Citigroup Asking for Treasury OK to Pay Bonuses to Key Employees

Citigroup Inc., soon to be one-third owned by the U.S. government, is asking the Treasury for permission to pay special bonuses to many key employees, according to people familiar with the matter.

The request comes as Citigroup is grappling with broad government pay restrictions that could break apart its legendary energy-trading unit. People at that unit, Phibro, are threatening to leave because of pay caps tied to the U.S. bailout of Citigroup. Phibro has been the source of hundreds of millions of dollars in profits for the bank, and has paid out hefty compensation, including a roughly $100 million windfall last year for the unit's leader, Andrew Hall.

Citigroup is looking for ways to free Phibro from the federal restrictions, including a spinoff of the unit, according to people familiar with the matter. Separately, Sumitomo Mitsui Financial Group and Citigroup reached a deal in which the Japanese bank will acquire a large chunk of Citigroup's operations in Japan.

Citigroup is trying to get U.S. approval for special bonuses for many of its employees. In a meeting earlier this month with Treasury Secretary Timothy Geithner, Citigroup CEO Vikram Pandit made the case for the stock-based bonuses. Executives are describing the bonuses as "retention" awards to perk up demoralized employees who the company worries are vulnerable to poaching by rival firms, people familiar with the matter said.

A person familiar with Geithner's thinking said the Treasury hadn't made a decision on whether to allow the bonuses. It is unclear how much Citigroup would pay out in bonuses if the government approved the move. A Citigroup spokesman declined to comment on details of the proposed compensation plans.

Citigroup's request comes after Congress, the public and the president blasted pay practices on Wall Street. Bonuses at American International Group Inc. and Merrill Lynch & Co. ignited political infernos in Washington.

Citigroup has already gotten its own share of criticism for excessive spending, thanks in part to its aborted plans earlier this year to buy a new corporate jet. The company has received $50 billion in taxpayer aid, and the U.S. government is protecting Citigroup against most losses on $301 billion of its assets. The Treasury is poised next month to become Citigroup's largest shareholder, owning as much as 36 percent of its common stock.

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