INTERNATIONAL: Letter From America - Corporate America's reputation takes a bashing

The latest Wall Street email imbroglio between Citigroup and US pre-school 92nd Street Y has dealt another blow to corporate America's reputation, writes US commentator Paul Holmes

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 pre-school at Manhattan-based '92nd Street Y' probably won't merit much more than a footnote. But PROs have been scrambling to deny or explain the trade-off, not exactly covering themselves in glory in the process.

What is known is that Citigroup made a £643,000 donation to the Y, and that shortly after Grubman's kids were accepted into the exclusive pre-school. The allegation - denied by all parties - is that, based on a flurry of emails, Citigroup's generosity may have been motivated by its desire to see Grubman upgrade his rating of AT&T, possibly in order to win the backing of AT&T CEO Michael Armstrong - a member of Citigroup's board - in Weill's battle for control with co-chairman John Reed.

The Y denies that anything improper took place. PR director Alix Friedman 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 92nd Street Y takes into account is the children themselves.'

Unfortunately, Friedman's denial came at the same time that Citigroup issued its own statement, acknowledging that the donation was intended to help Grubman: '...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.'

The Citigroup statement would have been wholly inoffensive had it ended there, but the company spokeswoman went on: 'This request is similar to many we receive from our employees asking for support for the community organisations in which they are involved.' If I've ever seen a more disingenuous statement from a major corporation, I really can't remember when.

For one thing, I don't believe the average Citigroup employee can walk into Weill's office, express support for a worthy charity, and walk out with a cheque for £600,000. For another, Grubman was no employee. He was, at least in theory, an objective observer.

If Citigroup can't see the difference between supporting employee involvement in community organisations and paying off an analyst, then we have all vanished down a moral rabbit hole. Corporate America depends on the objectivity of people like Grubman for credibility. No wonder it has none.

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