- The Washington Times - Thursday, March 19, 2009

NEW YORK (AP) - Citigroup is going through with more than $3 million worth of construction at its corporate headquarters in Manhattan.

The bank says the renovation will save $20 million in the long run. Top executives currently working on two floors will be consolidated in “smaller, simpler offices on a single floor,” Citigroup said.

But the office makeover at the bank’s Park Avenue address comes at a tricky time for the company, which is operating with $45 billion in federal funding after recording five straight quarters of losses. The bank’s use of taxpayer dollars has been under close watch.

Consolidating real estate is a good idea, said Sanjai Bhagat, a professor of finance at the University of Colorado Leeds School of Business. And $3 million is a tiny fraction of $45 billion. But the question is whether it really takes millions of dollars to move executives from two floors to one.

“They’re still living in the pre-2008 era,” Bhagat said. “They still don’t get the message.”

The bank, which has been planning the renovations for months, is paying $3.2 million for basic construction, including wall removal and fire safety systems, according to filings at the New York Department of Buildings. The total cost could end up being higher, though, after fees and other expenses _ other media reports estimated the cost of the renovations at $10 million.

Citigroup pointed out that it has saved $100 million over the past two quarters in premises and equipment expenses, and that its total global real estate space has decreased by nearly 6 percent to 94.3 million square feet.

A person familiar with the plans said the company intends to sublet the floor that it is exiting. He spoke on condition of anonymity because the plans were not final.

Citigroup scrapped plans to buy a $45 million private jet after President Obama called the expenditure “outrageous.” It has faced criticism, too, from a few lawmakers over its $400 million stadium naming deal with the Mets.

In front of a House panel in February, CEO Vikram Pandit said: “Let me be clear to the committee: I get the new reality.”

Other bailed-out institutions’ spending has been censured as well. The House Thursday passed a bill to levy a 90 percent tax on bonuses paid to high-earning employees at American International Group Inc. and other companies that have received at least $5 billion in government bailout money.

And a New York state judge Wednesday ordered Bank of America Corp. to disclose information about bonuses given to employees at Merrill Lynch & Co. just before the bank bought the brokerage company.

John Thain, the former CEO of Merrill Lynch, came under public scrutiny late last year for not only paying bonuses to Merrill Lynch employees before the brokerage was acquired by Bank of America Corp., but also for spending $1.2 million in late 2007 to renovate and decorate his Manhattan office in early 2008. He eventually agreed to pay the money back.

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