The Fraud by CEOs has been massive
Sandy Weill became a billionaire at the merged Wall Street bank, known as Citigroup, through a technique that compensation expert Graef “Bud” Crystal called the Count Dracula stock option plan – you simply could not kill it; not even with a silver bullet. Nor could you prosecute it, because Citigroup’s crony Board of Directors rubber-stamped it. The plan worked like this: every time Weill exercised one set of stock options, he got a reload of approximately the same amount of options, regardless of how many frauds the bank had been charged with during the year. (And there were plenty. See rap sheet below.)
Writing at Bloomberg News, Crystal explained that between 1988 and 2002, Weill “received 96 different option grants” on an aggregate of $3 billion of stock. Crystal says “It’s a wonder that Weill had time to run the business, what with all his option grants and exercises. In the years 1996, 1997, 1998 and 2000, Weill exercised, and then received new option grants, a total of, respectively, 14, 20, 13 and 19 times.”
When Weill stepped down as CEO in 2003, he had amassed over $1 billion in compensation, the bulk of it coming from his reloading stock options. (He remained as Chairman of Citigroup until 2006.) Just one day after stepping down as CEO, Citigroup’s Board of Directors allowed Weill to sell back to the corporation 5.6 million shares of his stock for $264 million. This eliminated Weill’s risk that his big share sale would drive down his own share prices as he was selling. The Board negotiated the price at $47.14 for all of Weill’s shares.
