Travelers’ Aoohcation to Acquire Citicorp Assurance Co. 

Teichman We are on the record at this time. It’s about lo:05 a.m., Thursday, June 4, 

1998. We’re here in regards to the application of Travelers to acquire control of Citicorp 

Insurance Company. My name is Mike Teichman I am the Deputy Attorney General that 

represents the Department of Insumnce. Our hearing officer for this matter is Tony Meisenheimer. 

And, with that, Mr. Hearing Officer, I‘m going to turn it over to you. There arc some folks that 

did enter the room. I’m going to say again, please sign your name on the pad that’s going around. 

Meisenheimer: Good morning. as Mr. Teichman said, I am Tony Meisenheimer, and I 

have been appointed by Commissioner Williams to act as the hearing officer in today’s 

proceedings. As you know, the purpose of this hearing is to address pursuant to Section 5003 of 

the Insurance Code the application of Travelers to acquire indirect control of Citicorp Association. 

Citicorp Assurance Corporation. In order to focus on the issues raised and matters presented at 

today‘s hearing, I would like to review the standards the Department must apply in rcvie\\ing this 

application. Pursuant to Section 5003d, the Commissioner is instructed to approve proposed 

changes of control unless after a public hearing she finds I) that the financial condition of an? 

acquiring party is such that it might jeopardize the financial stability of the insurer or prejudice the 

interests of the policyholders, or 2) that as a result of the proposed changes of control, the insurer 

may be able to satis the requirements for the issuance of a license to write the lines of insurance 

for which it is currently licensed. 3) the competence, evpericncc and intcgriv of those persons who 

would control the operation of the insurer are such that the merger would not be in the interests of 

the policyholders and of the public, or 4) the plans or proposals which the acquiring party has to 

liquidate the insurer, sell its assets_ or consolidate or merge it \\ith any person, or make material 

changes in its business or corporate structure or management, are unfair to polic?holdcrs or not in 

the public’s interest; 5) there is any- evidence that the proposed change of control may substantially 

lessen competition in the state or create any monopoly in the business of insurance in this state or 

elsewhere or the insurer has failed to file adequate information in compliance \\ith Title 18, 

Delaware Code, Section 5003(a), or 6) the plan is likely to be hazardous or prejudicial to the 

insurance-buying public. Non, we’re going to stick to these six (6) things today, I hope, in keeping 

this hearing on course. Before we begin evidence. does anybody want to make any motions’? 

Ed Welch: Your Honor, Ed Welch from Skaddcn Arps. if I could just take a moment, we 

represent Travelers. I’d like to introduce my partners here, Bob Sullivan from our New York 

office, and Jeq Hirsch. They’re here x\ith me today. And also from LeBeauf, Lamb, Don 

Henderson is here as well. Don’s in the back over there. He’s counsel for Citicorp He’s present 

as well. Your Honor already has our Form A, and I know that along \xith all the exhibits Mr. 

Henderson is going to be forming - handing out some biographical aflida\its so Your Honor \\ill 

have those as well. I suppose we ought to formally move the admission of the Form A just so that 

we’ve done that. Now, my colleague here nilI be handing out some other exhibits. Why don’t you 

go ahead and do that. 

Teichman: Mr. Welch, let me just interrupt you for one second. My understanding is that 

there was going to be some motions regarding the order of witnesses that you all wish to present? 

Welch: Happy to do that, yes. 

Teichman: Let’s get to those kinds of issues before 

Welch: Fair enough What we have in mind, Your Honor, in terms of presentation that we 

think would work this morning would be the folIoWing: 1) we’d like to call Mr. James Michener, 

who is the senior vice president and general counsel for Travelers Propee & Casualty At the 

conclusion of this testimony, we propose to call Mr. Charles Prince, the senior vice president and 

general counsel of the Travelers Group. At the conclusion of that &ness. we’d like to call Ms. 

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Mulholland, general counsel, Citicorp insurance Group. Our thought, Your Honor, was that it 

made sense, of course, to get our whole presentation on the table. Each of these witnesses will be 

addressing different components of the various standards that Your Honor made reference to. So 

our thought was if we could get our presentation on the table and then perhaps at that point open it 

up to cross-examination, we thought it might make a little bit more of an orderly proceeding. And 

that way, we have no intention, by the way, whatever, of trying to limit cross-examination of 

witnesses as appropriate, but we did think that if the whole presentation got out, it might make it 

easier for our colleagues who wish to examine them to do so in an effective and perhaps more 

efficient, timely basis. So I would make the motion at this time that we be permitted to put those 

witnesses on and to go forward and complete that testimony and have whatever cross Your Honor 

deems to be appropriate. 

Meisenheimer: Are there an?- objections to this? 

Lee: I think we’d prefer to cross-examine them. 1 don‘t know. I think there‘s a danger in 

we‘ll take notes, but I think if we find it easier, given that the burden is actually on them to 

actualit- ask questions as the evidence comes in, we’re not going to stop them as they make their 

presentation, but I think it would be easier for us to actually ask questions, rather than call them 

back up and go back to what they were sallng. I don’t see it that thq have more than enough 

Meisenheimer: We do need to do this one way or the other, so 

Lee: I guess in one sense, the, your statement, the statement that there’s no objection to 

cross-examination as appropriate. My fear is that all this evidence will go in and then as soon as 

wc begin to ask questions, there \\ill be some already prepared motion to limit cross-examination. 

If we know, in fact, it‘s going to be as fairly liberal based on the standards, we’re more than 

willing to be accommodating on the order of the witnesses. 

Welch: I don’t think we have any ~-e certainly 1) we don‘t have any pre-prepared 

motion of any sort. If I did> I’d mention it at this time. I don‘t think we can make any motion to 

limit cross. If we do it after an orderly presentation of all Fee witnesses that we wouldn’t make if 

we were doing it one by one. I just thmk it uill make it easier for you all to hear the whole story 

and for the hearing examiner to hear the whole story as well. That’ all. There’s no, there’s nothing 

more to it than that. 

Teichman: Gentlemen, please direct your comments to the hearing officer. 

Meisenheimer: If you would direct them to me. And what we’re going to do is have each 

one of your people get up to three (3) and then you’ll have an opportunity after their presentation, 

of each one, to do a cross-examine. Okay? I thin!~ that will keep it much more orderly. 

Rangan: Can I also request copies of written testimony that are being read so we can 

follow it along while it is being read’? 

Meisenheimer: That‘s not a problem. 

Teichman: Yes, if there arc copies available, I have no idea whether -- 

Welch: Actually, Your Honor, we did not prepare extra copies for testimony. 

Meisenheimer: Okay, so w-e’re not going to be able to do that. 

Teichman: But that stuff will be made part of the record and it’s available. 

Meisenheimer: Right, it will be part of the record available to be reviewed. 

Lee: Just, I guess I’m not sure if it’s in the form of a motion as you obviously just brought 

that in myself. We both asked for discovery, this was denied by your Order. Obviously, we object 

to that. We think that that we’re prejudiced in this hearing being limited to the Form A. I guess 

that’s already in the written record. 

Meisenhcimer: Right, we’ve already addressed that. 

Meisenheimcr: It \%~as just pointed out to me that we do need to address the issue probably 

of how long we‘re going to keep this hearing open to get additional information in, the record open. 

So what I’m going to rule on right now is that we will leave the record open for five (5) days which 
will give you a chance to submit information which will give you a chance to review the aflidavits 

and the biographic&. 

Teichman: Anyihing that‘s submitted to, as part of the record, any2hing that’s introduced 

into evidence will be available for review. 

Lee: I mean, and again, this is not, in thinking about it, I think that part of the order on 

denying discovery that it was hard to imagine the relevance of the questions that we were asking to 

the application. I think that if it’s possible to at least, I understand that on a recent application that 

the five (5) days is sort of standard? We hope, I mean, again, if as things develop if we have not 

shown the relevance of the information that we were requesting, then I, we would have these five 

(5) days. But I thi& you could say, I anticipate conceivably at the end of it, depending on how it 

develops, conceivably making. moving that that be reconsidered and that discovery, post-hearing 

discovery be allowed. I don’t know, you know, the standard. You could then-- but 1 think it 

remains to be seen. 

Meisenheimer: I’ll entertain any motion. 

Lee: Okay. Great. 

???: The one point I did want to make, Your Honor, was Gtb respect to the biographic&, 

I understood Your Honor to have ruled on that and to have made clear that the biographicals would 

not be made part of the record. That’s the state of Your Honor’s rulings at this time. Not part of 

the public record, that is. Certainly, it’s part of the record for Your Honor. 

Meisenheimer: That’s an issue of discovery. But it’s not an issue of what is introduced 

here today. That will be public record available. 

???: Let’s go off the record for a minute. 

Teichman: It‘s about 20 minutes after 10:00 a.m. and we’re back on the record. 

Welch: Your Honor, N-e do have some exhibits I‘d like to band up to Your Honor at this 

time. 

Meisenheimer: Well, really, we’re at a point. We’re still doing the motions. Are there any 

other motions? Other than what you’re proposing? 

Teicbman: They’re ready to start with their case. 

Lee: As vou said, you’re willing to entertain motions. This is not the last call on motions? 

Meisenh&ner: Right. 

Welch: We’re going to hand up to the Court right now and the record should reflect that 

we’re doing so, h\o (2) copies of our exhibits as well as copies to Mr. Lee and Ms. Rangan. Your 

Honor, these e.xhibits outline our basic presentation to be used by each of our witnesses as a 

guideline essentially to their testimony. And as I say we would formally move their admission at 

this time. 

Teicbman: Let me interrupt you for a minute, Mr. Welch. This one, what I‘ve got is one 

package here it’s a booklet. Is this the only actual physical exhibit you wish to introduce into 

evidence? 

Welch: At this time, that’s correct. Subject to our comments earlier about having the 

Form A filed and submitted to the Commission, which in tarn commenced this proceeding 

Teichman: Well, I’ll mark it for identification as Travelers Exhibit # 1. And Mr. Hearing 

Officer, is it your desire to - 

Meisenheimer: Are there any objections? Then I move that it be marked as Exhibit #I. 

Welch: Just to clarify, I understand the documents have been admitted as exhibits. 

Lee: Yes. So in terms of the objections, obviously, what we’re going to try to do is to ask 

them questions about this. 

Teichmu: The question the hearing officer asked is specificall? is there an objection to 

moving this thing into evidence. 

Lee: Right. 

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Tcichman: There are none? 

Lee: There arc none given with the understanding, obviously, that we ask questions about 

it. 

Meisenheimer: At the end of his presentation. 

Lee: Sure. 

Welch: Your Honor, if there’s nothing further at this time, xve call, propose to call Mr. 

James Michener, Senior Vice President and General Counsel of Travelers Property/Casualty 

Corporation as our first witness. 

Teichman: Mr. Michener, sir, do you have any objections to taking an oath? 

Michener: No. 

Teichman: Sir, will you raise your right hand? Sir, do you wear to tell the truth, the 

whole truth. and nothing but the truth so help you God? 

Michener: I do. 

Teichman Go ahead and state your full name and position for the record. 

Michener: James M. Michcner. I’m a senior vice president, general counsel, and secrm 

of Travelers Property/Casualty Corp. 

Welch: Mr. Michener, what is your current occupation, sir? 

Michener: As I said, I’m senior vice president, general counsel, and secretary of Tra>~elers 

Property/Casualty Corp. which is a publicly traded insurance holding company approximately 

83% of the company is o\med by Travelers Group and its subsidiaries. And I have been 

authorized to speak on behalf of Travelers Group at this proceeding. 

Welch: In what insurance businesses are the company and its subsidiaries engaged, Mr. 

Michener? 

Michener: We are engaged in most forms of property/casualt?; insurance for individuals 

and commercial entities. We do business in ail fifty (50) states, Guam, Virgin Islands, Puerto 

Rico, and Canada. 

Welch: Now how long have you been working for the company and in what positions have 

you been working? 

Michener: I’ve been lvith the company and its predecessors since 1977 and I’ve held a 

number of positions in the corporate legal department. 

Welch: Okay. Could you describe for the hearing examiner your responsibilities at the 

company? 

Michener: As the general couns,l, I am responsible for overseeing and advising of the 

legal affairs of the company. My duties m&de regulatory compliance overseeing the preparation 

of cornpan)- filings, government affairs, inner company and third parl?; agreements, and the 

supervision of litigation. 

Welch: All right. Now I’d like to turn for just a moment if we could to the Travelers 

Group‘s proposed merger vith Citicorp. Mr. Michener, what has been your involvement with that 

transaction? 

Michener: I am the individual with overall responsibility for the insurance-related matters 

of the transaction, including the regulatory approvals. 

Welch: Okay. And could you also briefly describe for the examiner the struchue of the 

Travelers Group’s proposed merger? 

Michener: I’d be happy to. This would be a good chance to refer to the exhibits. And I 

would refer the hearing officer to Exhibit #l E.xhibit # 1 is a simple description of how the 

transaction will be accomplished. The first item, Travelers Group. \\ill form a new subsidiar) 

which we’ll call Newo. And this will act as the acquisition subsidiary for the acquisition of 

Citicorp. In a second step, Citicorp will merge into Newco. In a third step, Newco 41 change its 

name to Citicorp And as a tinal matter, Travelers Group vill change its name to CitiGroup. As a 

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result of these steps, Citicorp will become a direct, wholly-owxzd subsidiary of Travelers Group 

and all of Citicorp’s subsidiaries will become indirect subsidiaries of Travelers Group. Citicorp 

Assurance is one of those current Citicorp subsidiaries that will become an indirect subsidiary of 

CitiGroup after the merger. And then if we could go on in more detail, I would look at a number of 

other exhibits. Why don’t u% go to Exhibit #2. 

Teichman: Let me interrupt you just for clarity with the record. You, what you’re 

describing as Exhibit #2 is #2 within what has been marked as Exhibit #I. Is that right? 

Michener: That is correct 

Teichman: Thank you, sir. 

Welch: Just for the record, the lower right-hand comer of each page has the exhibit 

numbers that Mr. Michener will be referring to and I’d appreciate you pointing out that obviously, 

xe had marked this as a single exhibit, and the references he‘ll be making will be to the lower right 

comer. 

Teichman: Mr. Welch I‘m going to ask you to keep your voice up a little bit. The 

machine’s having trouble. The farther you arc from the microphone, the louder you have to be. 

Welch: All right. Go ahead Mr. Michener. I think we’re directing the attention of the 

hearing examiner to Exhibit #2. 

Michener: Yes, Exhibit #2 is a description of Travelers Insurance Holding Company 

system prior to the acquisition of Citicorp and the second page of that Exhibit #2 provides more 

detail in the current structure of Travelers Holding Company system. 

Welch: Okay. I’d like to then turn your attention to Exhibit #3. 

Michener: This is a description of Citicorp’s pre-merger insurance holding company 

system and you’ll note that Citicorp Assurance, the company that we’re discussixg today, is shoun 

in the bottom central part of that exhibit and it‘s ownership chain up to Citicorp is shown on the 

exhibit chart. For simplicity’s sake Ke have eliminated some of the intermediate holding 

companies on the Citicorp side. 

Welch: And then next I n-ould like to bring the hearing examiner’s attention to Exhibit 

#13. 

Michener: And this is a description of the Travelers Group post-merger insurance holding 

company system and as you will see at the top of the chart, the Travelers Group $4 remain there. 

Its name will be changed to CitiGroup, and the Citicorp Companies will be added as an additional 

chain of companies and that’s shobw on the right-hand side of the chart. Citicorp Assurance is 

shoxxn in the lower right-hand corner and as it was before the merger, it will continue to be a 

subsidiary of Citicorp Life Insurance Company. 

Welch: So this is the post-merger structure of the organization? The prior exhibits were 

the pre-merger structure? 

Michener: Yes, that is correct. And as these e.xhibits illustrate, the end result of the 

transaction is that Citicorp and all of its subsidiaries, including the insurance subsidiaries, will 

become an additional chain of companies held by Travelers Group. 

Welch: Now Mr. Michener, what overall benefits does Travelers Group believe that it x\ill 

derive by, from the merger with Citicorp? 

Michener: Travelers Group believes that the financial services industry today, including 

the insurance industry, is being driven by three (3) forces. These are consolidation, globalization, 

and conversions. Indeed, it is hardly possibly to pick up a newspaper over the last several years 

aad not see some evidence of this in the financial services indus-. In this environment, Travelers 

Group believes that it’s crucial for the company to expand into new markets, establish a global 

presence, and to compete \igorously for new customers through a diversified product base. And 

the merger with Citicorp and Travelers Group will enable Travelers to do this. First, the merger 

\\ill create the world’s leading fmancial services company in terms of asset base and market 

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capitalization. Second, as a result of Citibank’s global presence, the merger will provide Travelers 

Group with access to new markets worldwide. Finally, the merger will allow Travelers Group to 

provide a full range of consumer financial services, including banking investment services, 

insurance, and asset management. 

Welch: All right, now Mr. Michener, I‘d like to turn for just a moment to the Form A 

filing relating to the proposed acquisition of control of Citicorp Assurance. Are you familiar 

personally with that filing? 

Michener: Yes, 1 am. 

Welch: And once again, you’ve touched on this earlier, but are you familiar with where 

Citicorp Assurance stands within Citicorp’s overall organization? Let’s talk about that for a 

moment. 

Michener: Yes I am familiar with that and I’d like to suggest to the hearing examiner that 

we look at Exhibit #3 again which we looked at before. This is a schematic of Citicorp’s present 

prc-merger insurance holding cornpay stmch~e. And as you, as the chart shows, Citicorp 

Assurance Company is a subsidiary of Citicorp Life Insurance Company which is an Arizona 

insurance company. In turn, that company is a subsidiary of Citibank Delaware which is a 

Delaware banking corporation. That company is owned by Citicorp Holdings, Inc. which is a 

Delaware business corporation which is finally owned by Citicorp, which is the parent company 

which is publicly held. 

Welch: All right, now what about Citicorp Assurance’s insurance activities? Are you 

familiar with the scope of those activities? 

Michener: Yes, I am. 

Welch: And could you please describe for the hearing officer what @pe of business 

Citicorp Assurance is licensed to wite? 

Michener: It is licensed to write certain property/casualty lines in the state of Delaware 

and its business consists entirely of insuring or reinsuring certain risks of Citicorp and its affiliates. 

Welch: Okay. Now to be specific about that, what Qpes of business does Citicorp 

Assurance currently actually write? 

Michener: First of all, Citicorp Assurance does not sell insurance to the general public. It 

only has corporate policyholders and only insures or reinsures the exposures of affiliated 

companies. 

Welch: Okay. 

