NEW YORK | Citigroup Inc. reversed course and said it will not take delivery of a corporate jet it previously planned to purchase.
Pressure to cancel the deal came from the Obama administration and amid a chorus of concerns from politicians who are worried about how banks that have received federal funds are spending the money. Citigroup has received $45 billion in capital from the government in recent months amid the ongoing credit crisis.
“Citi has no intent to take delivery of any new aircraft,” the New York-based bank said Tuesday.
An official in President Obama’s administration contacted Citigroup on Monday to reiterate Obama’s position that such jets aren’t “the best use of money at this point,” and are “an outrageous use of funds” for a company getting taxpayer dollars, said a White House official who spoke on the condition of anonymity.
Late Monday, Citi said it had placed a deposit in 2005 to acquire a new corporate jet, and that it didn’t plan to use government funds for the purchase. The New York-based bank noted that any cancellation of the deal would likely lead to millions of dollars in penalties.
On Monday, the New York Post reported that Citi was set to take possession of a new corporate jet, and still planning to receive it even after it received the government funding.
With the cancellation of the deal, a deposit on the jet will be lost but is recoverable once the jet is sold, according to a person familiar with the situation. Citi was in the process of purchasing a Dassault Falcon 7X for $50 million, the person said.
In addition to not taking delivery of a new jet, Citi is also planning to cut the number of corporate jets in its existing fleet to two from five, said the person, who asked not to be identified because those details haven’t been made public.
Corporate jets have become a hot-button topic amid the ongoing credit crisis as the cost of owning and operating them has come into question, especially for companies receiving financial support from the government.
In November, executives of automakers Ford Motor Co., General Motors Corp. and Chrysler LLC were roundly criticized for flying on corporate jets to Washington to ask Congress for federal bailout money.