Citi's Fat Cats Take a Drubbing in Decline

BOSTON -- Wall Street firms encourage the top brass to own equity in order to align their interests with those of ordinary stockholders. It's good to know the system works -- even if, so far, the main result is the satisfaction of knowing that the big shots are feeling your pain.

Take Citigroup ( C), where board members and senior management are losing big money as the bank's deepening crisis sends its shares into freefall.

Their total losses on stock and options this year? Nearly half a billion dollars.

That's right. Thirty board members and top executives have seen nearly $500 million wiped off the value of their shares and options.

Even for Citigroup's well-heeled head honchos, this is a lot of dough. And it shows that anyone who believes the wealthy can be wholly insulated from the knock-on effects of the subprime meltdown is dreaming. The news comes at fears of writedowns and mounting losses sent the stock plummeting to a fresh four-year low.

The figures on personal losses at the top of the bank come from an analysis of Citigroup's public filings.

They include a $52 million loss suffered just by Mr. Establishment himself -- executive committee chairman Bob Rubin, Bill Clinton's former Treasury Secretary and a leading figure in the Democratic Party.

Rubin holds 345,000 shares along with 4.6 million share options at exercise prices ranging from $33.44 to nearly $50. In January his holdings were valued at $75 million.

Today: Just $23 million.

Mexican banker Roberto Hernandez has seen his fortune reduced by about $220 million. Hernandez joined the board after selling Citigroup his bank, Banamex, six years ago. That deal has left him with 14.56 million Citigroup shares.

Most of the other losses have been borne by company executives. But the powerful and connected outside directors haven't been spared completely. Movers and shakers like former CIA head John Deutsch and Johns Hopkins chairman Michael Armstrong are out a million bucks or two.

The figures provide an indication of the pressure on chief executive Chuck Prince to turn the ship around quickly or walk the plank. Speculation about Prince's fate is growing following the dramatic ousting of Stan O'Neal, his counterpart at Merrill Lynch ( MER).

Citigroup stock, which began the year at $53.88, fell below $39 yesterday amid growing fears of write-downs and capital needs. One Wall Street analyst even questioned whether the dividend was safe. The last time the shares were this low was in October 2003.

According to the most recent company filings, directors and senior management owned 25.3 million shares. The value of those shares has plunged by $404 million this year to $956 million.

Top figures also held 10.7 million stock options. Most, or 7.7 million, were held by five senior executives -- Prince, Rubin, wealth management boss Sallie Krawcheck, Chief Operating Officer Bob Druskin, and Vice Chairman Stephen Volk. Based on exercise prices ranging from $32.05 up to $55.88, those options have lost another $72 million in value.

That brings the total to $476 million.

One caveat: It's an estimate. And it is not complete. The figure, for example, does not include losses on another 3 million stock options held by other senior figures, where the exercise prices are unknown. Nor the effect on any stock granted since the last proxy statement.

Citigroup's top brass are standing by Prince for now, but of course fine words butter no parsnips -- and float no yachts.

As O'Neal just learned, the end comes quickly when it comes.

In keeping with TSC's editorial policy, Brett Arends doesn't own or short individual stocks. He also doesn't invest in hedge funds or other private investment partnerships. Arends takes a critical look inside mutual funds and the personal finance industry in a twice-weekly column that ranges from investment advice for the general reader to the industry's latest scoop. Prior to joining TheStreet.com in 2006, he worked for more than two years at the Boston Herald, where he revived the paper's well-known 'On State Street' finance column and was part of a team that won two SABEW awards in 2005. He had previously written for the Daily Telegraph and Daily Mail newspapers in London, the magazine Private Eye, and for Global Agenda, the official magazine of the World Economic Summit in Davos, Switzerland. Arends has also written a book on sports 'futures' betting.

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