Michener: And it wites only hvo (2) tqpes of business. First, it provides contractual 

liability insurance to Citibank, N.A., a national bank subsidiary of Citicorp located in Ne\v York. 

Second, Citicorp Assurance provides reinsurance on coverages underwritten by unaffiliated 

companies, American Security Insurance Company and Standard Guaranty Insurance Cornpan) 

for Citibank South Dakota, N.A. which is another national bank subsidiary of Citicorp located in 

South Dakota. As a result, the company functions in essence like a captive insurer and does not 

market its products to the general public in Delaware or elsewhere. 

Welch: Okay. Mr. Michener, let’s take a moment and look at Exhibit #J. With that 

exhibit in mind, I’ll ask you what is the percentage Citicorp Assurance writes of the 

property/casualty market in Delaware. 

Michener: Well fist, as the hearing examiner know-s, the property/casualty market 

consists of a number of lines of insurance, and in most of those lines of insurance, Citicorp 

Assurance market share is -O-. The only line in w-hich it wites is called ‘-other liabiliv” which is a 

miscellaneous liability line. And in that line it’s market share is less than 1% as sho\\n on the 

Exhibit #4. 

Welch: All right. Now hoI\ competitive, Mr. hlichener, is the market in Delaware of 

propcrt)/casualty insurance? 

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Michener: The insurance market in Delaware, as in the rest of the country, is highly 

competitive and divided among a number or companies. Citicorp Assurance’s share of that 

market, as we discussed, is very small. 

Welch: All right. With that in mind, let’s go on to Exhibit #5 if we could, identified in the 

lower right-hand corner of the page, With that e.xhibit in mind, let me ask you, Mr. Michener, will 

the acquisition of control of Citicorp Assurance substantially lessen competition in Delaware or 

tend to create a monopoly? 

Michener: Well the short answer is no with respect to the property/casualty business that 

is written by CiticorpAssurance, we have just discussed that, and as I mentioned, its market share 

is extremely small. Citicorp has other companies that are not the subject of the hearing today that 

are licensed in Delaware, and I believe the only one is Citicorp Life Insurance Company. Exhibit 

#j shows the markets in which Citicorp Life Insurance Company and Travelers wite the same 

lines of business in Delaware. And as you Gil see from the chart, both Travelers and Citicorp Life 

Insurance Company have very small market shares in the lines of business that they write, like 

annuity, accident & health, and deposit. And of course, when you add those two small market 

shares together, you wind up with also a small market share of the combined company after the 

merger. And just to go through them one by one, in the life insurance area the combined market 

share will be approximately l%, the market share and annuity will bc approximately l/3 of 1%. 

Welch: That’s the second column on the page, is that right? 

Michener: Yes. The life is in the first coiumn, and I’m referring to the percentage showi 

in the bottom box under the life column And then if we would move to the annuity column, also in 

the bottom box, the market share percentage is approximately l/3 of I%. The moving on to 

accident and health, the lower box shojting the combined market share is approximately % of l%, 

and similarly uith deposit insurance which is a type of life insurance, the market share is 

approximately % of 1% on a combined basis. 

Welch: Okay now, folIoGig completion of the merger, will Citicorp Assurance be able to 

satis@ the requirements for the issuance of a license to write the line or lines as the case may be for 

which they are presently licensed? 

Michener: Yes, it will I am not aware of any aspect of the transaction which would 

jeopardize Citicorp Assurance’s continued ability to qualify for its present licenses. 

Welch: Let me turn to another topic for a moment. Does Travelers Group have a 

regulatory compliance program? 

Michener: Yes, we have an extensive one. 

Welch: And has any license or permit of any Travelers Group Insurance subsidiary ever 

been revoked or suspended, Mr. Michener? 

Michener: No. 

Welch: And to conclude, if we could, n-hat effect will the merger have on the abiliv of the 

state insurance departments, including the Delaware Department of Insurance, to regulate an 

insurance company doing business in their states? 

Michener: I think the merger will have no adverse effect on that ability to regulate the 

insurance companies. The merger behveen Travelers Group and Citicorp will result in a holding 

company structure that will be regulated along functional regulation lines so that insurance banking 

securities activities will continue to be regulated by the same regulators that regulate them now. So 

in sum, I think it will have no adverse effect or really any effect on the ability of the Delaware 

Insurance Department or other insurance departments to regulate insurance activities. 

Welch: All right, thank you ver) much. Mr. Examiner, we have no further questions of 

this nitness at this time. Now, at the conclusion of the presentations of our witnesses, 1 think we 

would like to recall Mr. Michcner and have him kind of sum up. But subject to that, we have no 

further questions at this time. 

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capitalization. Second as a result of Citibank’s global presence, the merger will provide Travelen 

Group with access to new markets worldwide. Finally, the merger will allow Travelers Group to 

provide a full range of consumer fmancial services, including banking investment setices, 

insurance, and asset management. 

Welch: All right, now Mr. Michener, I‘d like to tom for just a moment to the Form A 

filing relating to the proposed acquisition of control of Citicorp Assurance. Are you familiar 

personally with that filing? 

Michener: Yes, 1 am. 

Welch: And once again, you’ve touched on this earlier, but are you familiar with where 

Citicorp Assurance stands within Citicorp’s overall organization? Let’s talk about that for a 

moment. 

Michener: Yes I am familiar with that and I’d like to suggest to the hearing examiner that 

wc look at Exhibit #3 again which n-e looked at before. This is a schematic of Citicorp’s present 

pm-merger insurance hokling company strutire. And as you, as the chart shows, Citicorp 

Assurance Company is a subsidiary of Citicorp Life Insurance Company which is an Arizona 

insurance company. In turn, that company is a subsidiary of Citibank Delaware which is a 

Delaware banking corporation. That company is owned by Citicorp Holdings, Inc. which is a 

Delaware business corporation which is finally owxd by Citicorp, which is the parent company 

which is publicly held. 

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Welch: All right, now what about Citicorp Assurance‘s insurance activities? Are you 

familiar \sith the scope of those activities? 

Michener: Yes, I am 

Welch: And could you please describe for the hearing officer what type of business 

Citicorp Assurance is licensed to write? 

Michener: It is licensed to wtite certain proper+/casualty lines in the state of Delawzre 

and its business consists entireI>- of insuring or reinsuring certain risks of Citicorp and its affiliates. 

Welch: Okay Now to be specific about that, n-hat t)pes of business does Citicorp 

Assurance currently actually write? 

Michener: First of all, Citicorp Assurance does not sell insurance to the general public. It 

only has corporate policyholders and only insures or reinsures the exposures of affiliated 

companies. 

Welch: Okay. 

Michener: And it writes only hvo (2) tqpes of business. First, it provides contractual 

liabilim insurance to Citibank, N.A., a national bank subsidiary of Citicorp located in New York. 

Second, Citicorp Assurance provides reinsurance on coverages underwritten by unaffiliated 

companies, American Security Insurance Company and Standard Guaranty Insurance Cornpan) 

for Citibank South Dakota, N.A. which is another national bank subsidiary of Citicorp located in 

South Dakota. As a result, the company functions in essence like a captive insurer and does not 

market its products to the general public in Delaware or elsewhere. 

Welch: Okay. Mr. Michener, let’s take a moment and look at Exhibit #J. With that 

exhibit in mind, I’ll ask you what is the percentage Citicorp Assurance writes of the 

property/casualty market in Delaware. 

Michener: Well first, as the hearing examiner knows, the property/casualty market 

consists of a number of lines of insurance, and in most of those lines of insurance, Citicorp 

Assurance market share is -0-. The only line in which it writes is called ‘-other liabiliw” which is a 

miscellaneous liability line. And in that line it‘s market share is less than 1% as sho\\n on the 

Exhibit #4. 

Welch: All right. Now hon competitive, Mr. Michener, is the market in Delaware of 

propcrt)/casualty insurance? 

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Prince: Yes 

Welch: Let me turn for a moment if I could to the background on Travelers Group itself 

Could you provide a brief background of Travelers Group? 

Prince: Well, there is a great deal of public information about Travelers Group and its 

various subsidiaries because a number of our companies are public filers under the FCC system, so 

there are anaual reports and so forth for a number of our companies a number of which are 

attached, I believe, to the Form A, that are widely available. If I can, I would try to direct the 

Hearing Examiner’s attention to a couple of pages of Exhibit #I that have already been referenced 

to try to point to a couple of significant points. The Travelers Group itself is a widely he14 

publicly traded, diversified financial services company. If I can start, please, with page 6 of 

E&bit # 1, you will see that at the end of last year at the end of 1997, Travelers Group had total 

assets of approximately $386.5 billion dollars and a stockholders equip of about $21 billion 

dollars. If I could ask you to turn now to Page 7 - 

Meisenheimer: Excuse me, would you refer to that as Exhibit #7 of Exhibit #l? Just for 

clarification. 

Prince: AI1 right - one of these versions will be right. Exhibit #7 of Exhibit #l. You’ll 

see that we’re in four (4) primary businesses. The consumer finance business, the investment 

services business, property/casualty insuraoce, and life insurance. 

Welch: All right now, Mr. Prince. The first one of those businesses you mentioned is 

consumer finance services, could you describe that for the Hearing Exammer, please? 

Prince: Of course, if I could ask you to turn to Exhibit #8 of Exhibit #I. There you’ll see 

that the consumer tinance business is operated through a commercial credit company and its 

various subsidiaries and they provide consumer lending services, credit card services, and various 

credit-related insurance services among their other activities. 

Welch: All right now the other, the next business that you mentioned is investment 

senices, could you describe that for the Examiner, please? 

Prince: That’s on the next, exhibit, Exhibit #9 of Exhibit #I. You’ll see that the 

iwestment services business is offered principally through Solomon % Smith Barney Holdings. It 

provides investment banking and trading, retail brokerage, mutual fund, and investment 

management services. 

Welch: All right, now can you s ummarize the third business of Travelers Groups 

operations which 1 think you identified as propeq/casuaI& business? 

Prince: Yes, that’s on the next page. Exhibit # 10 of Exhibit # 1 and this is the Travelers 

Property/Casualty business that Mr. Michener described. As you can see, it’s 83% owned by 

Travelers Group, the group of companies offer a Ride array of commercial and personal lines of 

coverage principally in the U.S. They are licensed in all 50 states, the District of Columbia, and 

certain other jurisdictions. And the principal companies are rated at least A or Excellent by A.M. 

Best which means that they have excellent financial stren,@h and a strong ability to meet their 

ongoing obligations to policyholders. 

Welch: All right. The final business that you mentioned was life insurance services. Can 

you summarize that business for the Hearing Examiner? 

Prince: On Exhibit #I 1 of Exhibit #I, we talk about our hvo (2) life insurance operations, 

the Travelers Insurance Company and its subsidiaries in the Primerica Financial Services group of 

companies. These life insurance companies are also licensed and operated in all 50 states and the 

District of Columbia, Guam, and certain other jurisdictions, and all of these companies are rated A 

or Excellent by A.M. Best. 

Welch: All right. Irt me change topics on you for a moment, if I could. What, in terms of 

the merger itself, now what consideration will Citicorp shareholders receive in the merger? 

Prince: In connection nith the merger, each outstanding share of Citicorp common stock, 

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9 
???: Actually, in hearing the flow, additionally we’d objected to having three in a row go, 

but I think it might be better having three go, subject to being able to recall which of the three that 

we want. As it tamed out, you were correct. 

Welch: Well, we get one right every now and then. Your Honor, at this time, we will call 

Mr. Charles 0. Prince. 

???: Just, before you begin, I guess I’m qualified at least as to that witness, we didn’t see 

any reason to break the flow. That doesn’t mean, we may after this witness, but- 

???: Quite candidly, I don’t think there is a problem, but why don’t we just go forward. 

Prince: I’ll try to do as good a job. 

[laughter] 

Tcichman: Sir, can I get you to raise your right hand? Sir? state your name please. 

Prince: Charles Prince. 

Teicbman: Sir, do you swear to tell the truth, the whole truth and nothing but the truth so 

help you God? 

Prince: I do. 

Teichman: And go ahead and state your name for the record. 

Prince: Charles Prince. 

Teichman: We just did that, didn’t we? And your title, too 

Prince: My title is executive vice president and general counsel of Travelers Group. 

Welch: Mr. Prince, how long have you held the position that you have just identified for 

the hearing examiner? 

Prince: I‘ve been the general counsel with Travelers Group or its predecessors since early 

in 1983 and I also will serve as co-general counsel of CitiCroup after its formation. 

Welch: And would you briefly describe for the examiner your duties and responsibilities 

in that capacity? 

Prince: In my current position I have responsibility for several of the administrative 

functions of the combined company. The legal department, government relations, and corporate 

securi@. 

Welch: Now in this capaciv, one or more of those capacities, did you have occasion to 

become familiar with the details of the proposed transaction which is the subject of this hearing 

today? 

Prince: Yes, I have. 

Welch: And could you give us a brief description of your involvement and your role in 

that proposed transaction? 

Prince: Well, I assisted in the performance of the due diligence effort leading up to the 

agreement. I also participated in the negotiation of the contract and so forth. Presently, I have 

overall responsibility for obtaining the necessary governmental and other approvals overall for the 

transaction. 

Welch: Now, in connection with these responsibilities. have 1-00~ also become familiar nitb 

the Travelers Form A which has been filed with the Delaware Department of Insurance and which 

is the subject of this proceeding? 

Prince: Yes, I have. I participate in the drafting of the Form A, and of course, I executed 

it in behalf of Travelers Group. 

Welch: Now, Mr. Prince, is the information contained in that filing accurate? 

Prince: Yes, it is. 

Welch: Okay. And were you present and listening to the testimony of Mr. Michener 

regarding the structure of the transaction and the merger? 

Prince: Yes. 

Welch: And do you agree with his description of the merger? 

8 

8 
Welch: Now, have the parties designated individuals as executive officers, and if so, have 

their biographical affidavits been filed with the Department? 

Prince: Yes, certain individuals have been designated and the Form A application 

indicates the biographical affidavits of these individuals of Travelers Group and of Citicorp. And 1 

believe those are being filed supplementally. I also believe that aU of them have been or will be 

submitted except for one which should be submitted very shortly. 

Welch: Let’s talk for a moment about financial condition. Could you describe for the 

Hearing Examiner the financial condition of Travelers prior to the consummation of the merger? 

Prince: Yes, 1’11 turn back to the exhibit booklet if I may and ask you to turn to Exhibit #6 

of Exhibit # 1. 

[pause] 

Welch: Mr. Prince, I think you were starting to tell me about the financial condition of 

Travelers Group prior to consummation of the merger. 

Prince: Yes, I was just referring all of us back to Exhibit #6 of Exhibit #I which we had 

looked at just a fav moments earlier in my testimony where the financial condition of Travelers 

Group is identified as you can see the total assets at year-end were $386 billion and stockholders 

equity was almost $2 1 billion. As an integrated financial services company with diversified 

earning stream from various businesses, each of which are strongly capitahzcd, Solomon, Smith 

Barney, Commercial Credit, Travelers Property Casualty, Travelers Life, Prime&a Financial 

Services, with all these different companies, Travelers enjoys strong earnings and strong cash flow. 

Welch: Now, follo\\ing the merger, what would the financial condition of the company 

be? Define the companies we’re talking about. 

Prince: Sure. If I could direct your attention to Exhibit #I2 of Exhibit #I, this is a detail 

of the pro forma basis of the combined companies at year-cod. This is the simple arithmetic of 

adding the hvo (2) companies together, Travelers Group and Citicorp And as you can see on this 

pro forma basis, the financial strength and capitalization of the company would be exceptional. 

Welch: Now let’s change topics )-et again if we could. I‘m going to ask you to talk for a 

moment about the plans for Citicorp Assurance, which is the actual subject of this hearing, that is 

Citicorp Assurance, will the proposed merger jeopardize the financial stabili% of Citicorp 

Assurance. Will that prejudice the interest of any of its policyholders? 

Prince: No, as I‘ve indicated, the Travelers Group is very w-ell capitalized, and I beliwe 

that the combined financial strength of the hvo (2) companies after the merger will enhance the 

financial stability of the subsidiaries of the compzmy and will certainly not prejudice the interests of 

any policyholders. 

Welch: This next question is a long one, but let me try it anlvay, because I think it covers 

some ground that‘s important. Does Travelers Group have any present plans to either liquidate 

Citicorp Assurance, to sell its assets other than in the ordinar) course of business, to merge 

Citicorp Assurance with other entities, or make any other material change with the insurers 

business or corporate structure or management, for that matter, that would be unfair and 

unreasonable to its policyholders or otherwise not in the public interest? 

Prince: 1‘11 give you a short answer to a long question, the answer is no to any of those 

matters. 

Welch: Okay, then that’s addressing the ? 

Prince: That’s correct. 

Welch: Does Travelers have any plans to replace current management for Citicorp 

Assurance or change its current business in any significant way? 

Prince: Again, the answer is no, we have no plans to change the business or to replace or 

change the current management of Citicorp. 

Welch: Now, will the operations of Citicorp Assurance be integrated \\ith those of other 

II 

11 
other than shares owned by the two (2) companies themselves, will bc converted into the right to 

receive 2% shares of Travelers Group common stock. Fractional shares will be paid for in cash. 

In addition, each issued an outstanding share of Citicorp preferred stock, again, other than shares 

owned by the hvo (2) companies directly, will be converted into the right to receive one (1) share of 

a corresponding series of Travelers Group preferred stock. As a result of these various 

conversions following the merger, the former Citicorp shareholders as a group, and the current 

Travelers Group shareholders *iI1 own approximately 50% of the outstanding shares of CitiGroup. 

Welch: All right, let’s talk for a minute about the value of the consideration. What’s the 

value of the shares of Travelers Group common stock that Citicorp shareholders will obtain? 

Prince: Because it’s based on stock exchange, the value changes every day as the stock 

market changes. But just as a point of reference, the figure that’s often used is that the value will 

be approximately $70 billion dollars. This figure is based on the number of shares of Citicorp 

common stock outstanding at about the date of the announcement, which wxs $45 1 million shares, 

and the price of a share of Travelers Group common stock on that date which was about $6 I a 

share. 

Welch: Now is Travelers Group incurring any debt in connection with the merger? 

Prince: No, we’re not. 

Welch: Let’s turn to yet another topic, Mr. Prince? 

???: Actually, could you maybe look at this one moment? I guess, in terms of a written 

copy of it, I’m not objecting to any question or anything, I‘m just, I’m wondering really is that 

earlier you’d said there are no extra copies of it? 

Welch: That is correct. 

???: That really is correct? 

Meisenheimer: Would you please wait according to what we agreed until he finishes his 

presentation. 

???: Okay. Go on and proceed from here. 

Prince: I don’t have to start over again do I? 

