later after Vikram Pandit got the job. At the time, Weill imagined that he would be welcomed. “I had 50 years of experience,” he says. “I felt that just because I retired didn’t mean my brain went to mush. Maybe I could help.”
No one responded to his offers.
The rejection stung. Citigroup had for so long been central to his life. It was hard to accept that he had no control or influence over it anymore.
Weill continued to track it closely. “He was watching every movement of the stock; he was reading everything,” recalled Mike Masin, a longtime friend and a former chief operating officer of Citigroup.
One news item, in particular, was crushing: Last winter, The New York Post ran a picture of Weill on its front page with the headline, “Pigs Fly: Citi Jets Ex-CEO to Cabo”. He had taken the corporate plane to vacation in Mexico, weeks after Citi had accepted a $45 billion taxpayer bailout. The flight provoked a public outcry and media frenzy.
Weill says he was horrified by being cast as a greedy, out-of-touch Wall Streeter taking advantage of taxpayers. The night the Post article came out, he issued a news release promising to never again use the Citi jet.
In April, Weill and Citi agreed to terminate the consulting contract in which he was provided use of that jet, as well as office space, cars and security.
Weill firmly contends that what he built at Citigroup created huge value for employees and shareholders. Beyond that, he has been an enormously generous philanthropist, giving some $800 million to charity over the last three decades, he says. This, he says, is what he wants to be remembered for.
Still, many people see Weill as a root cause of Citi’s troubles. He bought up businesses around the globe, from New York to Tokyo to Sao Paolo, but his critics say he never managed to meld them into a cohesive company. To some, this was the foundation of its failure.
Weill said that the model on which he built the company was not at fault, that it was the management that failed. For this, he accepts partial responsibility. “One of the major mistakes that I made was my recommending Chuck Prince,” he says of his handpicked successor, who ran the company from 2003 to 2007. Weill blames Prince for letting Citi’s balance sheet balloon and taking on huge risks.
Once close friends and colleagues, the two men no longer speak.
Prince declined to comment for this article.
Analysts say that managerial problems plagued the Citi empire and that its board, which might have imposed some order, became little more than a rubber stamp during the Weill era.
Weill remains in far better shape than most other Citi investors. Although Forbes bounced him from its list of the 400 wealthiest Americans—the magazine once estimated his net worth at $1.5 billion—he still lives regally: a $42 million apartment in Manhattan; homes in Greenwich, Connecticut, and the Adirondacks; and a yacht.
Citi, meanwhile, has recently shown some signs of improvement: it posted a third quarter profit and repaid $20 billion to the government last month. But for so many who depended on Citi, the bank has caused irreversible damage. It’s a reality that Weill says pains him. “Look what it’s done,” he says. “It’s hurt the dreams of so many people.”
©2010/The New York Times
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First Published: Sun, Jan 03 2010. 10 35 PM IST