Weill defends Citigroup's actions over Enron

Citigroup’s chief executive Sandy Weill yesterday defended his company's actions amid increased US government scrutiny into its relationship with bankrupt energy trader Enron.

“From everything we know, our activities with Enron were legal, met accounting standards, and reflected industry practices – and our people, relying on the advice of independent legal and accounting experts, believed they were doing the right thing,” Weill said in a letter to Citigroup employees. “In the last few days, our company has been severely criticised for past activities in our corporate and investment bank. I feel badly and I truly regret the pain that has been caused.”

Earlier this week, Citigroup and JP Morgan Chase sought to shift blame on to auditor Andersen for its role in approving 'prepay' transactions, which masked Enron’s financial malaise. Testifying to the US Senate Permanent Subcommittee on Investigations, the Wall Street powerhouses defended their six-year involvement in providing more than $8 billion in financing to Enron.

“Today’s investors are demanding greater transparency in financial disclosure, and therefore we are responding accordingly. By today’s new standards, and with the benefit of hindsight, we will evaluate client transactions in an entirely different light than in the past...If we find that anyone in our company has done anything wrong or fails to abide by our professional standards, we will take all appropriate actions swiftly,” Weill warned.

Accordingly, Citigroup is building stronger walls to separate research from investment banking and managing the conflicts that may arise from time to time, Weill added. The bank is also seeking to avoid possible conflicts of interest by not using its auditors to do consulting work.

“The recent decline in our stock price is completely disconnected from the fundamental strengths of our company. We earned a record $4.08 billion in the past three months alone. We have $92.5 billion in total equity and $10.5 billion in credit reserves,” Weill said. “The issues raised relate to a small segment of the corporate and investment bank and need to be put in the context of the diversity and breadth of Citigroup’s operations. In the past twelve months, we received ratings upgrades from major rating agencies, and are now rated one notch below AAA or equivalent.”