Fact: Andrew Hall was owed somewhere around $100 million based on his contract with Citigroup. This was based on a contractual agreement which has not been disputed.
Fact: This extraordinary agreement became a political problem for Citigroup. How could they even think of paying so much money to one person when they are owned by the taxpayers who just saved their butts from bankruptcy? Horrors, horrors.
Fact: Citigroup just sold Phibro, the group that Hall runs, for $250 million.
Fact: Phibro reportedly earned Citigroup an average of $371 million over the last five years.
Now, I'm not an Investment Banker. I'm just an educated observer. But I'm also a shareholder in Citicorp, both in actual shares and as a taxpayer. As an actual shareholder, and a de facto shareholder, I'm pissed off.
In a normal, non-politically charged environment, Phibro gets a price dramatically higher than $250 million. I understand that it is a trading business so recurring revenue is difficult to predict. That said, because the political pressure to not pay Mr. Hall and his team what they were contractually required to be paid became so acute, shareholders lose.
I do not understand why Citi could not take the case of keeping Mr. Hall (i.e. pay him what they owe him) to the public and the government. His track record is undisputed. How is Citi, which has lost billions and billions and billions, better off without a subsidiary that made an average of $371 million over the last five years? Is there anyone out there who can argue that Citi is better off for not paying Mr. Hall? Surely paying him his $100 million without the political debate would have resulted in a much higher price for the business.
Yes, paying $100 million to one person for anything is obscene. I get it. Some people want to penalize Citi for taking all of our taxpayer money and then having the chutzpah to want to pay any one person so much money. I get that too.
And now, we all lose the benefit of all the money that Phibro was making for Citi over the years, while not getting anything remotely close to fair value for the business. The “outrage of the masses” costs all of us.
