Salary cap misses one Obama appointee

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By Jim McElhatton

Weeks before the Treasury Department announced a half-million dollar salary cap for executives at companies taking federal aid, one of President Obama's top political appointees reported a seven-figure compensation deal with one of the nation's biggest recipients of bailout cash.

Deputy Secretary of State Jacob Lew filed financial-disclosure papers last month showing he took home just under $1.1 million last year as a managing director at Citi Alternative Investments, a unit of Citigroup. So far, Citigroup has gotten $45 billion in federal bailout funds.

Last week, Treasury announced rules to keep senior executives at some firms that get bailout money from earning more than $500,000. The cap won't apply to Mr. Lew, however. It isn't retroactive, and not all executives at companies taking bailout money are affected by the new rules, compensation specialists say.

Mr. Obama promised to rein in big Wall Street paydays, especially at companies taking government bailout money.

"For top executives to award themselves these kinds of compensation packages in the midst of this economic crisis is not only in bad taste -- it's a bad strategy -- and I will not tolerate it," Mr. Obama told reporters last week.

The head of one government-watchdog group said Mr. Lew's compensation deal, reported in a recent government ethics filing, appears to conflict with the spirit of Mr. Obama's new pay rules.

"If it's in bad taste for those on Wall Street, then it's bad taste for those leaving Wall Street, too," said Melanie Sloan, executive director of the nonpartisan Citizens for Responsibility and Ethics in Washington.

The White House did not comment when asked about Mr. Lew's work for Citigroup. Through State Department spokesman Raphael Cook, Mr. Lew also declined to comment. And a Citigroup spokeswoman said she could not discuss personnel matters.

According to Mr. Lew's financial disclosure, filed at the U.S. Office of Ethics, he listed $1,099,999.99 in salary and discretionary cash from Citigroup, as well as between $250,001 and $500,000 in unvested, restricted Citigroup stock.

He also reported being eligible for discretionary compensation and that he would receive it prior to becoming deputy secretary of state. A former director of the Office of Management and Budget under President Clinton, Mr. Lew was confirmed by the Senate on Jan. 28.

Had the new pay rules been in place last year, specialists say Citigroup executives likely would have seen their pay cut, according to compensation specialists.

"I think they certainly would have," said Temple University accounting professor Steven Balsam, a specialist on executive compensation. "They were paying out huge amounts of money ... and it backfired. All the while, they were getting bonuses."

It's unclear what, if any, role Mr. Lew's division, Citi Alternative Investments, played in Citigroup's money troubles. He was chief operating officer and managing director at Citi Alternative, which, according to the company, has about 850 employees and $49.3 billion of capital under management as of Sept. 30. The division specializes in private equity, hedge funds, real estate and other investments.

Raghuram Rajan, an economist at the University of Chicago, said Mr. Lew's $1.1 million in compensation perhaps would be considered "relatively reasonable in normal times."

"But as you get into the downturn, we're seeing questions about whether some of these salaries are reasonable once they're bailed out by the government," he said.

Mr. Lew isn't the only Obama appointee leaving the private sector with a six- or seven-figure compensation deal. Other big earners include:

• Attorney General Eric H. Holder Jr., who reported receiving more than $3 million from his last job as a partner at the D.C.-based law firm Covington & Burling.

• Deputy Attorney General-nominee David Ogden reported $1.5 million from his partnership share from the WilmerHale law firm.

• Defense Department General Counsel-nominee Jeh Johnson reported $2.6 million in partnership income from Paul, Weiss, Rifkin, Wharton & Garrison LLP.

• Securities and Exchange Commission Chairman Mary Schapiro reported $675,000 in deferred compensation as a board director at Kraft Foods, and $2.75 million through her former full-time job as chief executive of the Financial Industry Regulatory Authority.