"...staggering losses and intense public scrutiny..." -Citigroup..Nov 16, 2007

[SoCalDem]

http://money.cnn.com/2007/11/08/news/companies/citigroup_alwaleed.fortune/index.htm


Prince Alwaleed: Why Chuck had to go
In a Fortune exclusive, Citigroup's biggest single investor talks about his disappointment in Chuck Prince, the bank's colossal losses, and his views on a successor CEO.

By Andy Serwer and Barney Gimbel, Fortune
November 16 2007: 2:37 PM EST

(Fortune) -- In the midst of staggering losses and intense public scrutiny, former Citigroup CEO Charles O. Prince III could always count on the support of the company's biggest individual shareholder: Prince Alwaleed bin Talal bin Abdul Aziz al Saud. Less than a month ago, the Saudi prince, who owns 3.6% of the company, even dismissed a sharp drop in earnings as a "mere hiccup." But Fortune has learned that Prince Alwaleed and other major shareholders agreed last week that, if Chuck Prince didn't offer his resignation after the news of the additional $8 billion to $11 billion writedowns, they would publicly call for his ouster. In an exclusive interview, Prince Alwaleed, speaking by phone from the desert outside Riyadh, talked with Fortune's Andy Serwer and Barney Gimbel about the final days of Chuck Prince's tenure at Citigroup (Charts, Fortune 500).

Fortune: When Citigroup first reported the writedown three weeks ago, you said that you supported Citi and Chuck Prince. Do you feel like you were misled? Did the situation change? What happened there?

Prince Alwaleed: Let me tell you the facts. Basically when Citigroup pre-announced the $6.4 billion writeoff, Chuck Prince called me within five minutes of the announcement and informed me of that loss and I told him bluntly and openly, "Is this the end of the story? Did you think of everything?" His answer was "yes" and he expected normalization in the fourth quarter. I listened to the analyst discussion he had with everybody else and he said there would be normalization in the fourth quarter. So obviously, this gave me comfort that this was a onetime event and only an aberration and I backed off.

Although the writeoff said $6.4 billion, post-tax $3.4 billion, if you compare this to the equity of Citibank and the profits of Citibank in the third quarter, there was a $2.4 billion profit. So it was a hiccup assuming that this was a onetime event. But what happened two or three weeks later, another $8 to $11 billion additional write-off, the situation changed completely. You cannot come to the public and say that this normalization is expected in the fourth quarter and then three weeks later, not three months later, you come and say there is an $11 billion writeoff. This is unacceptable. That's when the events changed completely. My backing was withdrawn dramatically. You should never commit to something that you can't deliver. Never.


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