Citi Chairman Is Said to Have Planned Chief's Exit Over Months

Vikram Pandit's last day at Citigroup swung from celebratory to devastating in a matter of minutes. Having fielded congratulatory e-mails about the earnings report in the morning that suggested the bank was finally on more solid ground, Mr. Pandit strode into the office of the chairman at day's end on Oct. 15 for what he considered just another of their frequent meetings on his calendar.

Vikram Pandit is said to have been stunned when he was given an ultimatum and told: “The board has lost confidence in you.”

Michael O'Neill is said to have begun building a case to force out Mr. Pandit after Mr. O'Neill became chairman in April.

Instead, Mr. Pandit, the chief executive of Citigroup, was told three news releases were ready. One stated that Mr. Pandit had resigned, effective immediately. Another that he would resign, effective at the end of the year. The third release stated Mr. Pandit had been fired without cause. The choice was his.

The abrupt encounter, described by three people briefed on the conversation, included a terse comment by the chairman, Michael E. O'Neill: “The board has lost confidence in you.”

A stunned Mr. Pandit chose to resign immediately. Even though Mr. Pandit and the board have publicly characterized his exit as his decision, interviews with people close to the board describe how the chairman maneuvered behind the scenes for months ahead of that day to force Mr. Pandit out and replace him with Michael L. Corbat, the board's chosen successor.

Once he became chairman this year, Mr. O'Neill, 66, meticulously built a case for the chief executive's ouster, they say, first meeting privately with less-satisfied board members and then drawing in others until Mr. Pandit had virtually no allies left.

As Mr. Pandit was reeling from his encounter, three board members confronted John Havens, the bank's chief operating officer and a longtime lieutenant.

“Vikram has offered his resignation, and we would like to give you the opportunity to offer yours,” a board member said, following a script prepared by the board's lawyers, according to several people with knowledge of the meeting.

Startled, Mr. Havens briefly challenged the directors, pointing to the solid performance of the institutional clients group, and then relented, saying his resignation would be on Mr. Pandit's desk within five minutes.

The dramatic boardroom coup at the bank's Park Avenue headquarters has rankled some people at Citi, especially senior executives who feel that the action was needlessly ruthless and who spoke only on the condition that they not be identified. They point out that Mr. Pandit successfully steered the once moribund bank through one of its most turbulent chapters, repaid roughly $45 billion in federal lifelines, rebuilt capital and began to focus the sprawling institution.

This week, senior executives at the investment bank convened a group of employees to try to stem any exodus, according to several people briefed on the meeting. Among the employees' questions: why remain at a bank that treated its top executive so harshly?

Now, the new top officials of the bank are circling to retain the support of some crucial executives, including Brian Leach, Citi's chief risk officer and a longtime ally of Mr. Pandit, and James A. Forese, who heads the securities and banking division, according to several people close to the discussions.

Mr. Pandit, Mr. O'Neill, Mr. Havens and Mr. Corbat did not return calls for comment or declined to comment.

The seeds of the turmoil were planted in April when Mr. O'Neill, who had been on the board since 2009, took over as chairman from Richard D. Parsons.

Some executives close to Mr. Pandit immediately identified Mr. O'Neill's ascent as bad news for Mr. Pandit, regardless of how the bank was faring. After all, Mr. O'Neill had vied for the chief executive position before it ultimately went to Mr. Pandit in 2007.

Still, the board transition appeared to go smoothly at first. The handover was marked by a dinner at Citi's headquarters. Together, Mr. Pandit and Mr. O'Neill roasted the departing chairman, considered more of a diplomat than a strategic banker. At one point, Mr. O'Neill gave a lei to Mr. Parsons, in recognition of their shared fondness of Hawaii: Mr. Parsons attended a university there and Mr. O'Neill was chairman and chief executive of the Bank of Hawaii.

A version of this article appeared in print on October 26, 2012, on page A1 of the New York edition with the headline: Citi Chairman Is Said to Have Planned Chief's Exit Over Months.