Citigroup sidesteps pay row with Phibro sale

Citigroup has sold its Phibro oil trading business to Occidental Petroleum in a $250m deal that takes the heat out of controversial $100m bonus for trader Andrew Hall
Schloss Dernberg a 1,000 year old castle near hamburg owned by oil trader Andrew Hall. Photograph: Public Domain

A British-born star trader at Citigroup who caused a political furore by earning a bonus of almost $100m (£63m) is to leave the struggling bank as part of a sale of its oil and gas trading division, Phibro, to a Los Angeles-based energy firm, Occidental Petroleum.

Phibro is headed by Andrew Hall, an Oxford-educated modern art enthusiast whose stratospheric earnings have become a public relations fiasco for Citigroup. Hall made $98m in 2008 and is tipped to be due a nine-figure bonus this year following astute bets on the direction of commodity prices.

The division, based in a converted dairy farm in suburban Connecticut, has been highly profitable for Citigroup, generating average annual profits of $371m over the last five years to provide a useful contribution to the bank's battered finances. Occidental said its net investment in the acquisition was likely to be about $250m.

Citigroup described the sale as "the outcome of an evaluation of a variety of alternatives" and said it was "consistent with Citi's core strategy of a client-centered business model".

There have been rumours on Wall Street for months that Hall was seeking a 'quiet divorce' from Citigroup, alarmed by a deluge of criticism over his remuneration. Hall is understood to have examined the possibility of leading a buyout of Phibro and Citigroup reportedly sounded out the billionaire Warren Buffett as a possible buyer.

Experts on Wall Street say that Citigroup's sale of Phibro is largely to shake off the pay row, rather than for any commercial reason. Tom Bentz, a commodities analyst at BNP Paribas in New York, said: "I think most people expected it to happen at some point. Andy Hall is due a huge payout and with Citigroup under government scrutiny right now, it was going to be difficult to go forward with Phibro. I'm sure Phibro wanted out."

The US Treasury owns 34% of Citigroup, having pumped billions of dollars of taxpayers' funds into the bank to keep it afloat, and a so-called 'compensation czar' appointed by the White House, Kenneth Feinberg, has been reviewing the bank's pay arrangements. President Obama has repeatedly condemned runaway Wall Street bonuses, describing them as "the height of irresponsibility" and a White House spokesman has described Hall's pay as "out of whack".

Even Citigroup's chief executive, Vikram Pandit, has expressed unease about Hall's earnings. Pandit was asked at a speaker meeting in New York last month whether he believed $100m was an excessive amount to pay a single individual. He simply replied: "Yes".

Hall's defenders say that his division has been consistently successful and that, under a contract written well before the financial crisis, he is entitled to a slice of its profits.

Although born in the UK, Hall is a naturalised US citizen. A chemistry graduate, he worked for BP before joining Phibro, which was then owned by Salomon Brothers, in 1982. Hall lives in Connecticut but he also owns a 1,000-year-old castle near Hamburg called Schloss Dernberg. A keen collector of modern art, Hall has works by the likes of Andy Warhol, Bruce Nauman and Julian Schnabel.