Photo: flickr/World Economic Forum
Citigroup’s chief executive was called out in a new study by the left-leaning Institute for Policy Studies about being paid more by the bank last year than the firm paid in U.S. federal taxes, Reuters’ Nanette Byrnes reports.We pulled out the following excerpt from the “Executive Excess 2012: The CEO Hands in Uncle Sam’s Pocket” study featuring Pandit [.PDF] (emphasis ours):
Four years after the bailout that saved the firm from ruin, Citigroup and CEO Vikram Pandit are still living off taxpayer largesse. The firm, now profitable again, obtained a $144 million tax refund last year, thanks to some spectacular preferential tax treatment.
Companies undergoing significant changes in ownership normally have to forfeit tax benefits associated with past losses, a wise tax code rule designed to prevent profitable companies from buying up unprofitable ones for tax avoidance purposes.
Under this tax code rule, Citigroup should have been required to give up its tax benefits in 2009 when federal officials sold the government’s one-third bailout ownership stake in the banking behemoth. But Pandit lobbied hard and won a special exemption. Accounting experts estimate the long-term value of the waiver at several billion dollars.13
Citi, of course, owes its very existence to the massive bailout the bank received in 2008. According to the TARP Congressional Oversight Panel, the firm gleaned more government bailout subsidies than any other bank. Its haul totaled nearly half a trillion dollars in assistance through TARP, FDIC, and Fed liquidity programs.14
Pandit, after receiving $38.2 million in 2008 compensation, famously agreed to accept a mere $1 in salary until the troubled firm returned to profitability. But then the firm offered him $14.9 million for 2011 and shareholders, angered by the firm’s dismal stock performance, rebelled. In April 2012, 55 per cent of shareholders voted to reject Pandit’s outsized pay package. As of July, Citi’s board of directors still hadn’t revealed whether this nonbinding shareholder vote will trim Pandit’s pay package.15
A Citi spokeswoman acknowledged to Reuters that the bank did not pay U.S. federal income tax in 2011 because of losses from 2008 and 2009.
She also noted that Citi paid on average $3.7 billion a year in federal income taxes from 2000 to 2006, and paid other taxes last year, including more than $3 billion in payroll taxes, and that Pandit voluntarily took a salary of just $1 in 2010.
Pandit wasn’t the only CEO singled out in the study, though.
There were 25 others mentioned whose companies paid them more than they did in federal taxes, the report said.