When the full story of this year's corporate scandals is written, the deal under which Citigroup CEO Sandy Weill helped analyst Jack Grubman get his twins into preschool at Manhattan's 92nd Street Y probably won't merit much more than a footnote. But PR people have been scrambling to either deny or explain the sordid trade-off, not exactly covering themselves in glory in the process.
Citigroup donated $1 million to the Y, and shortly thereafter, Grubman's kids were accepted into the exclusive preschool. What seems likely, based on a flurry of e-mails, is that Citigroup's generosity stemmed from its desire to see Grubman upgrade his rating of AT&T, probably in order to win the backing of AT&T CEO Michael Armstrong - who is on Citigroup's board - in Weill's battle for control with co-chairman John Reed. The Y denies any impropriety. Alix Friedman, director of PR, told The New York Times, "Every child - every child - goes through the same rigorous admissions process. The implication that a large donation - and it is by no means one of our largest - can grease the process is just not true. The only thing the Y takes into account is the children themselves." But Friedman's denial came at the same time Citigroup issued a statement acknowledging that the donation was absolutely intended to help Grubman. "From the outset we have tried to make it clear: Mr. Grubman sought Mr. Weill's help for the twins in the fall of 1999, and the contribution we ultimately made in the summer of 2000 grew out of that request," read the statement. That would have been wholly inoffensive had it ended there, but the company spokeswoman went on to claim there was nothing remarkable about Citigroup's involvement: "This request is similar to many we receive from our employees asking for support for the community organizations in which they are involved." If I've ever seen a more disingenuous statement from a major corporation, I really can't remember when. I don't believe the average Citigroup employee - or even the average Citigroup exec - can walk into Sandy Weill's office, express support for a worthy charity, and walk out with a $1 million check. And the real kicker is, Grubman was not just an employee but, in theory, an objective observer. How can Citigroup not see the difference between supporting employee involvement in community organizations and paying off an analyst? Ultimately, corporate America depends on the objectivity of people like Grubman for credibility. No wonder it has none. Even worse, Weill appears to have used company funds for his own personal ends. The manipulation of Armstrong did not aid Citigroup; it aided Weill in his bid to control Citigroup.