Welch: All right, I think, we started to talk, Mr. Prince, about the question of shareholder 

approvals. 

Prince: Yes sir. 

Welch: A little bit of shithng topic, will the shareholders of both Travelers Group and 

Citicorp be given the opportunity to vote on the proposed transaction? 

Prince: Yes, each of the shareholder groups will vote separately- on the transaction. 

Welch: And when will that vote take place? 

Prince: Both of the shareholder votes have been scheduled, again separately, but both 

votes will bc held on July 22, 1998. 

Welch: Now I think the Form A submitted by Travelers Group under Item # 1 I indicates 

the Travelers Group will inform the Commissioner of Insurance of the identity of the proxy 

solicitors retained in connection with the meeting of shareholders that wc were talking about a 

moment ago. Have prosy solicitors actually been retained by either party to the merger? 

Prince: Yes, I believe they have. I believe the Travelers Group has retained Morrow & 

Company and Citicorp has retained Georgeson & Company. 

Welch: All right, let‘s turn to yet another topic, if you could. And that’s the Travelers 

Group directors and officers. Or directors for the moment. What will the makeup be of the 

Travelers Group Board following consummation of the transaction? 

Prince: There will be a board of 24 people, 11 outside directors from each of the hvo (2) 

companies presently, so that’s 22, and Mr. Sanford Wile and Mr. John Reed, respective chairmen 

of each of the two (2) companies will also be members of the board, and each of them \\ill serve as 

chairmen and co-chief executive officers of the company. 

10 

10 
Company Act, we will have a minimum of hvo (2) years from the consummation of the merger 

with the possibility of three (3) one-year extensions to conform our operations to the Baok Holding 

Company Act limitations. 

Welch: Let‘s talk about other regulatory approvals for the moment. Have all other state 

and federal regulatory approvals been obtained? 

Prince: Not yet, but they are all in process, and thq’re all grinding away. We have 

various regulatory approvals, both domestically and internationally. 

Welch: Okay, can you describe those for the Hearing Examiner and their current status? 

Prince: Well, both Travelers Group and Citicorp are required to file with various domestic 

and international regulatory agencies. These include, of course, the Federal Reserve Board under 

the Bank Holding Company Act that we talked about, certain other banking agencies, some state 

banking agencies, state insurance regulatory authorities, and the various foreign authorities. 

Welch: Your Honor, we have no further questions of this witness at this time. Your 

Honor, as our next witness, we’d like to call Catherine S. Mulholland. 

Meiscnheimer: Just a second. 

‘???: I’d actually like to ask if we could question Mr. Prince on what he just said. I don’t 

know if I initially understood. After the first witness, they thought we were going to ask questions, 

and we waived. 

[w=l 

???: If I could just initially respond to Mr. Lee’s request. The testimony of Ms. 

Mulholland is relatively short, and Mr. Prince is obviously going to be staying in the hearing room 

for the entire hearing and would be available at any time. 

Meisenheimer: Okay. Are your questions just a few, or are they voluminous? I mean, 

how many questions do you have? 

Lee I guess it depends on how it develops. 

Meisenheimer: To keep it moving, I move that I m-ould like to go ahead and let Ms. 

Mulholland 

Lee Sure. 

Meisenheimer: Okay. 

Teichman: Ms. Mulholland, will you raise your right hand? Ma’am, do you swear to tell 

the truth, the whole truth, and nothing but the truth so help you God’? 

Mulholland: I do. 

Teichmao: Then nil1 you state your fill name for the record? 

Mulholland: Catherine S. Mulhollaod. 

Teichman: And your position? 

Mulhollaod: I am general counsel and senior vice president of Citicorp Insurance Group. 

Teichman: Thank you. And, Ms. Mulholland, I’m going to ask you to keep your voice up 

so that we can get you on the tape. 

Welch: In your answer, Ms. MulholJand, you made reference to your employment with 

Citicorp Insurance Group. Can you explain to the Hearing Examiner what exactly it is that 

Citicorp Insurance Group is comprised of? 

Mulholland: Okay, again, if you would look at Exhibit #3 on Exhibit # 1, you will note 

that on the right-hand side, Citicorp Assurance Company at the bottom is an affdiate of First 

Citicorp Life Insurance Company, a New York company, and both are wholly owned by Citicorp 

Life Insurance Company, an Arizona insurance company, with our direct parent being Citibank 

Delaware and ultimately our ultimate parent being Citicorp. On the left side of the chart, you 41 

see Citicorp International Trade & Indemnity, Inc., a New Jersey insurance company, that is not 

considered part of Citicorp Insurance Group, but it is an insurance subsidiary of Citicorp. 

Welch: All right, that’s Citicorp Assurance way down there at the bottom of the chart, is 

13 

13 
Travelers btsurance subsidiaries? 

Prince: Again, the answer is no. I believe that Citicorp Assurance will continue its 

operations as they are now conducting. 

Welch: All right, Let’s focus on the Board of Directors of Citicorp Assurance. What will 

be the makeup of the Board of Directors of Citicorp Assurance after the merger? 

Prince: There are no plans to change any members of the Board of Directors of Citicorp 

Assurance. 

Welch: All right. What will the impact of the merger on jobs be in Delaware? How many 

employees are expected to be maintained? 

Prince: Because all of the plans will remain the same, I believe there will be no affect on 

employment levels in Delaware as a result of this transaction. 

Welch: Okay. Now wilt the competence, experience, and integrity of those persons who 

will control the operations of Citicorp Assurance be such that it would not be in the interest of 

policyholders and the public to permit the acquisition of control? 

Prince: Well since Travelers has no plans to change the management or the Board or their 

corporate stnmture, then the same individuals who have been responsible for controlling the 

operations of Citicorp Assurance will continue in that capacity. In addition, since Citicorp 

Assurance really has only three (3) corporate policyholders, the insurance-buying public won’t be 

affected by the acquisition of control in any way. 

Welch: Now let’s turn to some banking law issues if we could. Is Travelers Group 

currently authorized to conduct any banking activities? 

Prince: Yes, Travelers Group currently has two (2) bank subsidiaries which are licensed 

to conduct business in Delaware. The first is Travelers Bank gL Trust, FSB, or Federal Savings 

Bank, a federally chartered savings bank located in Newark, Delaware, and the Travelers Bank 

USA which is a Delaware state chartered bank 

Welch: All right, now what do these hvo (2) banks actually do? 

Prince: Travelers Bank USA is engaged in the credit card business, and Travelers Bank & 

Trust, FSB is primarily makes home equity loans. 

Welch: Now can you explain for the Hearing Examiner the impact of the Federal Bank 

Holding Company Act on the merger? 

Prince: Yes, as a result of our merger with Citicorp, Travelers Group will become a bank 

holding company under the Federal Bank Holding Company Act. We have filed an application 

with the Federal Reserve to become a bank holding company, and once n-e receive that, we will 

face certain limitations on our insurance and banking operations under the Act 

Welch: All right, we’re focusing on Citicorp Assurance for the moment, does that mean 

that following the merger there is a possibility that Travelers Group could be forced to sell Citicorp 

Assurance because of the Bank Holding Company Act? 

Prince: No. Many people read in the press the reports that at some point in the future 

Travelers Group may have to divest or limit its insurance operations. Actually, the operations of 

Citicorp Assurance are permitted by the current version of federal law, and so we don’t expect that 

there would be any requirement in the future, even if the law stays exactly as it is, for us to sell, 

dispose of, or in any way separate the operations of Citicorp Assurance following this merger. 

Welch Ah right, now assuming that the Federal Reserve Board approves the Travelers 

Group’s application to become a Federal Bank Holding Company, will the Bank Holding Company 

Act impose any limitations on the insurance-related activities of the Travelers Group following the 

merger? 

Prince: Yes, and I referred to some of these limitations just a moment ago. It’s possible 

that at some point in the future, the company could be required to divest or separate some of its 

insurance operations, not including Citicorp Assurance. However, under the Bank Holding 

12 

I2 
America and American Security Insurance Company and Standard Guaranty Insurance Company. 

Welch: With that in mind, is it accurate to say that Citicorp Assurance reinsures or 

insures only affiliates? 

Mulholland: Yes, it is. 

Welch: What’s the A.M. Best rating of Citicorp Assurance? 

Mulholland: It’s A-, which is an Excellent rating. 

Welch: And do you have any expectation that that will change as a result of the merger? 

Mulholland: No. 

Welch: What is Citicorp Assurance’s policvholder surplus as of March 3 l”, 1998? 

Mulholland: As of March 31y it’s $25 mill;on. 

Welch: Okay. And will that policyholder surplus change in any way as a result of the 

merger? 

Mulholland: Not as a result of the merger. 

Welch: Let’s turn for a moment, Ms. Mulholland, to the stahltoT criteria, if we could. 

I‘m going to ask you a series of questions about the statutory criteria. Following Traveler Groups 

acquisition for control of Citicorp Assurance, will Citicorp Assurance continue to satisfy the 

prerequisites to write the lines of insurance that it currently wites in Delaware? 

Mulholland: Travelers Group has indicated that it has no present plan to change the 

operations of Citicorp Assurance follo\+ing the merger. So 1 see no reason why Citicorp 

Assurance would not continue to qualify with those licenses after the merger. 

Welch: Are you aware of any aspect of the proposed merger between Travelers Group and 

Citicorp that would affect Citicorp Assurance? 

Mulholland: 1 am not aware of any aspect of the proposed merger that would in any way 

jeopardize Citicorp Assurance’s license. As the person responsible for Citicorp Assurance’s legal 

and regulatory affairs, 1 believe that Citicorp Assurance has complied with all Delaware licensing 

and other regulatory compliance requirements in the past and 41 continue to do so following the 

acquisition. 

Welch: Ms. Mulholland, will the proposed acquisition of control substantially lessen the 

competition in Delaware? 

Mulholland: No, 1 personally reviewed the exhibit regarding the combined market share of 

Citicorp and Travelers insurance subsidiaries licensed in Delaware. Mr. Michener was correct in 

stating that in evev line of business, both in life and health, property and casualty, that Citicorp 

and Travelers subsidiaries have a vel); small market share. In addition, Citicorp Assurance onl) 

writes in the line of other liability, which is a hodgepodge of, you know, line 19 miscellaneous 

liability, and no other line of property/casualty insurance. 

Welch: Ms. Mulholland, \\ill the financial condition of Travelers Group jeopardize the 

linancial condition of Citicorp Assurance or otherwise prejudice the interest of its policyholders? 

Mulholland: No, Travelers Group is a well capitalized company whose insurance 

subsidiaries enjoy very high ratings. Furthermore, Travelers -- 

Teichman: Ms. Mulholiand, let me ask you to stop for just a second. And we’re going to 

go off the record for just a moment. 

[pause to change tapes] 

Teichman And we’re back on the record, it’s about 6 minutes after 11:OO a.m. 

Welch: All right, Ms. MuIholland, before we went off the record, 1 think 1 had asked you 

whether or not in your judgment the financial condition of Travelers Group would jeopardize the 

financial stability of Citicorp Assurance or prejudice the interests of its policyholders. Why don’t 

you start that answer off again? 

Mulholland: Okay. Well as 1 mentioned that Travelers Group is a well capitalized 

company whose insurance subsidiaries enjoy very high ratings. Furthermore, Travelers Group 

15 

15 
that right? 

Mulholland: Yes, that is correct 

Welch: All right. Now, do you also hold a position with Citicorp Assurance? 

Mulholland: Yes, I‘m vice president and general counsel for Citicorp Assurance. 

Welch: And Ms. Mulbolland, how long have you been working for Citicorp Insurance 

Group? 

Mulbolland: I have been working for Citicorp Insurance Group since July 1997. 

Welch: Let’s talk about your responsibilities in Citicorp Insurance Group. Could you 

describe those for the Hearing Examiner? 

Mulholland: Yes, as general counsel, I’m responsible for overseeing and advising on the 

legal affairs of each of the three (3) Citicorp Insurance Group subsidiaries, including Citicorp 

Assurance Company. My duties include regulatov compliance, overseeing the preparation of 

company filings, corporate affairs, government relations, inner company and third-party 

agreements, and supervision and management of staff 

Welch: Let’s turn for a moment to the structure of the merger. Some of the other 

witnesses talked about that, but we’d like to hear it from your standpoint. Have you reviewed a 

copy of the Form A statement and exhibits the Travelers Group filed with the Department in 

connection with the proposed merger? 

Mulholland: Yes, I have. 

Welch: Okay , in what capacity did you actually review that? 

Mulbolland: Well, I reviewed it and 1 helped prepare it. 

Welch: In your judgment, does the Form A statement accurately characterize the merger 

and its impact on Citicorp Assurance? 

Mulholland: Yes, it does. 

Welch: And did you hear the testimony of the previous witnesses, Mr. Prince, Mr. 

Michener, regarding the impact of the merger on Citicorp Assurance? 

Mulbolland: Yes, I did. 

Welch: And to your knowledge, was that testimony accurate? 

Mulholland: Yes, it was. 

Welch: Let‘s turn for a moment to, again, to some details on Citicorp Assurance. 

Describe Citicorp Assurance for the Hearing Examiner, if you would. 

Mulholland: Okay, again, as shown on Exhibit #3, Citicorp Assurance is a stock 

property/casualty insurer whose ultimate parent is Citicorp which is also a Delaware corporation. 

Citicorp Assurance is domiciled and licensed in Delaware and only Delaware. As Mr. Michener 

explained, Citicorp Assurance currently has only hvo (2) types of business. First, it probides 

contractual liabiliv insurance to Citibank North America, a national bank subsidiq of Citicorp 

that is located in New York. The policy insures Citibank New York against its contractual liability 

under a debt cancellation agreement that Citibank New York has with borrowers for certain Qpes 

of loans made by Citibank New York. 

Teichman: Ms. Mulholland, can I ask you to slow dosn a little bit so that I can - 

Mulholland: So you can make notes? 

Teichman: Thank you. 

Mulholland: Secondly, Citicorp Assurance provides reinsurance on coverage underwritten 

by American Security insurance Company and Standard Guaranty Insurance Company, both of 

which arc Delaware domestic companies and that reinsurance is provided on behalf of Citicorp 

South Dakota. another national bank subsidiary of Citicorp. 

Welch: Non, Ms. Mulholland, does Citicorp Assurance sell any products at all to the 

general public? 

Mulholland: No_ it doesn’t. As I had mentioned, its customers are Citibank North 

14 

I4 
into evidence. 

Meiscnheimer: Okay. Let’s mark these Exhibit #2, the Form A filing. 

Teicbman: Okay, what I’ve got here is two (2) binders, loose-leaf binders These are just 

copies? One is the same as the other? 

Welch: Yes sir. 

Teichman: Mr. Hearing Officer, it’s your desire to mark one of them as Travelers Exhibit 

#2? 

Meiseoheimer: Right. 

Teichmar: Okay, so we’ll move it into evidence as Travelers Exhibit #2. 

Meiseoheimer: There’s one other issue that I would like to see addressed at this hearing 

today, or it could be submitted within the next five (5) days. I would like to see a list of the 

officers and directors that will be iovolvcd with the new company nith the merger and their 

qualifications. And their qualifications. Any information that can be released to the public. 

Welch: I’d be happy to do that, Your Honor. 

Meisenbeimer: Okay, we can do that in one of two ways. You can submit something or 

you can lntmduce it today orally. If you know the officers that we’re talking about here, the major 

officers and directors, you cao give a brief bio orally. That way we can address those issues, too. 

Welch: In order to be a little more orderly about it, why don’t we submit that 

supplementally. We’ll do that tier the conclusion of the hearing today. Now, just to &ifs, Your 

Honor, when you say officers and directors of the company, you mean of the parent compaoy, not 

Citicorp Assurance itself? Because obviously they’re not going to change. 

Meiseobeimer: Right, right. 

Welch: I’d be happy to do that. 

Lee I guess whichever part is not confidential, obviously, we would like a copy of, and I 

think, well, I was going to ask whether these binders are tbe same binders that were given to Ms. 

Rangan on Friday. 

Welch: The same thing was provided to Ms. Raogan on Friday afternoon. 

Lee: To some degree, your suggestion of either oral presentation or some, we understand. 

certainly people‘s social securi& number or home address we have no interest in, but in terms of --- 

Meisenheimer: Admission will be made with the next five (5) days. You’ll have ao 

opportuoi~ to review it. It nil1 be, a copy nilI be available to you. 

Lee: Of those binders, or the supplemental things that are going to be submitted? 

Meisenbeiier: The binders and the supplemental submissions, both. 

Welch: The bidders have already bzzn made available to the individuals. 

Meiseoheimer: I just wanted to point out, is five (5) days a fair time in order for you to do 

this? 

Welch: That‘s fine, Your Honor. It‘s not a problem. 

Meisenheimer: I mean, there’s no set rule that it has to be five (5) days. 

Welch: Five (5) days is fine. 

Meiseoheimer: If you can do it sitbin five (5) days, then we’ll have it done by. 

Lee: It’s just my understanding that in the prior proceeding that Ms. Raogan described to 

me, there was five (5) days sort of after the dust bad settled, she had five (5) days to review things. 

So it’s not, you know, there may be other reasons for extending it further. But obGously ifwe get 

whatever the supplemental submission is on Day 4 of the five (5) days we have to comment, it’s 

not a very useful affair to us. You say five (5) days to submit, if you submit it tomorrow, then it‘s 

only sir (6) days. We just want to make sure we have a chance to review. 

Meiseobeimer: Yes, that’s a very valid point, and we’ll hold it open five (5) days after n-e 

receive it for your response. 

Lee: Sure. 

17 

17 
capitalization and financial strength will be even greater following the merger. The interests of 

Citicorp Assurance’s policyholders, therefore, will not ix prejudiced by this proposed acquisition. 

Welch: Okay. Are there any current plans which Travelers Group has for Citicorp 

Assurance which are unfair or unreasonable to Citicorp Assurance’s policyholders or perhaps not 

in the public interest? 

Mulholland: No, both Mr. Michener and Mr. Prince have testified that they plan no 

changes to the business, corporate affairs, or managcmem of Citicorp Assurance. 

Welch: Okay. Now considering the competence, experience, and integrity of Travelers 

Group, do you believe that the proposed acquisition of control is in the interest of Citicorp 

Assurance policyholders and the insurance buying public? 

Mulholland: Yes, I do. The competence and experience of the management of Travelers 

Group is well-known in the insurance and financial services industries. Again, Citicorp Assurance 

only has three (3) policyholders. Its indirect parent, Citicorp -- Citibank North America, and 

Citibank South Dakota which it reinsures through contracts with American Security and Standard 

Guaranty. 

Welch: All right now is the proposed acquisition of Citicorp Assurance likely to be 

hazardous or prejudicial to the insurance-buying public in any respect? 

