WSJ: Citi Severs Huge Severance Packages

There’s been a common-sense sighting on Wall Street.

The Journal scoops that Citigroup is refusing to pay tens of millions of dollars it owes to five executives who have left the company in recent months.

Citigroup already has doled out more than half of the roughly $100 million it promised to the former executives. But company officials recently decided not to proceed with the remaining payments, concluding that they wanted to avoid even the possibility of a public backlash over the money, people familiar with the situation said.

Maybe that’s enough of a reason, but somehow that doesn’t smell quite right. I’d bet there’s something else going on here, too. For instance, the paper reports that the government didn’t push this. But here’s how it’s phrased:

Company officials have briefed the Treasury Department on their plans to halt the severance-related payments. Government officials didn’t demand that the bank end its payouts, according to a person familiar with the discussions.

Maybe the government didn’t “demand” it, it just “suggested” it.

The Journal says Citi is playing a game of chicken with its former execs, betting they won’t sue, knowing they’d face the wrath of the taxpayers who have already essentially paid for the first half ($50 million) of their severance.

And remember, “contracts are sacred” types, without the taxpayers’ $50 billion in bailout money, Citi would be no more and these guys would be in the back of the line of creditors.

Nice little scoop by the WSJ.

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Ryan Chittum is a former Wall Street Journal reporter, and deputy editor of The Audit, CJR's business section. If you see notable business journalism, give him a heads-up at Follow him on Twitter at @ryanchittum.