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Citi Gets A New Prince

7 minute read
Daniel Kadlec

After 17 years of anonymous toil helping build Sanford Weill into a Wall Street legend, and Citigroup into the largest banking institution in the world, Charles Prince has earned his moment in the spotlight. The question is, Will he ever get it?

Weill, 70, announced last week that he will step aside as Citi CEO at year’s end and that Prince, 53, will succeed him. But Weill won’t give up the chairman’s title until 2006, and he peppered his public remarks with reminders that he will remain a force at Citi. “My brain won’t stop,” Weill assured analysts during a conference call. When Prince at one point indicated that he was eager to get back to work the next day, Weill jabbed, “What, not today?” Weill also quipped that the new team–which includes Citi president Robert Willumstad, 57, who will take the additional title of chief operating officer–“better not screw up.”

Never mind that Prince, who feels comfortable enough to roast his boss on his birthdays in front of hundreds of employees and who once persuaded Weill to dress as Superman for the affair, is practically family to Weill–or that Weill’s gibes were in fun. Never mind too that Weill, Prince and Willumstad spent the weekend at Weill’s country home in the Adirondacks in upstate New York celebrating the succession plan over a meal of sea bass and a rare magnum of 1966 Henri Voillot Pommard from Weill’s cellar. This is business, and Weill has been spectacularly good and merciless at it, even at the cost of some of his closest business relationships.

Weill’s legacy is closely tied to Citi’s health, as is his personal fortune of $1 billion in Citi shares. Before joining Citi, Weill lost out in a power struggle at American Express in 1985. He never lost another, leaving a pile of adversaries, and colleagues, in his wake as he rose to the pinnacle of U.S. financial power at Citi. When Weill consolidated power following the 1998 merger of Travelers with Citicorp, previous favorite son Jamie Dimon was written off like a bad loan. So Prince knows he can’t afford to stumble–at least not before Weill lets go of the chairman’s role in 2 1/2 years.

That Prince is a lawyer who has functioned as Weill’s Mr. Fix-It says a lot about financial institutions these days. Citi is still stinging from a string of ethical lapses related to its financing of Enron and to the tainted stock research of former telecom analyst Jack Grubman that helped feed the stock-market bubble. There’s also plenty of skepticism, even inside the firm, that Prince is anything more than a seat warmer to get through this turbulent period. A quiet man and a consummate insider, Prince also faces a personal challenge: he will have to step out of his shell to lead a complex company with $1 trillion in assets spanning more than 100 countries.

“He’s a bit of a wild card,” notes James Mitchell, analyst at the brokerage firm Putnam Lovell. “He hasn’t been out front before. That’s where he’s really got to pick up the slack.” Prince doesn’t necessarily accept that. “Everybody’s personality is different,” he told TIME. “I don’t expect to see myself in the society pages.” That’s fine with Citi’s board. “What good is a high profile?” says Richard Parsons, who is CEO of AOL Time Warner (which publishes TIME) and a Citi director. “We need somebody who can actually do some stuff.”

Yet one need only check the stock tables for evidence that Citi shareholders are accustomed to a larger-than-life boss. Citi stock fell 5% on the succession news, and even a brief dip is no small matter at a company with an intense culture of ownership. That culture keeps executives fixated on creating value and has helped generate remarkable returns for shareholders. Those who have stood by Weill since he invested $6 million of his own money and gained control of consumer lender Commercial Credit in 1986 have earned about six times the market average, a stellar run that, until last year’s string of scandals, produced the “Weill premium”–a higher share price relative to earnings for Weill’s companies than for peer companies.

Yet mild-mannered Prince has plenty of supporters. “Chuck has very good judgment, often in tough business situations,” says Robert Greenhill, the veteran investment banker who ran Smith Barney and worked with Prince in the mid-1990s. Prince also wins high praise from his adversary in the stock research dustup, New York Attorney General Eliot Spitzer. Late last December, Spitzer was trying to wind up a $1.4 billion settlement with 10 brokerages (including Citi) that had been accused of misleading clients with faulty stock research. Spitzer feared that the talks were losing steam, so one morning he insisted that the major firms send to his office someone empowered to make an immediate decision. Citi sent Prince and a team of lawyers. Spitzer issued his ultimatum: Sign the deal, or he would see them in court. “The lawyers wanted to push back,” Spitzer recalls. “Prince cut them off. He basically said, ‘O.K., we’re done. It’s a deal.’ He wanted to get this behind him.” Prince didn’t check in with Weill until later. Soon after, the two sides tied up loose ends and Citi agreed to pay its $400 million fine. The deal also barred Weill from speaking to his analysts without a lawyer present.

Many experts view Weill’s position–as soon-to-be ex-CEO and chairman–as trouble for Prince. It’s “pretty unusual and pretty inhibiting” for a departing CEO to stay on as chairman for two years, says Robert Mittelstaedt, a professor at Wharton Business School. “It means Sandy Weill is still in charge.” Rakesh Khurana, the author of a book about America’s obsession with charismatic CEOs, says of Prince, “He’s in CEO purgatory.” Weill insists he is moving on. “This was my decision and my timing,” he told TIME. “Why in the world would I do it if I wasn’t ready to step back from the day-to-day function?” Parsons says there was no board pressure on Weill to step aside.

In some ways CEO purgatory has been a familiar place for Prince, a quiet lifetime sidekick who once postponed his kidney surgery to help Weill close a deal. He has always been on hand when Weill is taking a bow. But he is the man on whom Weill has relied consistently in the crunch. “I’ve seen Sandy turn to Chuck over and over again,” says a banker who has worked with both men. And Prince’s willingness to recognize the good work of others and even let them take credit endears him to many.

Born and raised in Los Angeles, Prince began his career as an attorney for U.S. Steel before joining Commercial Credit as general counsel in 1979. Prince met Weill when Weill took over that company in 1986, and the two forged a long run of acquisitions–all negotiated by Prince–from Primerica to Travelers to Shearson to Salomon Brothers to Citicorp. Prince gained the upper hand as Weill’s successor last year when Weill asked him to run the firm’s investment banking business and get Citi out of Spitzer’s cross hairs.

Prince, a self-described workaholic, lives in Manhattan, has a weekend home on Nantucket, Mass., and keeps a boat at Stamford, Conn. “At least it was there,” he says of the boat he hasn’t set foot on in nearly a year. He and Weill, another confessed workaholic, share a hearty chuckle over that, underscoring their delight in their busy schedules. But Prince, who is divorced with two grown children, has found time for romance. This September he will wed Margaret Wolff, another high-powered attorney, and honeymoon in Italy. After that, it’s back to building a name–this time for himself. –With reporting by Daren Fonda and Jyoti Thottam/New York

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