Mulholland: No, I do not believe it will be. First of all, Travelers’ financial strength is 

added to that of Citicorp’s, The fact that the acquisition of control of Citicorp Assurance will have 

no impact on competition in Delaware and the fact that Citicorp Assurance does not market to the 

general public. 

Welch: Thank you, Ms. Mulholland. Mr. Examiner, we have no further questions of this 

witness at this time. 

Teichman: We‘re going to go off the record for a moment. 

Welch: Your Honor, just in case there is any doubt, I think I formally moved our exhibits 

into evidence, but I want to be clear about that that we did formally move them into evidence. I 

think Your Honor’s already ruled, but just in case I got it wrong 

Meisenheimer: We’re talking about Exhibit #I, okay. 

Teichman: We have been off the record for just a minute, and as soon as I hit the machine, 

Mr. Welch, y-ou started to talk. But we are back on the record and nothing you said was cut off 

before I started the tape 

Welch: Thank you, sir. 

Meiscnheimer: There’s a couple problems or not really problems, but issues that I would 

like to address that I think needs to be addressed here. Going back to our Form A filing just a 

minute. I would like to see the Form A introduced here as cvidcnce as an exhibit to this hearing. 

The information, except that which is not public information on the biographicals, but all the other 

information I would like to see someone move it. And if not, we’re going to move it as the agency. 

Welch: I have no problem with that at all, Your Honor. So we’ll formally move it at this 

time, if that’s would y-ou’d like us to do. We have a copy here I can hand up, and maybe that’s just 

an extra copy here Your Honor doesn’t need, because I know you already have it. That formally 

would move it into evidence subject to the questions that were addressed and discussed earlier in 

terms of the biographical information. 

Teichman: Let me interrupt for a sec. If there are, obviously, it’s up to you, whatever you 

wish to move into evidence, it’s your case. I know you’ve had problems with the biographicals, if 

you want to redact just that part and then give us the rest of that, then we can mark it in, if that’s 

your desire. 

???: Yes, the Form A copies which we have here do not include the biographical affidavits 

or anything that would be filed supplementally, so -- 

Welch: Okay. so we’ll hand those up to the Examiner right now, and formally move them 

16 

16 
Lee: Thanks It, under the heading, yeah. Do you have a copy of it? Under the heading, 

“Benefits to Policyholders” on page 2. You stated to the Commissioner and the Department, “it is 

anticipated that the merger will offer the parties opportunities to sell their respective products to 

each other’s customers.” Umm, 1 guess, can you explain a little more what you mean by that? 

Michener: Yes, wre’re hopeful that with the combination of the two companies that there 

will be opportunities to sell Travelers products to Citicorp customers and vice versa. 

Lee: Would these include selling Travelers insurance products through Citibank branches? 

You know, through the banks of Citicorp? 

Michcner: I don’t know. 

Lee: Is it the intent of the company to do that or is it that you don’t know whether that will 

be permitted? 

Michener: I don’t know whether that‘s the intent of the company. 

Lee: I’d like the, wc submitted as part of our, as one of our written submissions a letters 

from counsel to Travelers and Citicorp. I have like two copies, I think though, that it’s my 

understanding that thq’re part of the record. They’re written. 

Meisenheimer: Sure, wc would like to have them marked in as exhibits. 

Michcner: Do wc have them? 

Lee: It’s actually two (2) letters. You might want to mark them. If you don’t mind, in the 

same, I have like three (3) copies. You got them. 

Michener: Does that mean you don’t get to ask me any questions? 

Lee: What? No, no. You already had a copy. 1 faxed it when you called and asked me to 

fau it. You know, but I mean, you may not have it with you. 

Teichman: Please direct your comments to the Hearing Officer. 

Teichman: What I have here is two (2) documents - 

Lee: Hang on a minute. Exactly two (2) documents. One is dated March 30” and one is 

dated March 3 I. 

Teichman: Okay, this is a document that is, I guess, for lack of a better term we’ll call this 

Lee Exhibit #I, and it looks like a 5-page letter dated March 30’-! Mr. Hearing Officer, is it your 

desire to move this Lee’s Exhibit # 1 into the record? 

Meisenheimer: So move it. 

Teichman: The next item is, we’ll mark it as Lee Exhibit #2. And this is a 2-page letter 

dated March 3 1. Mr. Hearing is it your desire to move this thing into evidence? 

Meisenheimer: So moved. 

Teichman: Okay. Lee Exhibit #2. 

Lee: Okay. Ipause]. You got one. I guess with Mr. Michener, in the spirit of trying to 

stick with one witness at a time, when you said it’s, you don’t, you’re unclear as to Travelers or the 

proposed Citigroup’s intent on cross marketing, on selling Travelers insurance products to Citicorp 

branches, mnm, the hvo (2) documents that are there, I guess at this point, Mr. Prince, have you 

ever seen these before? 

Prince: I don‘t believe so. 

Lee: And you had said, when Mr. Welch was questioning you. that you were in charge of 

the, say again, I guess, he asked you what your role in the merger is? 

Prince: I have been asked to coordinate the insurance components of the merger, including 

the regulatory approvals. 

Lee: The approvals, but in terms of the plan going forward, actual business plan of the 

proposed CitiGroup? 

Prince: What 1 am working on primarily is the insurance approvals to accomplish the 

merger. Obviously, the merger has not taken place, so the companies are operating independently 

at this point. 

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19 
Meisenheimer: Now I have a question, would you state your name, please? 

Epstein: Yes, Jonathan Epstein from the News Journal I’d like for clarification on what 

is being left out of the public record as a member of the news media, I’m sure you can understand 

we’d protest anything being left out of the record. 

Meisenheimer: Sure. 

Epstein: Anything that is left out, we’d like that to be as narrow as possible. 

Meisenheimer: I would just like to refer you to the public affairs officer after the hearing. 

I don’t think that’s something that we want to address at this point. 

Epstein: Well, if you’re ruling right now on what’s being lefl in or out of the public 

record, then shouldn’t it be addressed at this point and not after the fact? 

Teichman: Mr. Epstein, the point the Hearing Officer is tning to make is that we’re in the 

middle of a public hearing, and it’s kind of like a trial. You wouldn’t interrupt in the middle of a 

trial to ask questions of the judge. So the same thing, if you have questions of the Department, 

then it would be appropriate at the conclusion of the hearing to ask Department representatives at 

that time rather than in the middle of a hearing where we’re taking aidcnce and dealing with 

motions and so forth. 

Lee: As a participant, I mean, this may - I’ll keep it very brief, the idea was that 

everything that’s not, that’s exempt under FOYA can be withheld. I don‘t know if you’ve 

detcrmincd in advance under the State Freedom of Information law I don’t know if you’ve 

determined in advance what can be withheld or, if again, not as an attempt to, if they submit things 

and we submit a request, would you then rule on it, you know rule on it? 

Meisenheimer: Absolutely. 

Lee: And we’ll do that quxkly, it‘s not an attempt to, but 1 think that may address it as 

well, at least that there’s some ruling and not just a --- that it be clear, not just a, what’s being 

withheld and then it be actually entitled to exemption under the Delaware --- 

Meisenheimer: Okay. 

Welch: In response to your specific question, we’d be happy to submit the requested 

information and we’ll do so promptly. 

Meisenheimer: And then you’ll have five (5) days to reliew it. 

Lee: But I guess n-hat I’m saying is are you going to review what they submit and actually 

determine whether its exempt under FOYA or not. Or is it just there and they submit it, and --- 

Meisenheimer: We’ll have to make that decision. 

Lee: Well, we need some kind of request, if that’s what triggers the review 

Meisenheimer: It‘s important to point out that if you’re not happy with what you receive, 

then you need to, you can make an objection to us, and we need to make a ruling and if we need to 

extend the time frame, then we can do it at that point. 

Lee: Okay. 1 guess what I’m saying is that it’s not, literally, if we get it, then we may 

submit a request and you can rule on it. And we’ll submit it quickly, you can rule on it quickly 

Meiscnheimer: Okay? And I think we’re at a point now for your cross-examination. 

Lee: All right. Mr. Michener. 

Teichman: Let me interrupt, just for continuity purposes. Try as best you can to, we’re 

pretty informal here, but, just cross-examine one person at a time rather than jumping behveen. I 

realize one question might be better answered by another individuai, but where possible, kind-of 

keep your cross to a single individual before you move on. 

Lee: Okay. Oh, I see, but is that --- I’ll try to do it that n-a)-, but if there’s a need to go 

back, it won’t be a - Mr. Michener, if your cover letter to the Form A which I think now has been 

moved in, I‘m assuming that the Form A and the cover letter to Commissioner Williams has been 

moved in --- 

Mcisenheimer: Exhibit #2. 

18 

18 
captive insurer, as one of our witnesses put it, is dealing with Three (3) policies, wholly owned, 

no plans to change the business, an entirely different issue than what he’s going at. For that 

reason, I would make the objection. I think it’s appropriate that if we keep this proceeding limited 

to the statutory criteria, we’re going to bc a whole lot better off. And I think it’s far more 

consistent with the purpose of the Statute and the purpose of the hearing, sir. 

Lee: We think that the statute looks much more to the financial strength of the actual 

applicant, which in this instance is the Travelers Group. Therefore, their express plans here in the 

presentation, they’ve attempt to not - it’s been a presentation that’s really at odds with the public 

presentation of the rationale of putting the two (2) companies together. We think this goes directly 

to the financial - what’s at issue is the integrity and competence, the integrity, experience, and 

competence of those who would control Citicorp Assurance and the fmancial strength of the 

proposed applicant, the Travelers Group. That’s what we‘re -- by their logic, the fact that they 

say they have no plans to change Citicorp Assurance is not enough You have to - if a bearings, 

a failing securities company applied to Delaware to acquire an insurer, it wouldn‘t matter if the 

insurer was a captive insurer or anything else. The purpose is to look at the financial condition and 

strength of the applicant. And that’s what, 1 think, after an hour and twenty minutes of read into 

the record testimony, 1 think to allow us to explore this question is not --- is by no means 

unreasonable. And I’d also refer you -- I‘d prefer not to do it as an integrity matter, but there is a 

contradiction in documents that we’ve submitted today between --- that we wish to explore. That 

goes to, I guess even credibility of one of the three (3) witnesses. While I’d prefer not to say it that 

“ay. We think it‘s a legitimate --- when the deal of this was announced, a state insurance regulator 

that didn‘t say, %ait a minute, it sounds like that deal’s not permissible under Federal law.” 

What’s the future financial strength of the applicant? It would seem that most state insurance -- 

that that’s at the heart of the future financial strength of the applicant. And that’s what we want to 

explore briefly and it would be unreasonable to not allow us to do it. 

Welch: Your Honor, if I could make just one quick point. And it’ll be real short. The 

point is, the fed issues are to be done with the fed If you have problems with federal law and 

federal points you want to make, there’s a forum there, you can make them. He‘s done that. 

However, if there’s any issue at all about credibility of this management, we don‘t have aa) 

problem with these gentlemen and Ms. Mulholland addressing them. So I do think, Your Honor, 

respectfully, that this ought to be limited. But if it goes to credibility, I think our witnesses will be 

happy to answer it. And if Your Honor has a concern about that, that’s no problem from our 

standpoint. I would suggest we keep it as brief -- 

Meisenheimer: Okay, but I’m having some trouble right now with your relevance as far as 

the financial How this is relevant to the financial condition. 

Lee: Actually, if I can --- 

Meisenheimer: I‘m going to allow you to continue, but it’s not going to be forever. We’re 

just going to try and see where you’re going. 

Lee: I understand. The reason I began by asking, their own presentation at the Insurance 

Department said “‘we’re gonna cross-sell” right under the heading, “Benefits for Policyholders”. 

So it seems that that -- unless the showing they’ve put forward to the Department has a benefit of 

the proposed merger is the ability to cross-sell. 

Meisenheimer: Before you going any farther, too, I need to know if you’re going to have 

an objection as to this exhibit. 

Welch: If I could just take -- 

Meisenheimer: First of all, we’ll need to mark this as Lee Exhibit #3. 

Lee: It’s testimony of Mr. Prince, so you might want to read -- 

Prince: And others. 

Let: No, yours. 

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21 
Lee: Sir, Mr. Prince, have you seen these two documents before? 

Prince: I haven’t. 

Lee: I guess I’m directing your attention to the Exhibit of the March 30” letter. To page 4 

of it. second paragraph from the bottom, I don’t know if you want to read it out? I don’t want to 

put the words in your mouth, 1 can read it out, however you want to do it. 

Prince: Please feel free to read it out. 

Welch: Your Honor, before that happens, let me just interpose an objection if I could. I 

think in Your Honor’s earlier opinion you made the point that with matters involving the fed are 

pretty far afield. In fact, 1 think what Your Honor said was it strains credibility, it strains one’s 

imagine to figure out what it is that those proceedings have to do with this proceeding. Now I 

would make the objection at this time on the relevant basis with respect to communications and 

discussions with fed, and all those issues involving the fed, this is not the fed. This is the Delaware 

Iosurance Commission, and as Your Honor pointed out at the outset, we’ve got a series of these 

statutory criteria and those are the things we’ve tried to focus on. Mr. Lee has appeared before 

the fed, we know that, he stated his position before the fed, and he’s been quite vocal about that. 

That’s a separate hearing, that’s a separate proceeding, the fed can consider whatever Mr. Lee 

submits to them that they think is appropriate, the fed can consider whatever issues arc appropriate 

under federal law. I would make the objection on the grounds of relevance here. If Your Honor 

rules against this_ I would suggest that this line of questioning ought to be limited, it ought to be 

kept short 

Lpause] 

Meisenheimer: Would you mind explaining your -- 

Lee: Absolutely. The, one of the statutory factors is obviously the strength of the existing 

Travelers Group and of the proposed merger. It‘s, we’ve, and again, I guess we can develop this. 

I was surprised by Mr. Michener’s answer of not knowing, both Mr. Wheel and Mr. Reeve, the 

CEO’s of the hvo (2) companies merging at the top level have said that the cross-selling of 

products is essential to the merger and is the financial rationale for the merger. These documents, 

we’re not asking questions to know about the fed proceeding. These documents describe, I believe, 

in much more detail than was presented today, the actual business plan of the company. And what 

we‘re asking, we believe it goes to possible hazard and prejudice to the insurance-buying public 

and the financial strength of the proposed company because existing law would seem to preclude 

that they cross some of these products. There seem to have been discussions in which indications 

were given that this might be allowed. “tit we’d like to explore them. We also have, and I mean, 

1 didn’t have the, under the integrity factor, competence, experience and integrity of the proposed -- 

- those who would control the proposed company? One of the three (3) witnesses, we at least, we 

seek to explore a discrepancy between other testimony under oath to Congress and the contents of 

these letters which we think is something we absolutely have a right to gently explore in terms of 

they presented witnesses, they’ve sworn under oath. I’ll introduce, 1 guess, Lee #3, which is a 

transcript of Congressional testimony of Mr. Prince on April 29” to Congress. 

Teichman: Will you provide a copy to counsel? 

Welch: Your Hbnor, if I could make one point, I think the issue here, Mr. Lee’s argument 

missed the point. He wants to talk about cross-selling amongst various Travelers and Citicorp 

subsidiaries. The point that’s been made here, and I thii made vel)- clearly by Ms. Mulholland 

and Mr. Prince and Mr. Michener is that what we’re talking about is one (1) tiny Delaware 

insurance company at the bottom of the chain. It only has three (3) policyholders, and they made 

the point very clearly and very explicitly that they’re not selling policies to the public. nothing’s 

going to change. This is just one little subsidiary that only does a very limited amount of business. 

Now, Your Honor did make the point at the outset, let’s stick to the statutory criteria. I onI); make 

the point that what Mr. Lee’s going into is something that goes far beyond what this little, this 

20 

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Lee: ummhnm 

Prince: That’s on page 3 of Lee Exhibit #3. If you go back to page 2 of Lee Exhibit #3, 

there is a series of questions that Congresswoman Waters asked of Mr. Rhodes, my counterpart at 

Citicorp. And I won’t repeat them all, but the general tenor of them was, “Isn’t it true that you 

sought an informal opinion? He gave yo” informal support? Isn’t it true that he thought it was a 

good idea? And that I’ll be with you all the way. 7” Questions of that sort. And Jack wrote, 

answered, “no.” At that point, Congresswoman Waters turned to me and said, “All right. How 

about Travelers? Were you in the meeting with Mr. Greenspan?” I said, “no.” And she said, 

“And you aren’t privy to any information about his response to the idea about the merger?” 

Continuing the line of questioning, “Was there some kind of a secret or favorable pre-filing 

indication from Chairman Greenspan. 7” And I answered then and I stand by the answer, that I am 

not and was not. 

Lee: No, I appreciate - I mean, it certainly moves along this way. What I asked you 

earlier --- have you seen the Lee Exhibit # 1 and #2? The letters between 

Prince: I have indeed. 

Lee: And, I get the - in paragraph one where it says we appreciate yo”r advice - 

Prince: I’m sorry, where’s paragraph one? 

Lee: Okay. Paragraph one of letter one. 

Welch: It would be helpful if you could identify the date of that. 

Lee: Sure. It is the March 30”’ letter. The - in fact, I mean, again, it may not be the 

formal w-ay - would you be willing to give a similar narrative of yoour understanding of the letters 

and have yo” seen them before and when you w-ere aware of them and - 

Prince: Yes. 

Lee: Well, that would be great. We’ll be veq, you know, as they said, informal. Go 

ahead. Launch into it. 

Prince: I’ll wait, if I may. 

Lee: Sure. You’ll see, it‘s moving - I mean, we’re not, rather than asking a series of 

pointed questions, we’re more than willing to do the same @pe of narrative briefly on these hvo 

and? 

Prince Mr. Lee has asked me about Lee Exhibit #3, which is a March 30, 1998 letter to 

Virgil Maddingly, the general counsel of the Federal Reserve Board. The brief history of this 

document as I recall it is that as a result of a meeting between some of the legal representatives of 

the hvo (2) companies with Mr. Maddingly, this letter was sent to him to confirm many of the 

matters that were discussed in that meeting. IJh, I don’t know if that puts it in a better context for 

you or not. 

Lee: I guess, where the letter says, “we appreciate yo”r advice.” At the - 

Prince: Can you show meLee: Sure. March 30 letter paragraph one. “Thank you for your time and assistance and 

we appreciate your advice.” Were you - 

Prince: I’m sorry. Perhaps I have a different copy than >-0”. 

Lee: No, it’s no problem. 

Prince: Oh, well you skipped two (2) lines. I’m sorry. 

Welch: Well let’s - if wre’re going to have that read into the record, it ought to be 

accurate, that’s all. 

