Printed from the Charlotte Observer -
Posted: Wednesday, Oct. 01, 2008

Ex-CEO at fault for bank's fate?

Kathy Haight
Published in: Local News
  • What is Citi buying?

    Wachovia on Monday agreed to sell its banking operations and most of its assets to Citigroup for $2.16 billion in Citigroup stock.

    What's left?

    A Charlotte-based public company called Wachovia remains. It will house the Wachovia Securities brokerage, Evergreen investments and insurance services. Current Wachovia shareholders will remain owners of this company. The company has provided no details on the remaining company's financials or employee total. Analysts estimate it could be worth between $4 to $7 per share.

    Who gets the $2.16 billion in Citi stock?

    The remaining Wachovia holding company. Individual shareholders will not receive any Citi stock.

    Why didn't Citi buy all of Wachovia?

    Citigroup CEO Vikram Pandit said his company already has its Smith Barney brokerage arm and has previously divested its asset management business. He also said it made for a less complicated integration.

    What is the future of the remaining Wachovia brokerage/asset management firm?

    The firm could go it alone or it ultimately could be bought by another bank or brokerage.

    Do Wachovia shareholders have to approve this deal?

    Yes. A shareholder meeting date hasn't been set.

    Does it need Federal Reserve approval?

    Yes. The Fed has not given a timeline.

    What are the disadvantages of the deal for shareholders?

    They will no longer have an ownership stake in Wachovia's retail bank, wealth management unit and corporate and investment bank.

    What are the advantages of this deal?

    Citi and the FDIC are assuming Wachovia's troubled assets.

    When will the deal close?

    Citi expects the deal to close by Dec. 31.

  • 2008 Wachovia Board of Directors

    Wachovia's 17-member board includes many long-timers. Chairman Lanty Smith is the most senior member, serving since 1987.

    All but four of the current directors were serving at the time of the May 2006 decision to buy Golden West, the acquisition that cost Chief Executive Ken Thompson his job and ultimately led to the company's downfall.

    John Baker II, chief executive, Patriot Transportation Holding, Jacksonville, Fla. Director since 2001.

    Peter Browning, career includes serving on boards of Lowe's and Nucor; former chief executive, National Gypsum and Sonoco Products. Director since 2001.

    John Casteen III, president, University of Virginia. Director since 2001.

    Jerry Gitt, retired, Palm Desert, Calif. Director since October 2006.

    William Goodwin Jr., chairman and president CCA Industries, and chairman and chief executive, The Riverstone Group, both in Richmond, Va. Director since 1993.

    Maryellen Herringer, attorney, Piedmont, Calif. Director since October 2006.

    Robert Ingram, vice chairman pharmaceuticals, GlaxoSmithKline, Research Triangle Park. Director since 2001.

    Donald James, chairman and chief executive Vulcan Materials, Birmingham, Ala. Director since 2004.

    Mackey McDonald, chairman VF Corp., Greensboro. Director since 1997.

    Joseph Neubauer, chairman and chief executive Aramark Holdings, Philadelphia. Director since 1996.

    Timothy Proctor, general counsel Diageo plc, London. Director since November 2006.

    Ernest Rady, president and founder, American Assets and chairman Insurance Company of the West, Irvine, Calif. Director since April 2006.

    Van Richey, chief executive and president, American Cast Iron Pipe, Birmingham, Ala. Director since 2004.

    Ruth Shaw, retired, Charlotte and executive adviser to chief executive of Duke Energy, where she was an executive. Director since 1990.

    Lanty Smith, chairman and chief executive Tippet Capital, Raleigh, and chairman Precision Fabrics Group, Greensboro. Wachovia chairman since May and interim chief executive following Ken Thompson's June dismissal until Bob Steel's hiring in July. Director since 1987.

    Bob Steel, chief executive Wachovia and director since July.

    Dona Davis Young, chairman and chief executive, The Phoenix Companies, Hartford, Conn. Director since 2001.

    Two retired directors were on the board at the time of the May 2006 decision to buy Golden West:

    Robert Brown , director from 1993 to 2007. During that time, he was chief executive of a High Point firm.

    John Whitaker Jr., director from 1996 to 2007. During that time, he was chief executive of a Winston-Salem firm.

    Stella M. Hopkins, SOURCE: SEC filings.

  • Related Images

    Ken Thompson didn't want to talk Tuesday when he answered the door at his Charlotte home.

    But many in the community were talking about him.

    “Everybody has always had a lot of respect for him as a human being, as a man, as a banker,” said Charlotte Chamber chair Pat Riley. “Best I can guess, from the bleachers, is he got caught up in looking at opportunities through rose-colored glasses.”

    Some spoke highly of the former Wachovia chief executive, who is currently chairman of the board of the Charlotte-based Foundation for the Carolinas. Others questioned his judgment and blamed him for this week's sale of his former bank.

    “Ken's ears have got to be burning,” said the wife of a retired Wachovia executive, who didn't want to be quoted criticizing her husband's former employer. “Nobody wants a sizable chunk of money to go down the drain. This was not a happy thing.”

    It was Thompson's decision, with board approval, to buy mortgage specialist Golden West Financial in 2006. The deal proved disastrous and faced immediate investor backlash because the housing market was showing signs of slowing.

    In June, Thompson was forced to retire by the board after eight years at the helm and 32 years at the company.

    His exit package was modest compared with the huge payouts of some top executives forced from their jobs by dismal company results. He received severance pay of $1.45 million, the equivalent of 16 months' base salary. He also got office space and the services of an executive assistant for up to three years.

    He has likely suffered heavy stock losses since his June 1 departure. A securities filing dated June 4 showed that he and family members held a total of 820,869 shares of Wachovia stock. Immediately prior to his ouster, those shares were worth more than $19.5 million. At Tuesday's closing price of $3.50, they were worth $2.87 million.

    Business and civic leaders said this week that the CEO doesn't act alone making decisions. Thompson chaired a board that voted to buy Golden West.

    “We ought to ask about the board,” said Hugh McColl Jr., retired CEO of Bank of America. “Nobody does anything in a vacuum.”

    High Point businessman Robert Brown, who was on the Wachovia board that approved the Golden West deal, agreed that board members share the burden of the decision with Thompson.

    “We all have some responsibility and some remorse for what has happened,” he said Tuesday, adding that no one had a crystal ball to predict the massive foreclosures that were to come.

    Former University of North Carolina system president C.D. Spangler said it's important to remember the success Thompson brought to Wachovia.

    “He was part of the team that helped build first Union and Wachovia into a major national strength,” said Spangler, who lives near Thompson in Charlotte's upscale, tree-lined Eastover neighborhood.

    In online responses to the Observer's Wachovia stories, some readers expressed anger at Thompson and the board, raised prospects of shareholder lawsuits and criticized Thompson's vetting of the Golden West deal.

    Spangler knows there are those who believe Thompson and the Wachovia board should have foreseen problems the Golden West deal would bring.

    “My experience is,” said Spangler, “that it's almost impossible to see these things.”

    Stella M. Hopkins, Rick Rothacker and Kerry Hall contributed.

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