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November 14, 2008 3:05 PM

Citigroup's Board Shopping for a Legal Adviser

Posted by Brian Baxter

By Brian Baxter and Julie Triedman

According to a story in Friday's New York Times, Citigroup is struggling with a sagging share price and a year's worth of asset writedowns. Another issue: Citi's board is apparently fighting over which Am Law 100 firm free of conflicts it should retain as counsel.

Quoting an anonymous "person close to the situation," the Times reports that "Citigroup's board has been bickering over seemingly small issues, including which white-shoe law firm will represent it. ..."

The potential problem for Citi: Wachtell, Lipton, Rosen & Katz, which has been advising the banking giant's board, now represents Wells Fargo in litigation against Citi over the former's $15.1 billion acquisition of Wachovia in early October--a deal that followed Citi's own aborted Wachovia acquisition. A call to Edward Herlihy, cochair of Wachtell's executive committee, was not immediately returned by the time of this post.

Sullivan & Cromwell would also seem to be out of the running given its representation of Wachovia in the Wells Fargo deal.

The Times reports that Cravath, Swaine & Moore is now being considered for the plum assignment of representing Citi's 15-member board. B. Robbins Kiessling, the head of Cravath's banking practice, was out of the office on Friday and unavailable for comment. A spokeswoman for the firm declined to comment. Like Wachtell, Cravath is a go-to firm for board advisory work, primarily through former presiding partner Robert Joffe.

Beyond what's going on at the board level, sources tell The Am Law Daily that there appears to be a legal shakeout occurring in the M&A ranks as well.

Davis Polk & Wardwell is grabbing a growing share of the financial giant's deal work. One example: the firm was lead M&A counsel on the failed Wachovia acquisition, while Skadden, Arps, Slate, Meagher & Flom, Citi's longtime M&A counsel through executive partner-elect Eric Friedman, served as due diligence counsel.

Friedman has represented Citi on the $3.7 billion sale of its asset management business to Legg Mason in June 2005 and on Citi's $11.5 billion divestiture of its Travelers Life & Annuity unit to MetLife in January 2005. In May, Friedman advised Citi on the $900 million sale of CitiStreet to ING Group. (Friedman did not respond to a request for comment by the time of this story.)

As for Davis Polk, its increased role appears to coincide with the arrival of current Citi CEO Vikram Pandit and vice-chair Lewis Kaden from Morgan Stanley at the end of 2007. Morgan Stanley has been a longtime Davis Polk client; Kaden was a partner at the firm for 21 years.

One important barometer of where Citi is headed with its M&A work: which firm it uses as lead counsel on its reported acquisition of Bethesda, Md.-based Chevy Chase Bank.

A spokeswoman for Citigroup declined to comment and Chevy Chase Bank did not immediately return a phone call requesting information.


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