Lee: Okay. ‘Thank you very much for your time and assistance in the conversations we 

had last week. Our objective was to obtain your views on questions important to the proposed 

merger of red and blue,” [which is Travelers and Citicorp] “including the “se of cross-marketing, 

and we appreciate your advice.” Umm, at the time that Travelers’ counsel, Mr. Sweet, &Tote the 

letter to Mr. Maddingly, you were aware that he was writing a letter? This was conveyed? 

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23 
Teichman: AII right. This is a 2-page document, or strike that, a 3-page document tbat at 

this point is merely marked for identification purposes only as Lee Exhibit #3. 

Lee: Okay. Mr. Prince. 

Welch: Your Honor. no objection for pmposcs of the, the articulated purpose for the 

exhibit is to question Mr. Prince on integrity matters, so as 1 said, we don’t have any objection to 

that. Again, the same objection with respect to the fed matters. I think it’s far afield, but on that 

limited issue for limited testimony, we’re not going to object. 

Meiseobeimer: Okay. Proceed. 

Teichman: Tbis is moved then, into evidence? 

Meiscnheimer: Yes, it’s moved. 

Lee: Maybe, the relevance of the copy that you have. Since I don’t want to put anyone 

else’s words in your mouth, but I guess, as to this one, from question - oh, Ms. Waters, from 

where Congressman Waters asked you whether you were privy to advice from - she said, the term 

of the report. I don’t know if you want to - actually, I no longer have my copy - 

Prince: I’m sorry, is there a question? 

Lee: There is a question. 

Prince: Okay. What is it, please? 

Lee: The question is, is it true that in Congress on April 29, 1998, io response to a 

question whether you were privy to advice prior to announcing a merger from Chairmao Greenspan 

on the Federal Reserve Board tbat you said ‘ho.” 

Prince I’m going to ask you to restate that question. I’m trying to understand. 

Lee: Sure. Is it true that in response to a question from Congresswoman Waters whether 

you were privy to advice given by the chairman of the Federal Reserve Board as to the 

permissibility of the merger, that you answered “no.” 

Prince: Are you asking me to restate or recharacterize what you‘ve introduced as Lee 

Exhibit #3? 

Welch: Your Honor, let me object for a moment. I have a little trouble following the 

question. I tbiok it’s a little confusing. 

Lee: I would have been happy to read it out. You know, I can read it out. 

Welch: To the extent, Mr. Hearing Examiner, that there’s some testimony that he wants to 

idcntifs-, the gentleman wants to identify, and ask Mr. Prince if he stands behind it, I have no 

problem with that. My suggestion would be to identify the question and simply ask him what his 

position is on that testimony. If he could be just a little clearer. I don’t follow - 

Meisenheimer: We’re having trouble understanding If you could, you know, redirect? 

Lee: Sure. Have you had a chance to review Lee Exhibit #3? 

Prince: I have. 

Lee: And, and the statement transcribed is yours? You stand behind? 

Prince: They are correct 

Lee: Okay. In Lee Exhibit #I, umm, and you object? The statements basically say that 

you were not privy to advice from Chairman Greenspan of the Federal Reserve Board. 

Prince: Since you’ve asked it four (4) times, should I simply give you a sense of what 

happened at the hearing? 

Let: Sure, go ahead. 

Prince: I’m glad you were there. 

Lee: What? 

Prince: You’re focusing on a question which is on page 3 of what you’ve handed me. And 

the question is, Representative Waters and you aren’t priq- to any information about his [referring 

to Mr. Greenspan] response to the idea about tbc merger bchveen you and Citicorp. And my 

answr to that question was: “1 am not.” That’s tbe question you are referring to, I believe. 

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22 
analysis. So I would say in that sense, he did not provide us any advice 

Lee: Now this will get more into financial. The same paragraph, the same paragraph 

where it says - second up Tom the bottom on page 4 of the March 30 letter where it states, “in 

light of the advice we have provided to our clients” [meaning Travelers and Citicorp] “‘they are 

comfortable proceeding with the transaction, provided you are not uncomfortable with the type of 

practices outlined above.” Is it your - okay. Would it be fair to say that unless the practices 

outlined in the letter of cross-selling were not viewed unfavorably by the Board that the merger 

would not have been announced and would not take place? 

Prince: I think there are about 12 ‘hots” in that. I can’t follow it. I’m sorry 

Lee: okay. 

Welch: The -imess has made the objection for me, I guess. I would also note that the 

question made some assumptions extemporaneously about what was intended in the letter. He 

jumped from a quote into an interpretation of the quote. But in any event, if we could have - 

Lee: Sure, no problem. What practice - when, when. What practices - described in this 

letter that you say that you’ve seen, would need to be done in order for Travelers and Citicorp to 

even have announced the combination, as the letter says? 

Welch: Respectfi~lly, Your Honor, same objection with the question. 

Lee: What is the lett - What is the statement, what does the statement mean when it says, 

“the merger will only be announced if certain practices are not viewed unfavorably by the Board”? 

Prince: Let me - 

Lee: This goes directly to the financial, because the merger was announced, and yet the 

letter implies that if certain cross-selling were not permissible, the merger would not have been 

announced. And now it’s being presented that those practices are actually up in the air and may 

not be permissible at all. In which case the rationale of the merger falls apart and the strength of 

the applicant is not there. By their oun admi - by the own admission of the letter. This goes back 

to why I’m pursuing this. 

Welch: Your Honor, I guess I would only say that that sounds like a piece of the question 

and a good bit of argument. I had objected when that argument was made. My only suggestion 

would be that if we’re going to have questions, let‘s have questions. If we’re going to have 

argument, we‘ll do that, too. But, if we could just have a clear question, we’d be fine with that. 

Travelers has no problem with that. 

Lee: You testified that you were involved in the negotiation of the contract 

Prince: Yes. 

Lee: In light of this letter, if during the hw-year waiver period, no cross-selling could 

occur, no sharing of data could occur between Travelers and Citicorp, would the combination have 

nonetheless been done? 

Prince: I’m not sure I understand the line of your questions, but perhaps I could just 

respond for a moment and see if we - 

Lee: Sure, I have no objection. 

Prince: I think that it is not correct, your presumption that the possibilities of crossmarketing are in danger or in question. I don’t understand that to be the case at all. Crossmarketing is extremely important to us and it’s an important part of this transaction. I would point 

out, if I may, that Citicorp Assurance won’t be involved in cross-marketing at all. There is no 

marketing to the public now, there \\ill be no marketing to the public in the future. Now, I don’t 

know if that moves the ball along or not. Is there a question that I didn’t answer that’s in there 

somewhere? 

Lee: Sure. Yes. If this letter which you say you’re aware of - I guess we’ll go back, 

we’ll go back - 

Prince: I’m still aware of the letter. 

25 

25 
Prince: I was aware that he was writing a letter. That is correct. 

Lee: The meeting referred to with Mr. Maddingly, did you attend it? 

Prince: I did. 

Lee: Presumably, Chairman Greenspan did not attend the meeting. 

Prince: That’s a gocd presumption. 

Lee: In the meeting, in the meeting that Mr. Rhodes did attend with Citicorp, is it your 

understanding that in the meeting that Mr. Rhodes did attend with Chairman Greenspao, that an 

indication was given to meet with Mr. Maddingly to, in fact, receive this advice prior to 

announcing the merger? 

Prince: I am not aware of that. 

Lee: Is, is, is, on page 4 of the March 30 letter - 

Prince: Yes? 

Lee Paragraph, second paragraph up from the bottom - “In light of the advice we have 

provided our client, they arc comfortable with proceeding with the transaction, provided you arc 

not uncomfortable with the tqpe of practices outlined above. While we do not ask for a written 

response or presentation to the Board or that the Board address this issue in its order, acting upon 

the application, we ask that you advise us if you disagree mith the approach analysis taken above. 

We will call you Tuesday evening.” How - 

Welch: Actually, that’s inaccurate, it says - 

Lee Okay. I’m sorry, I jumped over two (2) words 

Welch: I think you did. ‘We ask that you adv-ise us if you disagree sith the approach and 

analysis we have outlined in this letter.” 

Lee: “This is a very important issue for our client in order to maintain the proposed 

schedule. We propose to call you Tuesday evening.” How do you - I guess, how do - is it your 

position that the testimony to Congress, because Congresswoman Waters stated - asked whether 

advice had been received from Chai- Greenspan and a response “no” without qualifying that, 

that Chairman Greenspan’s lawyer had in fact provided advice was an accurate and forthright 

response? 

Welch: I think I’ll enter an objection to the question -- 

Lee: Goahead Sure. 

Welch: -- as being virtually incomprehensible. 

Lee: okay. 

Welch: Subject to that objection, if the \\;ttness understands it. 

Prince: I’m sorry, I do not understand it. 

Lee: Sure, okay. 

Meiseoheimer: Mr. Lee, I’m failing to see where this is going. Would you tr): to wrap it 

up and get to the point as scan as possible? 

Lee: Sure. 

Meisenheimer: I mean, I’m having a problem follo\xing you myself 

Lee: okay. 

Meisenheimer: Okay? So if you would continue and try to wrap it up, and then we’ll go 

to some other questions. We have hvo other people we’ll do. 

Lee: Sure. Is, is, is it - would you characterize the March 30 - March 3 I letter as, as 

involving advice received from the general counsel of the Federal Reserve Board? 

Prince: I don’t think so. I think that the - what we went in to see, oh, Mr. Madding11 

about, was to present our proposed transaction and to describe various aspects of it and to describe 

the legal analysis that we had and that our outside attomcys had given us about the transaction. He 

said he could not approve the transaction. He’s obviously not a member of the Board of 

Governors. And he didn’t express any approval or disapproval of our transaction or the legal 

24 

21 
Lee: And no indication was given? 

Prince: Not that I recall. 

gee The first letter says, “we want to know what you think” and the second lctten says, 

“thank you for the assistance.” But nothing was said as to what the person thought? 

Welch: Your Honor, 1‘11 object to that as an inaccurate characterization of those letters. 

The letters obviously say what they say, and I don’t think the examiner can summarize them in one 

or two statements and then use that as a predicate for the witness’s - to come up with an answer. 

Subject to that, if the witness understands the question subject to my objection, as far as I’m 

concerned, he can answer, Your Honor. 

Prince: Well again, I’m not sure I understand the question, but let me try to see if we can 

move the ball forward. As I said before, the meeting of the communication to Mr. Maddingly was 

to present the transaction and to present our legal analysis. That is, in the course of that 

discussion, including these letters, Mr. Maddingly neither approved nor disapproved of the legal 

analysis that we brought to the transaction. I think that we where comforted in our own minds by 

the fact that we had not received either an approval or a disapproval of our legal analysis. We 

went into the transaction believing that we understood correctly the legal issues involved. We 

received good advice. We came out of these discussions believing that. We had exactly the same 

view of the world before and after. 

Lee: Are these type of contacts with regulatory agencies something that you would do now 

that an application is pending? 

Welch: Your Honor, that‘s one I think I do have to object to on the same grounds. Now 

we go beyond the fed, now we’re getting into other regulatory agencies. This has nothing to do 

with Delaware and this little insurance subsidiary that sits down in the far corner of this chart 

which only has three (3) policyholders which only insures affiliates and which doesn’t sell to the 

public and whose policies and plans are not going to change. I think we are way beyond - now 

he’s getting into other things even beyond the fed. I think we are too far afield, sir. 

Lee: I object. In a way, we’re trying to develop what till be on the record and then the 

Commissioner can make her decision. But a-e would ask the question and you’ll answer it. You’ll 

see whether a company that takes the position that a question about communications with the 

Federal Reserve Board chairman can be said “no” when the chairman’s la\\yer giving the advice 

from our perspective. And that’s what we’re trying to put in. Umm, that that that when there’s a 

series of letters and clearly communications between the two (2) that will say, all the person said is 

“thank you for the letter”. We don’t think it’s credible. We don’t think that that’s - and it’s, it’s - 

that that that, to focus on the size of what the - on the size of the company to be bought, and not 

the, the ongoing credibility and integriv of the applicants. We thii it goes in there. And the 

Commissioner can make her decision on the tape of how she thinks. Then the documents are in 

there and they can be compared. Again, I mean, that’s what I‘m say -that’s why we’re getting it 

into the record. She can then make - she can then make her decision on it. Also. there are other 

questions. 

Meisenheimer: Well, I’m going to allow you seven (7) more minutes to continue this 

questioning on this, and then we’re going to another area because I’m having problems following 

you. I’m sorry, but I am. 

Lee: okay. 

Meisenheimer: Okay? 

Lee: No, no, no. But I also, I mean, I’m doing it as it is - okay. Seven (7) minutes. The 

- to your knowledge, were there communications with the fed - with uh, the Federal Reserve Board 

or its senior staff prior to March 30”‘~ 

Prince: Well, the March 30 letter I believe came out of our meeting with Mr. Maddingly, 

so I would have to say yes. 

21 

27 
Lee: sure. Yes. 

Prince: Every time you ask it, I’m still aware of the letter. 

Lee: Between the proposal to share data between Travelers Insurance Underwriting and 

the banks, were that - what would be the financial impact on the proposed CitiGroup if that were 

in fact not permitted 

Prince: 1 don‘t know. 

Lee: Given that the letter implies that the deal would not - that the proposed merger would 

not have even been announced unless these things were permissible. You don’t - you have no idea 

what the impact of that would be? 

Welch: Your Honor, 1’11 object to that, to the - 

Lee: What - he doesn’t know? 1 mean. Okay. Go ahead. 

Welch: If I could give my objection that might be helpful. Your Honor, 1’11 just object to 

the question as argumentative and as including an improper premise in the sense that it purports to 

be predicated on some invitation that Mr. Lee sees as beiig involved with the letter. I think you 

can ask him about what the letter says, he could ask him about what the letter doesn’t say, but 1 

don’t think he can predicate his question. Again, we’re talking about letters to the fed, now, that’s 

pretty far afield. But 1 don’t think he can predicate his question on his assumption about what it 

means, that’s all. 1 object to the question on that basis and request that it be rephrased 1 would 

also comment that age without being tedious, Your Honor, 1 don’t mean to be, but the fact is we 

are pretty far afield. 

Meisenbeimer: If we don’t get moving along here with direct questions, and then if there’s 

going to be an argument or summation, I‘d like for you to do it at the end of this question. 

Lee: Yes, sir. 

Meisenheimer: You still have the right to object to the questions, but if we get into 

argumentative statements, then we’re going to be here all day. So I’d like you to keep your 

questions as direct as you could, rather than speculative. 

Lee: Sure. 

Meisenheimer: Okay? 

Lee: Sure. The - torning to the second letter, March 3 I. The second letter, the second 

letter references - says - the first letter says we will call you Tuesday evening. The second letter is 

dated a Tuesday and says, ‘Thank you for your assistance.” Were you a pa@ to the tel -to the 

telephone conversation referenced in the letter? 

Prince: I was not. 

Lee: Was the, was the substance of the conversation rela - relayed to you? 

Prince: It was. 

Lee: What was relayed to you? By whom? 

Prince: By counsel. 

Lee: What was relayed to you? 

Welch: Your Honor, I’ll object to the attorney/client ad%e that that question might raise 

and conceivably dces. Subject to that, the witness can answer. 

Lee: Not what advice were you given, but what - to the degree that you seem to have been 

willing to address these communications with - communications with the Federal Reserve Board, 

going to the likelihood of the approval of these practices, what would - what communication of 

Mr. Maddingly was conveyed to you? 

Prince: I’m not sure I understand to the extent I’m willing to address these as part of your 

question. My recollection these many months later of the brief telephone call 1 received was that 

Mr. Maddingly had received the letter and had thanked us for sending it in. 

Teichman: Sir, 1 need to interrupt for a minute. Can you keep your voice up so that - 

you’re starting to fade. Just keep your voice up. 

26 

26 

Lee: Do you remember the date of that meeting? 

Prince: I do not. 

Lee: Other than that then, what then - the one meeting with Mr. Maddingly referenced in 

the letter - are you aware of other contacts behvccn Travelers and the Federal Reserve Board in 

connection &h this? 

Prince: Are we talking about the meeting with Mr. Greenspan that I did not attend? I 

don’t recall the date of that, so I don’t know whether it was before or after this one. Those are the 

only two (2) meetings that I know about. 

Lee: Are you aware - will you be surprised if, under the Freedom of Information Act, we 

have, we had received a fax from Skadden Arps outside counsel to Travelers to the fed dated 

March 24? 

Prince: The question is would I be surprised at that? 

Lee: Yes. 

Prince: No. 

Lee: Would you - do you have any idea what that communication involved’? 

Prince: No. 

Lee: Are you aware of an> communica - any further communications behvecn Travelers 

or Citicorp to the degree you‘re aware of them, and the Federal Reserve Board or its senior staff 

from March 30” - between March 3 I” - from March 3 1” forward’? 

Prince: After the date of these two letters? 

Lee: Yes. 

Prince: I’m not aware of any. That doesn’t mean that they didn’t happen. I wasn’t 

directly involved in that process, but I‘m not aware of any. 

Lee: Can you describe the process between the March 3 1” confidence that your legal 

analysis, as you say, your legal analysis was not, wasn’t unfavorable to the fed, and the actual 

announcement of the proposal? Of the proposed merger? 

Welch: Your Honor, could we have that question read back? Or I’m sorry, I guess we 

can’t because there’s no reporter. But if that could be rephrased - ho pieces didn’t seem to fit 

together. 

Meisenheimer: Would you rephrase your question’? 

Lee: Sure. Is it your - 1’11 change the question. Better yet. Is it your understanding that 

the March - subsequent to March 3 I and prior to April 5’ when the merger agreement was signed, 

there were no further communications with the Federal Reserve Board? 

Prince: Well I thii I’ve just answered that question. 

Lee: Okay. 

Prince: Do you want me to restate the answer? 

Lee: No, no. No, no. It‘s your understanding that you’re not aware of them? 

Prince: That’s correct. 

Lee: Are you aware - since the applicat - since an application has been filed \tith the 

Federal Reserve Board, are you aware of, other than written submissions sent to the parties. 

communications with the Federal Reserve Board? 

Prince: I - there have been a couple of meetings with a large group of staff of the Federal 

Reserve Board to go over a variety of matters that I have attended I can recall hvo (2) of those. I 

believe those have both been summarized in notes. But other than those hvo, I’m not aware of any. 

Teichman: Mr. Prince, please keep your voice up. 

Prince: I said I‘m aware of two (2) meetings with a large group of staff with the Federal 

Reserve Board to go over a variety of matters. I believe that those hvo (2) meetings have been 

summarized in minutes. I‘m not aware of other communications. That doesn’t mean there haven’t 

been any. I’m not directly involved in that process. But I’m not aware of any. 

