NEW YORK - Citigroup Inc. has promoted Charles Prince to lead its Salomon Smith Barney Inc. investment bank as the company tries to restore confidence amid investigations into how it handed out shares of initial public offerings while stocks surged.
Prince, who has reported to Chief Executive Officer Sanford I. Weill as Citigroup's general counsel and chief operating officer, replaces Michael Carpenter at the helm of the No. 1 bond underwriter and second-biggest manager of stock sales. Carpenter, 55, will take over Citigroup's global investment group, spokeswoman Leah Johnson said.
Weill "is in a spot now where he's doing a lot of damage control," said Marshall Front, chairman of Front Barnett Associates LLC, which owns 1.45 million Citigroup shares. "They want to put a lot of firepower behind the effort to settle legal issues."
Citigroup shares rose 79 cents yesterday to close at $31.07 on the New York Stock Exchange.
New York-based Citigroup's stock has plunged 34 percent this year amid concern that the biggest financial-services company might have to pay to settle lawsuits related to Enron Corp. and as it lost money in Argentina. Congressional committees also are examining whether the company offered IPO shares to favored executives and issued biased stock research to win investment banking work.
Michael G. Oxley, chairman of the House Financial Services Committee, which is spearheading an investigation into Citigroup's actions, said Prince was a "wise choice."
"I know Chuck Prince really well, and I can't think of a better selection," Oxley, an Ohio Republican, said in a telephone interview. "He has the highest standards in the business."
In a memo to Citigroup employees, Weill said Prince's top priority is to "make every effort to resolve promptly the particular issues the [investment bank] now faces." His second priority is to make Salomon a leader in setting industry standards "for appropriate business practices," the memo said, and his third priority is "to continue to grow and develop our business," Weill said.
Prince, 52, whose appointment was announced Sunday, earned his undergraduate, master's and law degrees at the University of Southern California in Los Angeles. He was an attorney for U.S. Steel Corp. and Control Data Corp. before joining Commercial Credit Co. in 1979. Weill became chairman of Commercial Credit in 1986.
After Travelers Group Inc. and Citicorp merged in 1998, Prince was Citigroup's general counsel. He has also assisted Weill in negotiating acquisitions, helped handle accusations that a Citigroup unit overcharged low-income borrowers for loans and worked on the sex-discrimination suit filed against Smith Barney in 1996.
Three congressional committees are investigating how Wall Street firms won investment banking business in recent years. Oxley has released documents in recent weeks showing that Citigroup banking clients, including former WorldCom Inc. Chief Executive Officer Bernard Ebbers, received coveted shares. Ebbers made a profit of $10.6 million on stocks made available to him by Salomon Smith Barney, the documents show.
Telecommunications analyst Jack Grubman, who left Citigroup last month after sparking lawsuits and investigations into whether his stock research was tainted, testified in Congress that the company earned $80 million in fees from WorldCom from 1998 through last year.
"Certain of our activities do not reflect the way we believe business should be done," Weill said in the memo announcing the management changes. "That should never be the case, and I am sorry for that."