Thursday, March 19, 2009

Citigroup Said to Commit $10 Million for New Executive Suite


By Erik Schatzker

March 19 (Bloomberg) -- Citigroup Inc. plans to spend about $10 million on new offices for Chief Executive Officer Vikram Pandit and his lieutenants, after the U.S. government injected $45 billion of cash into the bank.

Affidavits filed with New York’s Department of Buildings show Citigroup expects to pay at least $3.2 million for basic construction such as wall removal, plumbing and fire safety. By the time architect’s fees and expenses such as furniture are added, the tally for the offices at the bank’s Park Avenue headquarters will be at least three times as high, according to a person familiar with the project who declined to be identified because he’s not authorized to comment. Citigroup said the project will help it save money over time.

Pandit, criticized by lawmakers over Citigroup’s use of U.S. bailout capital, canceled an order for a company jet in January and told Congress on Feb. 11 that, “I get the new reality and I’ll make sure Citi gets it as well.” Of the biggest U.S. banks that received federal aid, only Citigroup has turned to the government three times for rescue. The company, once the biggest U.S. bank by assets and market value, has agreed to limit perks and restrict executive pay.

“In this environment, it absolutely sends the wrong message,” said Charles Elson, director of the Weinberg Center for Corporate Governance at the University of Delaware, referring to the office renovations. “Timing in life is everything.”

Citigroup said in a statement that the construction is part of a global space-saving initiative.

Cost Savings

“Senior executives in our corporate headquarters are moving from two floors to smaller, simpler offices on a single floor,” the company’s statement said. “Based on estimates made when the project was initiated, we expect to generate savings in the next few years well in excess of the project costs.”

Citigroup began planning the renovation last June and obtained demolition permits in September, before the bank received any bailout funds, said a person briefed on the process.

Some city approvals for the project weren’t issued until after Citigroup got its first $25 billion from the U.S. in October, under the Troubled Asset Relief Program, or TARP, according to records available at the New York Department of Buildings.

The new executive suite will be located on the second floor of Citigroup’s office on 399 Park Avenue, a floor below the one Pandit, 52, inherited when he took over as CEO from Charles “Chuck” Prince in December 2007. The second floor previously contained offices, which are being demolished, as well as boardrooms and executive-dining quarters.

Sub-Zero Fridge

Plans and instructions for the bank’s contractors, on file with the city, specify the installation of at least one Sub-Zero Inc. refrigerator and icemaker in the renovated space, along with “premium grade” millwork and Madico Inc. “Safety Shield 800” blast-proof window film. The project encompasses 17 private offices, each with space for administrative assistants, as well as two conference rooms and open areas with “soft seating,” according to the plans.

Citigroup hired New York-based Conant Architects, whose Web site says it designed the bank’s offices in downtown and midtown Manhattan. The plans also list acoustical, telecommunications and lighting consultants, as well as engineers.

Lawmakers have criticized banks over the way they’re using TARP funds. Democrats led by House Financial Services Committee Chairman Barney Frank and Senate Banking Committee Chairman Christopher Dodd say more of the money should be going to consumer and small-business loans.

Liddy to Thain

American International Group Inc. CEO Edward Liddy was lambasted by lawmakers at a hearing in Washington yesterday for allowing the insurer to allocate $165 million for bonuses to employees after taking government loans.

President Barack Obama spoke out against inappropriate spending at banks on Jan. 23, following reports that former Merrill Lynch & Co. CEO John Thain incurred more than $1 million of expenses to redecorate his personal office at the New York- based securities firm after it was acquired by Bank of America Corp. Thain was ousted the same month.

To contact the reporter on this story: Erik Schatzker in New York at eschatzker@bloomberg.net.

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