28 

28 
Prince: 1 am. And I’m also aware of our strong, unequivocal denial of the facts in that 

allegation. 

Lee And is it your understanding that the facts in that allegation involve not otdy 

discrimination in mortgage interest rates, but also insurance issues? Credit insurance? 

Welch: It strikes me, Your Honor, that the question is objectionable on the grounds that 

the examiner referred to the facts in that case. Mr. Prince has pointed out that the allegations in 

that case are something which Travelers denies. 1’11 object to that characterization to the extent 

that he wants to ask him about what he thinks the facts are, which he’s already done. The 

allegations have been denied where the thing stands. He can ask about that. The question was 

improper. 

Lee: No, we‘re asking actually about his awareness. I mean, we don’t object to putting it 

in that they disagree 

Prince: Thank you. 

Lee: Mr. Michener, as -- in your position as Travelers Insurance - Travelers Property & 

Casualty, both the National Fair Housing Alliance filing with HUD and the Han-is filing with 

HUD, arc you aware of both of them or one or the other? 

Michener: I am not aware of the Harris filing, I am aware of the National Fair Housing 

filing, and I agree with Mr. Prince’s comment on it. And the only other thing I would add is that 

the same time and the same day or two, filings were made against a number of other insurers, so I 

don’t believe that the filing-the alleged, the allegations in those complaints are really directed at 

Travelers, they’re directed at the insurance industr). 

Lee: Actually, I don’t want to - Rashmi? 

Rangan: Yeah Actually, in this matter that is here today - 

Teichman: Ms. Rangan, just go ahead for the record and state who you are. 

Rangan: Okay, my name is Rashmi Rangan. And Ms. Mary Harris, who I worked Gth 

last year to help her file her complaint with HUD, is here today and later on, time permitting, she 

will testifj. Back to some line of questioning that Mr. Lee \vzs conducting, I think my personal 

biggest concerns and fears are the - goes back down - 

Meisenheimer: Excuse me, but you’re making the statement, and we’re asking questions. 

Rangan: Okay. I will ask questions. On 29ti of March, you stated that you did not 

receive or to the effect that you did not receive counsel from Greenspan or anybody else in his 

office. On May 30” - March 30’, you requested categorically stating that unless cross-marketing 

opportunities were permitted, the merger would not move forward because it is not beneficial to the 

clients. You asked in that question - letter, clearly that if we do not hear from you, we will assume 

that our presumption is clear. Is that correct? 

Welch: I‘ll object to that, Your Honor, on the grounds that 1 think it isn’t a question, it’s a 

series of perhaps four (4) or five (5) questions beyond which it also includes, I think, the 

examiner’s perhaps argumentative point of view with respect to what she thinks the letters mean 

and the letters say or what was done. It might be better if w had one (1) question at a time asking 

about specific events, specific situations, so the witnesses can answer it and we can move on. A 

long diatribe like that followed with a question, “Is that right?” that’s a tough one for any witness 

to handle, and so I object to that. 

Meisenheimer: Excuse me. We’re going to recess at this point and we’ll be back. 

Teichman: I‘m sorry. We’re back on the record. I apologize for that. 

Welch: Your Honor, I would simply make the point that number one, our witness doesn’t 

have any problem with testi@ng about anything that’s relevant to these Form A standards. It’s not 

a problem in any respect. However, if you look at this article, Matthew Lee, Executive Director of 

theLee: That’s not what - 

30 

30 
Lee: I’m actually going to - I am going to - excuse me, Your Honor. Go ahead. 

[pause1 

Lee: I’m going to turn - Ms. Rangan said that of the 7 minutes, 3 minutes remain. 

Teichman: We’re going to go off the record for just a minute. 

Teichman: We’re back on. 

Lee: Reserving those 3 minutes, moving to another area You had testified under Mr. - in 

response to Mr. Welch’s question about the two (2) banks owned by Travelers. 

Prince: Yes. 

Lee: Travelers Bank & Trust FSB, Travelers Bank USA. 

Prince: Still those two (2). 

Lee: In terms of the, the, the uh compliance which was raised on, on, on direct, “mm, do 

you recall in 1997 a finding by the New York Banking Department that commercial credit and 

subsidiaries were not compl+g with the Home Owners Disclosure Act in New York state? 

Prince: 1 don’t remember a fmding by the New York Banking Department. I remember 

you raising the issue. And I don’t believe Citicorp has anything to do with those two (2) 

companies. So it may be that the New York Banking Department found something, I don’t recall 

it. I remember the issue coming up. 

Lee: DoyouMeiscnheimer: Mr. Lee, would you tell me - 

Lee: What the relevancy is? Compliance. They raised on their - they, they, they put into 

the record that that, that the applicant, Travelers Group, has a compliance program and a 

compliance culture, has never had a license removed, so I have a series of a few - it’s a few, it’s a 

few questions that we think are inconsistent with that. 

Sullivan: That was the testimony - 

Teichman: Sir, let me intermpt yo”. You made a couple comments - who are you, sir? 

Sullivan: My name is Bob Sullivan, from Skadden Arps representing Travelers. 

Teichman: Thanks. 

Sullivan: I think the hearing testimony of Mr. Michener reflects that the question asked by 

Mr. Welch was, “Has any Travelers Insurance subsidiary license been suspended or revoked?” 

Not as Mr. Lee has just characterized as any license by Travelers Group or its subsidiaries. 

Lee That wasn’t the question. There was a question, I think, to Mr. Prince about the 

banking subsidiaries of Travelers. 1 guess, identify - we have to presume that what you asked, that 

what you put in you believed was relevant. So we ask questions about it. 

Sullivan: Yes, but the question went to - 

Lee: Right. 

Sullivan: -- Mr. Michener that yo” referred to was, “Did any license of any of the 

Travelers Insurance subsidiaries, have they ever been suspended or revoked?” 

Lee: Right. 

Sullivan: The answer is no. 

Lee: Right, no, no, I did remember that. 

Sullivan: Just for clarification. 

Lee: Mr. Prince, are you aware of a fili”g for insurance redlining by the National Fair 

Housing Alliance with HUD concerning Travelers Insurance? 

Prince: I am, and I’m aware of our strong, ““equivocal denial of it. 

Lee: Are you aware of the status of it? 

Prince: I believe it‘s not moved since the”. I believe it was filed, we answered it, and I 

don’t believe HUD has taken any action on it since. 

Lee: Are you aware of a racial discrimination filing \\ith HUD by Mary Harris concerning 

Commercial Credit in the State of Delaware? 

29 

29 
Mcisenheimer: Mr. Lee, that is an assumption. I want you to move on. 

Teichman: And before you do that, Mr. Prince, can I ask you to move the seat closer to 

the microphone? 

Prince: Sure. 

T&&man: Your voice tends to trail off. 

Lee: More substantively on that point, as it goes to whether or not the proposed C&Group 

will be - will, will, will in fact be allowed to cross-market during the two (2) year divestiture 

period or further, is it your understanding that the four (4) in - in Exhibit #I, the March 30 letter, 

the four (4) numbered points combining and bundling products behveen Citibank and - Citicorp 

and Travelers, doing relationship pricing, tying the pricing of insurance products to a banking 

relationship, sharing the databases of the insurance company, including health insurers and the 

banks, and finally providing a single consolidated bill behwen banks and insurance companies. Is 

it your understanding that the Federal Reserve Board - that. that general counsel Maddingly has 

stated that those practices are consistent with, with not having an unfair competitive advantage and 

being able to divest the business. 

Welch: Let me object - 

Lee: That’s - it may be long, I don’t think it’s unclear. 

Welch: Your Honor, a couple of points. Number one, it is extraordinarily long. Number 

hvo, more importantly, he’s injected four (4) nevv issues relating to cross-selling by insurance 

subsidiaries and banking subsidiaries other than Citicorp Assurance. Again, the proceeding here is 

Citicorp Assurance. Citicorp Assurance doesn’t sell to the public, it’s only got four (4) -three (3) 

customers, rather, it doesn’t intend to sell to the public. Nothing’s going to change. He’s taIking 

about a whole series of different companies that have nothing to do with this transaction. With 

apologies, Your Honor, I feel compelled to point that out and to make that objection. Now, if the 

witness understands the question, and he can add something - as far as I’m concerned he may 

answer. But the line of testimony is just way far afield. 

Meisenheimer: One question, go ahead. But you’ve got to get to the point. 

Lee: I‘ll say this now, in, in the nature of it - given, and I don’t know if, if we’d submitted 

this letter earlier, that’s why I don’t want to go on. The key quote from this letter, we End, is - and 

this is why it goes to the financial strengths of the proposed acquirer - is this. From page 4 of the 

March 30 letter, second to the last paragraph. “In light of the advice we have provided to our 

clients” [i.e. Travelers and Citicorp] “they are comfortable proceeding with the transaction 

provided that you are not uncomfortable with the type of practices outlined above.” From that we 

infer that the CitiGroup combination, wbici~ will be the proposed acquirer and controller, Citicorp 

Assurance, is dependent on being able to do these practices. That’s why they’re relevant. It goes 

to the prospective Iinancial strength of the acquirer. And that’s why - the letter says it, the letter 

says wc are comfortable combining the ho (2) companies, which is what this application is all 

about, only if these practices will be permitted. And I named the four (4) that’s why it was a 

lengthy question. The practices being the sharing of data between insurance companies and banks, 

the bundle - the tying of pricing between insurance companies and banks, -- the point is not 

whether or not Citicorp Assurance is going to tie its practices, although it could. It may only be a 

captive insured now, but it’s chartered to do a full line of P & C and can at any time. And there’s 

no representation in the record that they will not immediately after, after - if there were an 

approval, being doing so. So it seems a fair thing to explore at this time. But I - I honestly - I 

believe that in light of the sentence which is not - you know, it’s not - it’s from senior outside 

counsel to the Travelers Group stating to the Federal Reserve Board they are comfortable 

proceeding with the transaction, i.e. merging Citicorp and Travelers. This letter is witten before 

the deal was even announced. If you, the Federal Reserve Board, are not uncomfortable with four 

(4) sets of things. And so we’re exploring whether in fact they-‘ve been given any assurance of 

32 

32 
Welch: If 1 could tinish my objection if it’s all right, sir. Is using every means possible to 

derail the Citicorp Travelen Group merger. Mr. Lee asked the Federal Reserve Board to fill out 

the application. Uh, if the fed refuses, Mr. Lee has asked several other regulators to recuse 

themselves. It’s thematic that Mr. Lee’s opposition to this transaction and perhaps a whole lot of 

other merger transactions, I don’t know. Our witness will answer any questions Your Honor thinks 

are appropriate, but I don’t see that this is substantive evidence of anything. I don’t think it’ll 

come in as substantive evidence. Subject to that, we don’t have any problem with the wimess 

answering any questions. 

Meiseoheimer: Mr. Lee, would you explain? 

Lee: Sure. I mean, I guess it almost goes directly to - in the earlier testimony, I asked Mr. 

Prince what was his understanding was said in the telephone conversation between Mr. Maddingly 

and Travelers counsel between the March 30” and March 3 I” letter. As I recollected, Mr. Prince 

said all that was said was, “thank you.” He thanked them for the letter. And this article reported 

by a respected banking trade paper on page 3, full paragraph 3, says, “during that call, Mr. 

Maddingly said, he told the lawyers the cross-selling plans should not interfere with the divestiture 

requirements or give the company an unfair competitive advantage.” Which is quite different than 

“Thank you for the letter.” And that’s what Mr. Maddingly said. Unless there’s some idea that 

Barbara Reem, 12-year banking reporter, made up the quote from Mr. Maddingly, either Mr. 

Prince - they’re inconsistent. Does Mr. Prince stand by 

Meisenheimer: I’ll mark that as an exhibit and then 1’11 let you start with your questions. 

Lee: Okay. In fact I’ve even asked the question. And now I’ll ask it again Mr. Prince, if 

I recollect this morning before the break when I asked what was said in the teiephone conversation 

behveen the March 30 and March 31” letter, Exhibits I and 2, you said that what wzas said v.as, 

“thank you for the letter.” In Exhibit #4 just introduced, full paragraph 3 on the third page, it is an 

article by Barbara Reem of the American Banker, it states during that call, Mr. Maddingly said he 

told the lawyers that cross-selling plans should not interfere with the divestiture requirements or 

give the company and unfair competitive advantage. Is it still your position that what was said in 

the call was, “thank you for the letter”? 

Prince: What I testified to this morning wils what the lawyers told me. And I stand by that 

testimony. What you’re pointing to is a comment that supposedly Mr. Maddiogly told the la\Fers. 

You’re missing the middle part of that. You’re missing the middle part of that. Now, I have heard 

our la\\>-ers tell us that it’s very important, coming to your point on Maddingly’s comment there, 

that our cross-marketing plans ought not - we must make sure they do not interfere with the ability 

to divest the insurance companies. If that quote is accurate, then that may be where that came 

from. 

Lee: But it remains your testimony that you’re aware of both letters and that what was 

conveyed to you after the communication that followed the March 30 letter, all that was conveyed 

to you was, “thank you for the letter.” And on that basis, the merger went forward. 

Prince: I‘m not sure how to answer that question. I stand by my testimony this morning. 

Is there a different question that I’ve missed? 

Lee: You stand by - you also stand by the testimony that that was the last communication 

you are aware of with the fed and folIo\*ing that, the merger was announced? 

Prince: If I can, make sure you recall I said I wasn’t personally aware of any other 

communications. There may have been some. You remember I said that? But I’m not personally 

aware of any others. 

Lee: You also testified that you were involved in negotiating the agreement presumably in 

reaching the final agreement. 

Prince: Indeed I was. 

Lee: So it noold bc reasonable to assume that if there were - 

31 

31 
that, tit _ tit this is central in any way. The Form A is informationally incomplete. Provides a 

mpemcial analysis aad is incorrect. We dispute whether they would be able to bold it for five (5) 

years and we tbi& that goes to the financial strength of the company. We were hoping to receive - 

the problm is that we received answers - this is why we asked for discovery - we t’@zeived 

answers that have been, I never knew we were going to cross-marketing from the head of 

insum=. We’ve received answers where we didn’t - 1 don’t know - I’m not saying you’re not, I 

maMeisenheimer: Mr. Lee, what you’re doing is making an argument here. You’re going to 

have a time to give your testimony, and that’s what I would like to move on towards. 

gee: I guess that I was noting that we object that it would have been more useful to us to 

have the actual - as you noticed in our first question after the break, what was said by - 

Teicbman: I think, Mr. Lee, the Hearing Officer has made a ruling with respect to your - 

Lee: Okay - we thoroughly object that neither of - 

Teichman: Mr. Lee-there will be ample opportunity - Mr. Lee -- 

Lee: --that neither author of the two (2) letters, Swede and Sahel, were here, because no 

one else can answer what was said, apparently. 

Teichman: Mr. Lee. Everybody will have an ample opportunity to make arguments to the 

JIearing Officer when the testimony is complete, when all the evidence is received. Once the 

Hearing Officer makes a ruling, and he tells you tbat be wants to move on, that means that he 

needs to move on. 

Rangan I have a few questions and anyone can actually answer. But to begin with, how 

many of you are here today? 

Meisenheimer: What‘s the relevance of that’? 

Rangan: How many of your legal counsel is here to defend against two (2) community 

activists? It‘s a question that I’m quite interested in knowing what are we pitted agains< how long 

is the If you don’t wish to answer, that’s fine. 

Welch: The only person speaking on that today, Your Honor, as far as I’m concerned, is 

me. I’ve made the objections that 1 think are appropriate, and by and large, I think we’ve had the 

witnesses answer questions, and I fail to see the relevance of doing a head count on whose in the 

room. 

Meisenheimer: We have the register of attendees here, which \-ou’re perfectly welcome to 

have a copy of 

Lee: Great. 

Rangan: &SO another question. Was Citibank Assurance Corporafion chartered to and is 

empowered to other property and casualty insurance, including to the general public in Delaware? 

Prince: I’m sorry, I didn’t hear the first part of your question. 

Rangan. Okay. Was Citibank Assurance chartered to and is it empowered to other 

property and casualty insurance, including to the general public in Delaware? 

Prince: I don’t know the answer to that. I assume it‘s a matter of public record. 

???: I would suggest that Ms. Mulholland answ-er that question. 

Mulholland: Yes, and the answer to the question is yes. 

Rangan: Thank you. It has also been stated time and time again that Citicorp Assurance 

Company basically does only captive insurance. Evhibit #4 of E.xhibit #I states “Citicorp 

Assurance Company has directly written 901,000 policies and has .898% of the market share.” I 

just need some clarification and explanation. 

Mulholland: Perhaps I can clarify that. That is - 

Teichman: MS. Mulholland, could 1 get you to come around so that we can get you on 

tape? 

hlulholland: In answer to your question, the 90 I is dollars and the - that is the contractual 

34 

34 
being able to do the four (4) things Because in fact if they haven’t, the tinancial strength of the 

proposed acquirer is in question and needs to bc further examined. If they admit it sure, that’s then 

- well it’s inconsistent with the prior testimony but at least it’ll show something. 

Welch: Your Honor, it’s a lot of argument. It’s a lot of rhetoric. I think what it really 

does is highlight the first sentence of this kzter that Mr. Lee puts in. Matthew Lee, this will make 

an argument, Executive Director of Inner City Press, is using every means possible to derail the 

Citicorp merger. This stuff has nothing to do with this Delaware proceeding. Now you’ve got a 

company like Travelers, multi multi-billion dollar sitoation, assets, the whole thing. It’s as strong 

of a financial vehicle as you can imagine. Sure, cross-selling, it’s got some-there’s some 

opportunities to it. The fed can do what the fed is going to do. Nevertheless, the theme here, the 

key theme is Matthew Lee is going to use every means possible as his exhibit points out to try to 

derail this thing. Subject to that objection, I do fmd no objection as far as I‘m concerned and the 

witness can answer. 

Lee: We don’t dispute that we object The facts that we are opposing in other forums 

have - doesn’t make the question less relevant or not. It goes directly - their own letter to the fzd, 

unless the letter to the fed wasn’t true. It says they feel comfortable going forward provided you 

are not uncomfortable with those practices. It is a totally fair inference to say if you’re not allowed 

to do the four (4) things, they are not comforrnble Gth the transaction and they wouldn‘t do the 

transaction. 

Meisenheimer: Do you have any other questions? 

Lee: No, I, the question - I, it‘s still - it remains up in the air. He said you don’t object to 

him answering - I can rephrase it, I can ask it - 

Prince: We don’t. 

Lee: Okay. 

Welch: As far as, Your Honor - 

Meiseoheimer: Let’s wrap this up. 

