Vikram Pandit's parting gift

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Just before Vikram Pandit was unceremoniously ousted as CEO of Citigroup, he made a big decision about the fate of the bank's hedge fund unit.

Bloomberg Businessweek notes that his decision was sure to please some people that he's worked with for many years.

"He agreed to give them most of it for free. While Citigroup is keeping a 25 percent stake, managers at the Citi Capital Advisors unit will pay nothing for the remaining 75 percent of that business as it becomes a new firm managing as much as $2.5 billion of the bank's money…The lender will pay the executives fees while gradually pulling out assets to comply with impending U.S. rules."

This in response to the Volcker Rule, which limits bank investment in alternative investment funds. The biggest beneficiaries are Jonathan Dorfman and James O'Brien, "who once worked with Pandit at Morgan Stanley (MS) and are currently co-heads of CCA."

They "will run the new entity. They will own about 25 percent of the firm. CCA portfolio managers and employees will share a 50 percent stake."

If the deal proceeds, Dorfman and O'Brien could end up in charge of a firm valued by one estimate at more than $100 million. But whether this deal will go through in the face of public scrutiny is a fair question. Shareholders have a right to ask about the value of the spinoff to Citigroup shareholders and whether there was a deal that would have been more generous to them as opposed to bank employees. We might not have heard the last of this.

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