In an internal memo, Prince said that Thomas Jones, chairman and CEO of Global Investment Management & Citigroup Asset Management; Deryck Maughan, vice-chairman and CEO of Citigroup International; and Peter Scaturro, CEO of Citigroup Private Bank, will leave immediately. "All have been members of the bank's senior management team for many years and we wish them well in the future," the memo said.

INTERNAL PROBE. Analysts see urgency in the move to get beyond the Japanese imbroglio. "There's no doubt about who's in charge now," says Howard Mason, senior financial services analyst at Sanford C. Bernstein & Co. According to sources familiar with the matter, Prince has hired Eugene Ludwig, a former head of the U.S. Comptroller of the Currency, to conduct a formal investigation into the Japan incident.

Ludwig, is now chairman and CEO of Promontory Interfinancial Network, a financial advisory firm for community banks that is based in Washington, D.C. Promontory's internal review indicated that Maughan, Scaturro, and Jones were responsible for the regulatory shortcomings of the Japan private bank's operations.

Effective immediately, Citigroup Asset Management, the Citigroup Private Bank and Travelers Life and Annuity will report to President and chief operating officer, Bob Willumstad. Effective Nov. 5, the Citigroup Private Bank will report to Chief Financial Officer Todd Thomson, who ran the private bank before Scaturro took the post in August, 2000, and Thomson was promoted to CFO.

"UNFAIR TRANSACTIONS." Also on Nov. 5, in a previously announced management shuffle, Thomson will take over the reins at Smith Barney, Citi's private client wealth-management and equity-research unit. Simultaneously, Sallie Krawcheck, now CEO of Smith Barney, will be Thomson's job as CFO.

The resignations come nearly a month to the day that Japanese authorities officially ordered Citi to shut down its local private bank within a year. Regulators said an investigation, begun in August, 2001, had found extensive legal violations over seven years, including lax governance and money-laundering controls and "numerous instances of unfair transactions...in which large profits were obtained through unsound means."

Citi immediately issued an apology, "with deep regret for its failure to comply with regulatory requirements," fired six bankers, slashed the salaries of eight other employees, and promised to improve internal controls for all of Citi's operations in the country.

BILLION-DOLLAR BLOWS. At the time, Merrill Lynch's financial analyst Guy Mozkowski downgraded the stock to neutral, citing that "aggressive profit incentives were overriding judgment." Reputation is everything in financial services, he said in his report: "Issues of ethical standards and control continue to compromise Citi's image." In his Sept. 20 report, Mike Mayo, a senior bank analyst with Prudential Equity Group, questioned whether the financial, operating, and reputational issues as part of the recent investigations are "simply a part of doing business for such a complex firm."

During the bank's earnings conference call on Oct. 14, Prince warned analysts that the Japan scandal would generate more fallout. He said at the time that he didn't anticipate the outfit would have to shell out additional payouts of the same magnitude that this year has witnessed.

In May, Citi wrote a $2.65 billion check to settle with investors for its involvement in the WorldCom fraud.The world's biggest financial services firm also said it would increase its legal reserve by another $4.95 billion to cover the cost of resolving litigation now pending in regard to the Enron case. Prince's motive was to settle and get the bank out of the headlines. And he is wasting no time about it.

-- Mara Der Hovanesian