Prince: I thought I heard four (4) questions in there. First, I would disagree with your 

characterization of the four (4) points, but they are what they are in the letter. You asked whether 

or not not being able to do cross-marketing would somehow implicate the financial strength of the 

company. I think that was the basis of your question. I think as we’ve gone through and looking 

at some of the exhibits of the financial size and strength of the company, cross-marketing is an 

abilit) for the company to do more. But the notion that if we were not permitted to do crossmarketing, that somehow the financial strength of our company would be called into question, is I 

think with respect, silly. Just silly. Another question you asked was whether or not, when we said 

in the letter we were comfortable proceeding, provided you, and you said, meaning the Federal 

Reserve Board.” That’s wong. This is not addressed to the Federal Reserve Board, it’s addressed 

to Virgil Maddingly. The fourth question I heard in there was had we received any assurance on 

the cross-marketing? And the answer to that is no. I don’t know if there are any other questions in 

there, but those are the four (4) I heard. 

Lee: I guess what I - what - given what the letter says, that the two (2) companies are 

only comfortable proceeding with the transaction of the proposed merger if the general counsel of 

the Federal Reserve Board, chief legal officer that advises the Board on the permissibility of 

activities, is not uncomfortable with it, it doesn’t-we believe that the application-do you -you 

were involved in preparing the Form A, as you said earlier. 

Meiscnheimer: Mr. Lee, I want you to wap this up. I just - please wrap it up. Because 

you’ve read that paragraph about six (6) times now. And I thii it’s time to make your point. You 

ask your question, you get your answer, and we move on to something else. 

Lee: I guess. you know - if you want to know what the point is, the point is this is not in 

the app with the Form A. The Form A describes the overall merger without stating that this is - 

33 

33 
Michener: My testimony, and I think the testimony of others is that we have no current 

plans to change the operations of the company. 

Lee: But there is, there is also no - the company could do it. There is no commitment 

being made in the record to the Department that that will not take place 

Michener: I can’t testify to what could happen. I can only tell you what the facts are. 

The facts are that we have no current plans to change the operations of the company. 

Lee: Exactly. I’m asking not what the plan is, but whether any representations arc made. 

Number two, is - and is, is, are you representing that, that, there - that, is Travelers committing 

into the record that if it were allowed to acquire Citicorp Assurauce that Citicorp Assurance would 

not be merged into a Travelers insurance company for any committed-to length of time? Two (2), 

five (j), or is it simply, are you - is that a commitment that is being made or is it simply a 

statement that there is no plan at this time? 

Welch: That’s about four (4) questions - 

Meisenheimer: Stop. 

Welch: Sorry, Your Honor, but subject to that, if the witness understands and wants to 

answer the question, I have no objection. 

Michener: We have no plans to merge the company in with any other companies if- I just 

know from my general experience in the insurance business if plans such as that were developed, 

we would have to go through a process similar to this in the future. It would require regulatory 

approval and would have to go through that process. 

Lee: Does that apply to the, to the first question about v,titing property/casualty directly 

to the public? Would you have to apply for, for, regulatory approval or would you just do it? 

Michener: I don’t believe we’d have to apply for regulatory approval to do that. 

Lee: And then the third question is, is finaucial in nature. And it involves either by, either 

by projected earnings or by percentage of projected earnings, what impact does Travelers believe it 

would have to not be allowed to engage in the four (4) practices described in, in Exhibit # 1 during 

the two (2) year waiver period 

Welch: Objection - clarity? 

Meisenheimer: Could you clarify it, please? 

Lee: Sure. That, that, that given - it was described that there was a due diligence made, 

it‘s been described that the deal is well thought-out. What, for the record, what would be the 

financial implication of - since there’s no assurance that these things - that, that, that - these 

practices that were described as being important can be done, whether there is any w~ay lvhether 

Travelers in its due diligence in thought about the merger calculated in any way the result on 

earnings or financial strength as you define it of not being able to do - not being able to crossmarket, and in fact, divesting insurance underwriting in two (2) years. 

Meisenheimer: Do you understand that question? Because I don‘t. I’m sow. 

Lee: Okay, I’m assuming - 

Meisenheimer: Would you rephrase it one more time, please? 

Lee: Okay. Okay. I’ll rephrase it, you’re right. Let me not A representation has 

been made that the company is strong and will be a benefit to the policyholders. What provi - 

what estimate has Travelers reached as to financial strength if it is in fact required to divest its 

insurance underwriting business two (2) years after a prospective Federal Reserve approval? 

Michener: The question of the impact, the financial impact on the combined company u~ith 

divestiture is one that has not been calculated. I think that analysts have looked at those figures 

and have made rough calculations based upon published figures. The company has not done that 

because the company doesn’t know what form the divestiture would take. The published reports 

that I have seen have su=ested it might impact 10% of our combined earnings. But again, those 

are a third party’s, those are not ours. We have not made that calculation. 

36 

36 
liability insurance that we sold directly to Citibank North, N.A., the New York bank. 

Rangan: Dces any other insurance company offer the same protection to the same 

sohsidiaries of Citicorp? I don’t understand the market share of .898%. WheTe is that derived 

from? 

Mulholland: Okay, that other liability is a line on the annual statement. The NAIC adds 

up all the lines and gets a total premium witten for each line of insurance sold in the property and 

casualty field. That’s the miscellaneous line that includes anything that doesn’t fall into vehicle 

insurance or such things. Under other liability, our debt cancella - our contractual liability for the 

debt cancellation is reported at $901,000. The annual premium. 

Rangan: And the percentages arc percentage breakdown of all of your loans, is that is? 

Mulholland: No, not at all. It has nothing to do with loans The $901,000 is less than 1% 

of that total line of insurance as reported to the NAIC. 

Prince: By all insurance companies in the state. 

Rangan: okay. 

Mulholland: No, 1 think in the country 

Lee: why is this - why is this listed under Citicorp Insurance? Are these policies written 

by Citibank, N.A.? 

Welch: Your Honor, I have no objection to the question, but I think we’re getting into a 

free-for-all here where we’ve got person shooting questions and another person jumping in. The 

indication was that we’d follow standard trial procedures, and I’ll object on that basis. 

Meiscnheimer: Sustained. 

Rangan I still need - I’m sorry, but I cannot understand, umm, the percentage 

breakdoll. 

Michener: Why don’t I take a shot at answering this question? I think I testified to it 

earlier. These are the numbers that arc indicated on Exhibit #4 of Exhibit # 1 are dollars and 

they’re in thousands of dollars. So if we start at the top - well, let me start even further. The 

source of this data is shown on the bottom of the page and is based on data from a company called 

One Source. And they collect, they are one of the organizations that collect data on premiums 

written bv insurance companies countrqxide. So in Delaware, for 1997, I believe, the entire 

industry,-if you add up all the insurance companies in Delax-are under this particular line of 

insurance, it nil1 be $100,300,000. That’s the top line. The next line is if you take all of the 

current Travelers Group subsidiaries that wite this line of insurance in Delaware and add up their 

premiums for 1997, you’ll get $4,240,000 and thai works out to be 4.227% of the entire industry 

And to keep going, Citicorp Assurance, tneir premiums were $901,000, their total -their percent 

of the total was .898%, so less than one percent. So finally, you add, just adding up those numbers 

and those percentages after the merger in this one particular line of insurance, I keep pointing that 

out, the total \vill be $5 million - or would have been in 1997, $5,141,000 with a market share of 

5.125%. 

Rangan: I think I understand it, thank you veq much. 

Meisenheimer: Do you have any rebuttal to the question? 

Welch: No, Your Honor, we don’t at this time. 

Meisenheimer: I think at this point, then, I think we’re ready for your testimony, Mr. Lee. 

Lee: We have a witness who’s been waiting. 

Teichman: Let’s just go off the record for a minute. 

[pause] 

Teichman: Okay, we’re back on the record. It’s about quarter to 2 in the afternoon. 

Leo hlr. Michener, is Travelers representing that Citi -that if it were to acquire Citicorp 

Assurance that it would remain a captive insurance company and not write property’/casualty 

insurance to the public in Delaware or elsewhere? 

33 

35 

























Hello, my name is Gwen Jacobs. I am the President of New York ACORN, and I am 

testifying today for New York ACORN, and for Maude Hurd, ACORNS National 

President who was not able to be here. 

In April ACORN did a study of Citibank’s record on single family lending to borrowers of 

different races and incomes in ten cities: we also looked at their lending record by 

neighborhood in 6 cities. Finally, we compared Citibank’s performance to the performance 

of other institutions. 

What we found is that if you are lower income person of any race, and especially if you are 

African American or Latino, you had better not look to Citibank for a loan. Citibank is not 

looking for our business, and if we go to them, we are much more likely to be rejected. 

Citibank is not making loans in our communities and not meeting its basic legal obligations 

to serve all potential borrowers in its service areas. 

Before I go over some of the details of Citibank’s outrageously bad record, there 

are two important things to keep in mind. First, don’t dismiss the numbers on Citibank’s 

failure to serve low and moderate income people with the thought we can’t afford to buy 

homes anyway. In cities around the country people with moderate incomes - below 80% of 

their areas median, and people with low incomes - incomes below 50% of the area median, 

even those with incomes below 30% of the area median, can and do buy homes. We can 

and do buy homes, and we can and do pay our mortgages. When barfks will lend to us. 

When banks like Citibank won’t lend to us we pay someone else rent forever - often more 

rent than we would pay monthly for a mortgage - without ever building the equity of 

owning a home. Or we are forced to pay outrageous interest rates at mortgage companies. 

Potential homebuyers who would contirbute to community growth and stability are forced 

to move in order to get a loan; houses are left abandoned, and neigborhoods deteriorate. 

Now for the details. 

In 19% ( the most recent year for which data are available) a Latino applicant for a home 

loan at Citibank was 300% more likely to be rejected than a White applicant. An African 

American applicant was 350 % more likely to be rejected than a white applicant. 

How does this compare to other institutivs? 

- Citibank is much worse than your averade bank. Citibank’s ‘rejection ratios’ -the rate at 

which minority applicants are turned away as compared to white applicants - are 

substantially worse than the average rejection ratios of all lenders in the 15 major cities 

ACORN has studied. On average Latinos were rejected 1.7 times as often as whites in 

1996 compared to 3 times as often by Citibank; and African Americans on average were 

rejected 2.1 times as often as White applicants compared to 3.6 times as often by Citibank. 

How does this compare to Citibank’s own past performance? 

- Citibank’s own perfommnce is getting worse not better. Citibank’s loans to African 

Americans and Latinos fell by more than 50% between 1995 and 19%. The share of 

Citibank’s single family mortgages that went to Latin0 and African American families fell 

dramatically from 36% in 1995 to 13 % in 1996. 

Even when we looked only at relatively high income applicants families earning 50 and 60 

thousand dollars a year and more, we found that African American applicants were rejected 

nearly 3 times as often as whites, and Latin0 applicants were rejected more than four times 

as often as whites. 
One thing that is particularly disturbing about Citibank’s record is the fact that not only do 

they reject minority applicants at high and growing rates, but also their practices - 

rejections, location decisions, advertising, outreach, customer service - who knows what 

combination of elements seem to be working increasingly to discourage or prevent 

minority families from even applying for loans. While the banks total number of 

applications per year is growing, both the percent of their applications from minority 

borrowers, and even the absolute number of such applications shrank between 1996 and 

1995 to unacceptable levels. Total applications from African Americans and Latinos fell by 

47 and 48 percents , respectively. The share of applications from African Americans 

declined in every city we looked at, and averaged only under 6% of all Citibank 

apphcations. 

What if we look at neighborhoods, not individual borrowers, or if we focus on income 

alone, rather than race? 

- Citibank has systematically redlined lower income neighborhoods of all races, as well as 

minority neighborhoods. 

For example, Citibank made 104 loans in the Baltimore area in 19%. Only 13 of these, 

however, were made in inside the city limits where the Citibank branch itself is located. 

Looking outside as well as inside the city, nearly half of the Baltimore areas 

neighborhoods ( 47%) are low and moderate income - that is, with average incomes below 

80% of area median but these neighborhoods received only 17% oi?the loans from 

Citibank. Neighborhoods with average incomes below 50% of area median are 16% of the 

metro area, but received only 2% of Citibank’s mortgages. Neighborhoods with more than 

90% minority residents make up 154 of the Baltimore metro area, but received only 1 

mortgage loan. 

In Miami, where nearly half of the metro area is made up of low and moderate income 

neighborhoods, Citibank made only 18% of its loans in these neighborhoods. Instead, a 

full half of the banks loans went to the only 21% of areas with average incomes above 

120% of area median. Of its 343 loans in the Miami area, Cirihank failed to make even Q 

sirwle one in the 15% of all area census tracts where minorities are more than 80% of the 

residents. 

Here in New York City ACORN looked at more than 800 Citibank loans and found that 

Citibank makes few loans to any low income or minority neighborhoods, and that while it 

makes the majority of its loans overall in Manhattan, it makes essentially no loans at all to 

minority or lower income parts of Manhattan. ( show race mp,l Citibank made no loans at 

all in census tracts in Manhattan which were more than 90% minority in 19%. and only 1 

loan in a census tract with more than 75% minority residents in the borough, although there 

are a total of 76 such census tracts on the island. The bank made only 5% of its loans to 

such neighborhoods city wide, even though they make up 28% of the MSA. 

Looking at income, ( show income map) although 18.2 % of the New York metro area is 

low income, Citibank made only 6 loans in these areas. Moderate income census tracts, 

with incomes between 50 and 80 percent of the area median make up an additional 35% of 

the city, but received only 10% of Citibank’s loans. 

I could go on and on. 

But what the numbers I have talked about, and those there wasn’t time to go over, add up 

to is a clear picture of the fact that Citibank is steering capital away from us. They control 

huge amounts of capital and they are directing it away from low and moderate income 

people of all races, and from African Americans and Latinos of all incomes. 
Without access to capital, no matter how hard we work, our families and our 

neighborhoods will never really thrive. By failing to make loans in our communities, - and 

they clearly fail to do so - Citibank is blocking our access to opportunity. 

Given this record, it is absolutely wrong for Citibank to be given access to still more 

markets. Given this record, it is absolutely wrong to give Citibank still more market 

power. The Federal Reserve Board needs to say No to this greater concentration of wealth 

and power, and say Yes to democacry 

4. 
My name is Gloria Waldron and I am a member of New York ACORN. I Am testifying in 

part for Ted Thomas, who is the President of Chicago ACORN, and was not able to be 

here. 

I want to say first for Ted and others in Chicago and around the country how disappointed 

and angry we are that the Federal Reserve is holding hearings on this merger onZy here in 

New York. A huge merger is being proposed between two giant compames with bad 

records, and it is a merger that we and many others believe is illegal under current banking 

law. Tens of millions of consumers across the county will be affected by this merger, in 

Chicago, and in Oakland, in Miami, everywhere. But they are being denied the opportunity 

to comment on it on it person, and deliver their messages to the regulators about what is at 

stake here. 

In Chicago in particular I know that not only ACORN, but also the Chicago Community 

Reinvestment Coalition, and the Woodstock institute, and others, groups with a long, 

active, and successful history of lighting for fair access to credit have asked for hearings. 

When the Federal Reserve Board refused, the Woodsotck institute proposed a video 

hearing, but the Board said that was too complicated too. When we see that the federal 

Reserve Board cannot even be bothered to take the trouble to be thorough in hearing from 

the public about a merger this important we are pretty upset. 

Now I want to talk about three things. * 

First, Travelers record of ignoring inner city and minority neighborhoods 

Second, the total inadequacy of the Citibank’s announced CRA commitment 

and Third, the illegal and dangerous nature of this proposed merger. 

Travelers Insurance is not serving lower income, urban and minority neighborhoods. We 

don’t have as many numbers on Travelers as we do on Citibank, because they do not have 

to make their numbers public. Thats part of the problem. What we do know isn’t good 

though. 

Insurance industry studies have pointed out that most of insurance agent’s business comes 

from within 3 miles of their office location, and office location was a key element in the 

Justice Departments Fair Housing Suit against the American Family company in 199.5. So, 

in order to back up what we know from experience about Travelers performance, 

ACORN has taken a look at their office locations and also their advertising practices. 

What we found is that in the ten large racially mixed cities and their surrounding metro 

areas that we looked at , three out of four Travelers agents are located in zip codes where 

whites make up more than 85% of the population. 

The travelers agents are located mostly in suburban areas, especially wealthier and whiter 

ones. Fewer than l/3 of the agents overall were located within the city limits, and this ratio 

was especially bad in some cities. In DC only 13% are within the city limits; in Bridgeport 

only 8% are within the city limits, and Philadelphia only 2% of travelers agents are located 

within the city limits. 

The travelers agents are located miles away from low and moderate income and minority 

neighborhoods. 9.3% of Travelers insurance agents in the cities we looked at were further 

than 3 miles from ACORN neighborhoods, while as I said industry studies show that most 

of an agents business comes from within 3 miles of their office. In Philadelphia travelers 

agents are on average more than 20 miles from central North Philly. In New York the 

average distance of Travelers agents from downtown Brooklyn is 24 miles! 
Little information about Travelers is available for average consumers, espeically in large 

cities. The company doesn’t list many agents in the phone book, and when it does list it is 

most often in suburban books. Unlike its competitors, Travelers does not advertise in city 

telephone books. In contrast, the company’s intemet home page which is much less 

accessible to low and moderate income people, as well as to minorities who have a lower 

rate of interment access than the population as a whole - lists many more agents than do the 

phone books. 

Gwen Jacobs has already talked about Citibank’s poor lending record. 

Citi has now announced a so called commitment to low income areas to go with its merger 

proposal. We think it is much too little and much too vague. 

Citibank has promised 115 billion dollars over 10 years, which is only 2% of its assets 

annually. Thats 2 % of its assets for African Americans and low and moderate income 

people. I call it insulting. 

Other banks involved in recent mergers have promised much more - 6% for Naitonsbank, 

5.5% for Bank of America, etc. 

Even within the 115 billion, most of what Citibank has promised is consumer lending, 

like credit cards and auto loans. This will not do anything to deal with their basic problem 

with making home loans, or small business loans, in our neighborhoods. 

Finally, not only do Travelers and Citibank each have records of shutting the door to credit, 

homeownership and insurance in the faces of low and moderate income and minority 

people, but the giant combination they are proposing breaks banking laws designed to 

protect the public from too close relationships between banks and other kinds of 

companies, and make sure that banks and other kinds of companies are regulated as they 

need to be. These laws were passed by Congmss - elected by the American people - and 

they have not yet been changed by Congress. We do not think that the Federal Reserve 

Board, on its own, should be deciding to change them, or to allow special exceptions. 

