The Real Scandal at Citi

Is it using a high-level ouster and tabloid-style rumors to obscure the disarray and dismal returns of Chuck Prince's reign?

by Mara Der Hovanesian

Did a fireplace, a fishtank, and a friendship with a business journalist really end Todd S. Thomson's tenure as head of global wealth management at Citigroup (C)? Or did other factors, just out of view, drive the ouster?

The question looms large as Citi struggles under the weight of poor financial performance and a disappointing stock price, and as CEO Charles O. Prince comes under increasing pressure to turn things around. Partly because of Citi's woes, many on Wall Street aren't taking the often-salacious press reports at face value. BusinessWeek has found that, indeed, some of the details don't stand up to scrutiny. And people familiar with the matter say that some Citi insiders bear responsibility for spreading inaccuracies.

To recap: On Jan. 22, Citigroup announced that Thomson, 45, and a onetime rival of Chief Executive Prince, was out. Chief Financial Officer Sallie L. Krawcheck, 42, would step in once a replacement CFO was found.

Nondescript Tank

Over the next several days, press reports citing unnamed sources offered details of Thomson's allegedly lavish spending. In particular, they described a luxurious office insiders called the "Todd Mahal," and as examples of his extravagance, they said he had installed a fish tank and a wood-burning fireplace. They also referred to a relationship between Thomson and CNBC anchor and BusinessWeek columnist Maria Bartiromo that seemed to go beyond the merely professional, citing a trip the two took from China to the U.S. aboard a company jet.

But how much of it was true? Some of the descriptions of Thomson's spending were provided anonymously by people in the upper ranks of Citi's management. Yet other sources close to Thomson have confirmed that while Thomson's office had a fireplace, there were several other fireplaces within Citi—including one in the conference room next to the office of Robert Druskin, the bank's chief operating officer and cost-cutting czar.

Moreover, Thomson's, like the others, was gas-burning (not wood-burning), and the connections for it were in place when Thomson moved in. The fish tank was nondescript and held goldfish—eight red and one black, a symbol of prosperity in Asian cultures and a cheap way to impress clients.

"Smear Campaign"

In general, say some Citi sources, the accusations seemed amped up. Other employees used Thomson's office to schmooze clients and even to host a recent book party for former Citi CEO Sanford I. Weill. "When you are in the high-net-worth business, you have to have people who relate to people worth $1 billion," says Peter E. "Tony" Guernsey Jr., president of Wilmington Trust FSB, a New York bank.

Thomson, who is negotiating a severance package, hasn't spoken publicly about the matter. He told BusinessWeek that he has "no comment on the smear campaign I've been reading in the media" and is proud of his accomplishments at Citi. "I think my record speaks for itself, and for now, I'm going to let it go at that." Citigroup declined to comment on the record, citing its press policy on personnel matters. Bartiromo has never spoken publicly about the issue. But sources say she has privately told friends and colleagues that everything she has done was completely proper and CNBC business.