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March 13, 2009 1:33 PM

Head of Citi Law Firm Group Departs

Posted by Nate Raymond

The head of Citigroup Inc.'s law firm group is checking out, leaving the dominant lender to the legal industry for banking rival JPMorgan Chase.

Lester Pataki, who has led the group for nearly five years, marked his last day at Citi on Wednesday, managing director Dan DiPietro confirms. Citi has not yet named a successor, DiPietro says.

It is not immediately clear what role Pataki will fill at JPMorgan. Pataki did not return a call or e-mail seeking comment. A spokesman for JPMorgan declined to comment.

It also isn't clear if Pataki will continue working with the legal industry. JPMorgan is not known to have an organized legal group like some other banks, such as Citi, Barclays, HSBC, and Wachovia, now owned by Wells Fargo.

Citi by far has the largest law firm group. The bank says it has relationships with more than 650 law firms, including 60 of the Am Law 100 firms. It also claims to have relationships with more than 38,000 attorneys.

Pataki ran Citi's law firm group since 2004. It previously was under the management of DiPietro, who took on a client service role after Pataki's appointment. Before that, Pataki was head of strategy for former Citi Private Bank president Damian Kozlowski. (Kozlowski left Citi in 2007.)

Law firms typically are considered good credit risks and banks are attracted to law firms because of their stable of high-paid partners--the banks lend money to partners for capital contributions and home loans.

As the financial crisis has deepened, law firms have dug deeper into their credit facilities, taken out new loans, and taken longer to pay down their credit lines, bankers say. Now bankers are anticipating lending more money to individual partners as firms begin making capital calls. Banks are now stipulating higher interest rates for those loans while also pushing for depositor relationships with firms and partners.

A few law firms have also defaulted on bank loans. Three Citi law firm clients--Heller Ehrman, Thelen, and Thacher, Proffitt & Wood--dissolved in 2008 after the bank called in the loans. And because of a “clerical error,” Citi and Bank of America may be forced to pay back $50 million to the Heller estate and be treated as unsecured creditors.

Meanwhile, troubles caused by the financial crisis have affected Citi on all levels, from the law firm group to the company at large. Citigroup shares opened Friday at $1.82, down from a 52-week high of $27.35. Citi has received three government bailouts to date.

Citi's global wealth management group, which includes Citi Private Bank, saw its net income fall 32 percent in 2008 to $968 million. In January, Citi agreed to sell a majority stake in its Smith Barney business to Morgan Stanley for $2.7 billion. After the sale closes, Citi has said it will restructure its global wealth management businesses to focus on its core assets, including Citi Private Bank.

Pataki isn't the only recent departure from Citi Private Bank. In February, John Longley, chief executive at Citi Private Bank, left for Barclays. And in January, Miami-based law firm group regional head Laura Kaplan, who had responsibility for Texas and Florida, departed to take charge of SunTrust Banks, Inc.'s private wealth management legal specialty group.

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