FT.com - article

Citigroup is embroiled in a legal row with a former senior executive whose multi-million dollar severance package was frozen last year at the height of the political storm over bankers' pay, according to people close to the situation.The decision by Kevin Kessinger, a former head of technology, to take legal action to force Citi to resume paying his severance is likely to fuel the debate over Wall Street's compensation just as banks are set to announce 2009 bonuses.People familiar with the matter said Mr Kessinger had decided to take Citi to arbitration, a form of out-of-court dispute resolution.It is understood that his severance package had been frozen for more than six months. Citi declined to comment. Mr Kessinger, who is now chief information officer at Canada's TD Bank, did not respond to requests for comment.In a surprise move in June last year, Citi suspended payments to a number of recently departed senior executives.Those receiving the payments included Mr Kessinger and Michael Klein, its former top dealmaker. At the time, Citi executives said the move was aimed at defusing the political row over financial sector pay that had been sparked by news of large bonuses for some executives at AIG, the stricken insurer. Legal experts had said Citi was vulnerable to legal action from the former executives because severance packages are binding agreements between the two sides.However, officials at Citi – which has been repeatedly bailed out by the US government – had replied that former executives understood the reason behind the move and in discussions had said that they were unlikely to take legal action.People familiar with the bank had suggested Citi would resume payments once the political furore over compensation had died down. However, Wall Street pay has remained a controversial topic among politicians and the public and is likely to become an even hotter issue when banks unveil their bonus payments with fourth-quarter results later this month. It is unclear whether Citi plans to resume payments to Mr Kessinger or whether the two sides might reach a settlement during arbitration. However, it is thought to be significant that last month's repayment by Citi of $20bn in federal bail-out funds has freed the bank from government restrictions on bankers' pay.Separately, it emerged that John Havens, the head of Citi's investment bank, was the company's highest-paid executive in 2009, with total compensation of about $9m. Mr Haven's package, revealed in a regulatory filing, was mostly comprised of Citi's shares.