03.03.09

Fuming: Sandy Weill

Privately, the former CEO who created the financial superpower is fuming that he hasn’t been consulted during the firm’s freefall—and some people close to him believe he cashed out of the stock a long time ago. Charlie Gasparino reports.

Privately, the former CEO who created the financial superpower is fuming that he hasn’t been consulted during the firm’s freefall—and some people close to him believe he cashed out of the stock a long time ago.

As CEO of Citigroup, years before the bank spit out huge losses that most recently led to a partial government takeover, Sandy Weill was known for many things: his belief in the financial-supermarket model that combined investment banking and commercial banking; his aversion to taking unnecessary risks, later ignored by his successor, Chuck Prince; and maybe most of all, his obsession with the day-to-day, sometimes minute-by-minute, fluctuations in the company’s stock price. How obsessed was Weill? Well consider the following anecdote relayed to me by a former associate during his days running Citigroup. It was around the year 2000. Citigroup’s share price was many times higher than what it trades at today. And there was Weill sitting at his desk staring intently at his computer screen as the price of the stock, trading under the symbol C, danced around its high of $56 a share. The executive began telling Weill about some important matter affecting the firm, but Weill couldn’t get his eyes off the screen. Other than an occasional “Uh huh” Weill’s eyes and attention were glued to Citigroup stock gyrations.

The current CEO Vikram Pandit added insult to injury, rarely consulting with Weill on policy matters except when he needed to raise money back in January 2008.

As most investors know, shares of Citigroup are well off that high—in fact, they are hovering around $1.25. If the past is any guide, Weill isn’t just pissed, he’s apoplectic. As the creator of the company and one of its single largest shareholders, he must have a lot to lose, or he has already lost a lot like many other shareholders, many of whom are former executives and board members who believed the various plans by his successors to save the company, from Prince to the current CEO Vkiram Pandit would work, only to discover they didn’t.

That said, it’s unclear just how much money Weill did lose during Citigroup’s collapse—and it’s becoming one of the biggest mysteries in the market these days. It’s particularly intriguing as Hank Greenberg, the former longtime head of AIG, whose massive government bailout has the stock trading even further south than Citi, has recently stated he lost around $2 billion, indeed much of his fortune, by maintaining investments in his old firm.

Did Weill believe in the new management that succeeded him? Based on a review of public documents and interviews with friends and former associates, it’s hard to tell. Friends of Weill tell me he felt particularly dissed that the Citigroup board didn’t reach out to him after they ousted Chuck Prince, and give Weill some role restructuring the company he created. Prince, of course, was Weill’s hand-picked successor, so maybe the board didn’t think Weill was suited for the job of fixing what he played a role in breaking—a point I have made several times over the years. Even so, Prince was ousted for doing something Weill had avoided for years—investing in risky assets. (By contrast, after purchasing Salomon Brothers, Weill immediately disbanded its arbitrage desk, which took big bets in the bond markets.) If anyone would have known how to stop the bleeding at Citi, it might have been Sandy Weill.

The current CEO Vikram Pandit added insult to injury, rarely consulting with Weill on policy matters except when he needed to raise money back in January 2008, when Weill joined a group of investors who purchased some preferred stock in the company, which, according to published reports, was small but significant because Weill’s involvement was used by Pandit to show that the man who built the firm had confidence in its new leadership. People who know Weill say that after a year of inaction, failing to sell assets and unload the bad debt on Citi’s books, Weill no longer has the same confidence in the new leadership, Pandit included.

For all these reasons, people who know Weill say they doubt he still has much of his fortune tied up in the company stock. Here’s what we know: The last public filing for Weill stock ownership came out in February 2006. It said he held 16.555 million shares. With a stock price hovering off its highs but at a still healthy $46, Weill’s holdings in Citi had a value of more than $760 million. If he hadn’t sold a single share, those same holdings would be worth a tad more than $20 million today.

But it’s hard to believe he hasn’t sold anything. By 2006, Weill was no longer an officer or a director of Citigroup, (his official title is chairman emeritus and he still has an office and, until recently, access to the company’s jet), meaning he no longer has to disclose whether he’s still holding any Citigroup stock. So if he has sold stock, as many former associates suspect, no one would know. One friend of his tells me he believes that Weill, like other longtime Citigroup executives, “has lightened up” on his holdings, but he didn’t know by how much. People who have worked for Weill assured me that the man who ran Citigroup would have sold most if not all of his Citigroup stock long ago.

The mystery is likely to continue. If Weill doesn’t have to make public disclosures, all we have is his public statements and at least for now, he isn’t saying anything. A spokesman for Weill didn’t return telephone calls for comment, and Citigroup won’t say whether Weill sold any of his holdings. Weill isn’t talking either; I put a call into his office, and a nice woman said someone would get back to me.

I’m still waiting.

Why is knowing how much Weill lost on his Citigroup stock so important? In my view, if Weill sold out sometime in 2007, when Chuck Prince was still in charge and the company was beginning to reel, he knew the end was near. It would have been nice to let the rest of us to know as well.

Charles Gasparino is CNBC's On-Air Editor and appears as a daily member of CNBC's ensemble. He is a columnist for the Daily Beast and a frequent contributor to the New York Post, Forbes, and other publications. His forthcoming book about the financial crisis, The Sellout, is scheduled to be published later in 2009.