Citibank and Travelers alone already have the power to block people in my neighborhood, 

and in neighborhoods like mine around New York and around the country from getting the 

financial resources we need to have a fair chance in this economy. They are doing it 

already. I am honestly scared at the thought of their getting together, getting bigger, getting 

even less interested in dealing with anyone who is not already part of their world. I am 

scared and angry. 
ACORN 

88 Third Avenue 

Brooklyn, NY 11217 

(718) 246-7900 

Fax: (718) 246-7939 

This year New York State has awarded a contract to Citibank to distribute food 

stamps and public assistance benefits electronically starting in January 1999. However, 

we have seen that Citibank is not a friend to us. It is basically a bank for the well-off 

We will be hurt if we let our money go there. What I urge each and everyone of you to 

do is open up an account in the bank of YOUR choice now and do not let the city decide 

the bank for you. Tell others this message so that they too may ben@it. 

Este a% el estado de Nueva York le grant0 un contract0 a Citibank para distribuir 

cupones de aliment0 y 10s beneficios de asistencia publica electronicamente comenzando 

en enero de1 1999. Pero, nosotros hemos visto que Citibank no es amigo de nosotros. Es 

simplemente un banco para 10s rices. Vamos a sufrir si dejamos que el dinero vaya hai. 

Lo que quiero que cada uno de ustedes hagan es quc abran una cuenta en el banco que 

USTED elige y no deje que la ciudad decide para usted. Diganle este mensaje a otros 

para que ello tambien beneticien. 
66/24/1998 89: 24 212-369-897.8 - YURA - AND -.-.-.-.. COMPANY PAGE 61 

-. 

SfiirGzy WiiiZums 

940 2.220” Street 

~mn~~, lMJ lo469 

June 24, 1998. 

dttentti Ms. Fzmini 

It ir quite ev’lientfrom recordidstatistics t&t Citibank 

Cendiqy recordto minmities adCow income’communities 

is rapic@y on the decline. More minorities are readicy 

rejectedfiom loans comparedto tfieir white 

counterparts. 7Tiir is a Glhtant vioGzti4.m of fair l2nd%y 

policies. 

I speak from experience as an @rican 2bn.erican hoping 

to realize the am&can dream of owning a home fm tfie 

first time, 6ut was rejectedafter appcying to Citi6ank 

for a Iban. -se unfairpractices must 6e mad2 known 

so tfiat consumers winnot support Cittianh!, Tiravelkrs 

wfiich is ifZ2gaffy merge witfi CitiGanR, or any otfur 

Cittiank afliatian 

Sincere Cy, 
No, this merger should not happen because, its illegal for one, two 

Citibank has a particularly poor record of direct lending to low income 

neighborhoods and people of color in New York City. 

Citibank lends almost exclusively to upper income neighborhoods in 

Manhattan predominantly white neighborhood (more than 85% white), receive 

75% of Citibank loans in 1996. Even more striking, Citibank made only six loans 

that year in low income neighborhoods in NYC, Metropolitan area. 

Again Citibank rejected African American and Latin0 applicants for 

conventional mortgages for homes purchase (2 %) times more frequently than 

white applicants. 

Citicorp and Travelers Group pledged to invest 115 billion in low and 

moderate income community over the next decade as part of their historic MEGA 

MERGES. 

Citicorp John Reed and Travelers Sandy Weill ear-marked more than half 

of that money 59 billion for credit cards students loans and consumer lending. 

The problem with that is Citicorp has not done anything in the past so what 

makes me believe that we as people of color or Latin0 can benefit from this 

merger. What I see is low and moderate income are being kept poor with high 

interest rate with the credit, and student loans. Meaning Citibank/Travelers are 

beneficiating greatly from this action and we as people of color are kept trying to 

keep our head above water. 

Please, read between the lines because life gets no better and increasingly 

harder to strike for a better condition in our livelihood. 

What can be done to improve our condition? We must have low interest 

rates and guarantee not to raise interest rate after 3, 6 month or even one year 

after contract. That would help toward depression in our poor neighborhood. 

That way we as people of color would an incentive to strike from depression to 

our Economy goals. 

Thank you for listening 

UNITED WE STAND, DEVlDED WE FALL 

It’s that simple!!!! 

We Are 

ACORN 
. $ 06/24/1998 16:22 17182219878 NOSTRAND TEL PAGE 01 

CITY BAN-K’S UNFAIR POLICY 

As a bank, there should be rules and regulations and even loop holes to 

go through. But every bank must try its be~~~M~then~ds of the people. 

The polices of Ciq~ Bank is-making it even harder for the poor to save 

money by raising the deposit for free checking to 5i600O in linked accounts, ~~ 

and its minimum ATM withdraw1 to $40; is a clear indication that the 

majority of poor people who me Blacks and Hispanics will be unable to 

maintain or open a saving account in that bank. * 
I 

. . 

The Citibank Travelers Deal: Sign on the Dotted Redline 

ACORN examined the lending record of Citibank in ten cities to determine the lender’s 

commitment to low income and minority communities and individuals. These lenders took more 

than 14.5CMl applications and originated more than 10,OCO single-family owner-occupied 

mortgages in 1995 and 19%. In 19 out of twenty cases, the share of loans and applications to 

Latinos or African Americans has declined dramatically between 1995 and 1996 and minorities 

tended to be rejected for loans substantially more frequently than whites. ACORN also looked at 

the geographic spread of Citibank’s lending in six metropolitan areas and found that low-income 

and minority neighborhoods were poorly served by Citibank. Citibank’s inadequate lending 

record calls the move to merge with Travelers into question on Community Reinvestment Act 

grounds. The markets Citibank currently serves are already underserved in terms of credit. 

Allowing Citibank easy access to new markets would only subject additional communities to its 

inequitable lending record. 

Citibank’s lending record is also compared to an ACORN study, which was released in September 

of 1997, which analyzed the aggregate lending records of banks in fifteen metropolitan areas. 

Using this information, ACORN is able to compare the racial rejection ratios of Citibank to the 

average rejection ratios of other institutions in the metropolitan areas where Citibank operates. In 

every case where Citibank o 

was worse than the average. p” 

rated in one of the previously studied ciqes. Citibank’s performance 

The merger between Citibank and Travelers is additionally troubling given Travelers dubious 

record of redlining its insurance products away from low-income and minority communities. 

Travelers has been charged with violations of the Fair Housing Act for offering homeowners 

insurance products whose underwritin, o ~ ouidelines have the effect of refusing to serve minority 

neighborhoods. In New York City, Travelers’ auto insurance coverage seems to avoid the Bronx 

and Queens, effectively screening out many minority drivers. These anecdotal problems suggest 

there may be more beneath the surface of Travelers performance, but there is no comparable 

disclosure requirement in the insurance industry to the Home Mortgage Disclosure Act ACORN 

used to evaluate Citibank. 

The findings of ACORN’s study on Citibank include: 

l Latin0 rejection ratios are getting worse at Citibank: For every white who was 

rejected by Citibank in 1995, more than two (2.08) Latinos were rejected. In 1996, three 

J_atinos were rejected for each white who was turned down - an almost fifty percent increase. 

This is worse than ACORN’s 1997 analysis described above which found on average 1.73 

Latinos were rejected for each white in 1996 nationwide. 

l Citibank’s African American rejection ratios are higher than the national 

average: In 1996. the African American rejection ratio at Citibank was 3.59 -- down from 

4.12 in 1995. While there is some improvement, Citibank’s African American rejection ratio is 

70% greater than the 2.11 ACORN found nationally. 

l Applications from minorities are shrinking at Citibank: Total applications from 

African American and Latinos fell by nearly half between 1995 and 1996. The number of 

Latinos applying for Citibank loans fell by 48% and the number of African Americans fell by 

47%. The share of applications from African Americans and Latinos dropped to 15% by 1996 

__ more than rZ0% decline since 1995. There was a decline in the share of Latin0 applicants 

between 20% and 80% in every city except for Miami which increased 30%. All told, the 

share African American applications at Citibank declined in every city and averaged only 

5.85% of all Citibank applications. 
l Citibank made half as many loans to minorities in 1996 as in 1995: The number 

of loans Citibank made to Latinos and African Americans fell by 53% and made up fewer than 

15% of the number of loans in Citibank’s mortgage portfolio. 

l Citibank rejects even wealthy minorities more frequently than whites: In six of 

the cities surveyed, African Americans and Latinos earning more than 120% of the median 

income were rejected more frequently than similar white applicants. Wealthy Latinos were 

rejected more than four times as frequently as wealthy white applicants on average. Wealthy 

African Americans were rejected nearly three times as frequently as wealthy wlute applicants on 

average. 

l Citibank loans almost exclosively to wealthy white neighborhoods: Citibank has 

systematically engaged in a practice of relining minority and low income neighborhoods, 

leaving them starving for credit. ACORN looked at over 3,080 home purchase mortgage 

originations in New York, Washington, Baltimore, Chicago, Oakland, and Miami. In every 

instance, Citibank loaned almost exclusively to the very whitest and upper income areas while 

at the same time virtually ignoring minority and low-income areas. 

Citi by City Analysis 

r 

Baltimore 

Lending Record by Race and Income of Applicant: The number and share of minority 

conventional mortgage applications has dropped off sharply at Citibank in Baltimore between 1995 

and 1996. African American applicants accounted for only 10.2% of Citibank’s 19% applicants, 

down from 38.2% in 1995. There was only one Latin0 applicant in 1995 and none in 1996. Over 

the same period, the share of white applicants grew 613% to reach 70.9% of all applications. The 

number of conventional loans to African Americans fell from 38 in 1995 to 11 in 1996 representing 

a 69.3% decline in the share of Citibank’s loans to African Americans. 

In 1995, the rejection ratio for African Americans was quite low -- only 1.09 African Americans 

were rejected for each white rejection. By 1996.3.15 African Americans were rejected for every 

white applicant who was turned down. Incredibly, even wealthy African Americans were 7.25 

more likely to be rejected than similarly affluent white applicants, the highest figure of all Citibank 

operations surveyed. 

Lending Record by Race and Income of Neighborhood: Citibank made 104 mortgage 

loans in the Baltimore metropolitan area in 1996. Disturbingly, only 13 of them were made inside 

the city limits, despite the fact that the only Citibank branch is located at Baltimore’s downtown 

Inner Harbor. Nearly half (47%) of Baltimore neighborhoods are low- and moderate income, but 

Citibank made only 17% of its mortgage loans to those neighborhoods. The poorest areas received 

the very least from Citibank. Neighborhoods earning below fifty percent of the median income are 

16% of the metro area but they received only 2% of Citibank’s mortgages, eight times less than 

their share of the city. This disparity was made up by Citibank in the wealthy areas. The 

wealthiest neighborhoods made up 16% of the metro census tracts but received more than 50% of 

Citi’s mortgage originations - a 300% over representation. 

Minority communities were particularly hard hit by Citibank’s indifference. One quarter of 

Baltimore MSA census tracts are minority, but they received only 3% of Citibank’s mortgages. 

Neighborhoods which are more than ninety percent minority received only one mortgage loan (1%) 

desptte making up 15% of the metro area. Neighborhoods comprised of 98% white residents 

make up 47% of the metro area. but Citibank made 66% of its loans to these areas. 
Chicago 

Lending Record by Race and Income of Applicant: While the total number of Citibank’s 

applications grew slightly in Chicago between 1995 and 19%, the number and share of minority 

applicants fell sharply. Applications by African Americans and Latinos dropped off by half 

between 1995 and 19% (from 221 to 109 and 402 to 177 respectively). The share of applications 

to minorities also fell by more than half, down 53.0% by African Americans and 58.1% by 

Latinos. The number of loans to African Americans and Latinos in Chicago has also been cut by 

more than half and the share of loans to African Americans has fallen by 57.5% between 1995 and 

19% to 5.4% of all Citibank’s conventional mortgages. The share of loans to Latinos fell by 

62.7% (to 10.0% of Citi’s loans) in 195’6. 

In 1995, African Americans were four and a half times as likely as whites to be rejected at Citibank 

in Chicago and Latinos were nearly three (2.78) times as likely to be rejected. In 1996, the figures 

fell slightly to 2.52 for African Americans and 2.6 for Latinos. ACORN’s analysis of all lenders in 

the 19% Chicago market found that African Americans were rejected 3.17 times as frequently as 

whites, only shghtiy worse than Citibank’s own record and that Latinos were rejected 1.93 times 

as frequently as whites, making Citibank worse than the market as a whole. 

Lending Record by Race and Income of Neighborhood: Although nearly twenty percent 

of Chicago’s census tracts are below 50% of the median income, Citibllhk made only 32 loans in 

these nerghborhoods, only 3.12% of its mortgage originations a more than six-fold under 

representation. Another 30% of Chicago’s census tracts earn between 50% and 80% of the median 

income, yet received only 22.4% of Cihbank’s mortgages, 30% fewer than their proportion in the 

metropolitan area. Nearly 45% (43.9%) of Citibank’s loans were made to the city’s most affluent 

neighborhoods even though they make up just 15% of the metro area -- nearly a three hundred 

percent over-representation. 

Minority communities were especially underserved by Citibank. Though 30% of the city’s census 

tracts are predominantly minority but they received only 4.6% of Citibank’s mortgages. The 19% 

of the census tracts where more than 90% of the residents are minorities received only 1.7% of 

Citibank’s mortgage loans. In comparison, the 45.0% of the census tracts which more than 8.5% 

of the residents are white received 71.0% of Citibank’s mortgage originations. 

Miami 

Lending Record by Race and Income of Applicant: The share of applications by African 

Americans fell from 18.8% in 1995 to 75% in 19%. The number of loans to African Americans 

fell by more than 50% (from 31 to 15) between 1995 and 1596. The share of loans to African 

Americans decreased by 693% to only 4.9% of Citibank’s conventional mortgages. African 

Americans were rejected more than three (3.25) times as frequently as white applicants in 1996. 

Even wealthy African Americans are rejected more than hvo and a half times (2.57) as frequently 

as wealthy white applicants. 

Lending Record by Race and Income of Neighborhood: While nearly half of Miami’s 

metropolitan area is low- and moderate-income neighborhoods, Citibank made only 18% of its 343 

home loans there. Instead, it made almost half of its loans to census tracts over 120% of the 

median income, despite the fact that these areas make up only 21% of the metropolitan area. There 

is a more than a 200% over representation of the most wealthy areas in Citibank’s loan portfolio. 

Those that lived in neighborhoods earning less than half the median income, about a fifth of the 

metro area, fared the worst. Only 3.5% of Citi’s loans went to those neighborhoods - a more than 

fivefold under representation. 

Minority communities received even less from Citibank. Incredibly, Citibank failed to make even a 

single loan in any census tract where minorities comprise more than 80% of the residents despite 

the fact that these tracts make up 15% of the metropolitan area. Overall, the minority areas, which 

are nearlv a fnawth nf the ritv WY&~ nnlv ‘4 5% nf Cirihank’c hnme Inan< -- 2 mnr~ than cir fnlrl 
under representation. The whiter areas, however, received ample access to credit. Areas where 

more than 75% of the residents are white received 87% of Citibank’s loans despite representing 

only 63% of the metro area. Census tracts where more than 95% of the residents are white 

represent ten percent of the city, but these tracts received 25% of Citibank’s mortgages. 

Las Vegas 

Lending Record by Race and Income of Applicant: Though lending activity decreased 

substantially between 1995 and 1996, it was most apparent amongst minority applicants. The 

number of African American applicants fell from 32 in 1995 to 2 m 19%. Latino applications 

declined from 107 to 5 in 1996. The share and number of loans to minorities also declined. Only 

two African Americans and one Latin0 applicant received Citibank loans in 1996. The share of 

African American loans fell 63.7% to 2.8% of Citibank mortgages in 1996. The share of loans to 

Latinos dropped 95.9% to 1.4% of Citibank’s conventional mortgages. 

Los Angeles 

Lending Record by Race and Income of Applicant: Between 1995 and 1996, Citibank 

took 50% more applications and made 57% more loans, but the benefits of this increased lending 

went predominantly to white and affluent borrowers. The share of African American applicants 

fell from 11.2% in 995 to 3.5% in 1996 and the real number of applicants fell by more than half 

from 57 to 27. The number of Latin0 applications fell from 2.52 to 78. and the share of Latino 

appltcations dropped from 49.7% in 1995 to 10.2% in 1996. The number of loans to whites grew 

from 66 in 1995 to 297 in 1996 -- a 3.50% increase. Over the same period the number of loans to 

African Americans dropped 57% to just 11 originations, a paltry 2.4% of Citibank’s mortgages in 

1996. Loans to Latinos decreased 70.8% to 40 mortgages, representing only 8.7% of Citibank’s 

originations. 

Citibank rejects minorities more frequently than whites and more frequently than average lenders in 

Los Angeles. A 1997 ACORN study of all lenders in Los Angeles found that African Americans 

were rejected 1.69 times as frequently as whites and Latinos were rejected 138 times as frequently 

in Los Angeles in 1996. Citibank rejected African Americans 3.26 times as frequently as whites in 

1996 and Latinos 2.40 times as frequently. Even for applicants who are all over 120% of the 

median income, Citibank rejected wealthy African .4mericans nearly three times as frequently 

(2.98) as wealthy whites and wealthy La&as more than three times as frequently (3.13~). 

New York 

Lending Record by Race and Income of Applicant: Although applications to Citibank 

increased by nearly 25% and loans increased more than a fifth between 1995 and 1996, little of this 

increased lending activity benefited minorities or those with low incomes. African American 

applications climbed 8.5% but the share of African American applicants fell by 10.7%. Latino 

applications fell slightly, from 134 to 128, but the share of Latin0 applications fell 21.4% to just 

5.0% of all Citibank applicants. Lending to African Americans and Latinos is also dropping. 

Citibank made 9% fewer loans to African Americans in 19% than 1995, but the share of loans to 

African Americans fell 25.0% to 6.6% of Citibank’s mortgage originations. Citibank made 18.4% 

fewer loans to Latinos in 19%. but the share of loans to Latmos fell 32.5% to 3.5% of Citibank 

mortgages. 

Citibank’s rejection ratios are higher than average New York lending institutions ACORN studied 

in 1997. At average New York mstitutions, African Americans were rejected 2.13 times as 

frequently as whites in 1996, but at Citibank they were rejected 2.67 times as frequently. Latinos 

were rejected 1.69 times as frequently as whites on average in 1996, but at Citibank they were 

rejected 239 times as frequently. Even the wealthiest minorities were rejected more frequently 

than whites with similar incomes. African Americans earning over 120% of the median income 

were rejected 2.63 times as frequently as whites earning the same amount in 1996. Wealthy 

1 ~lrinnc were more than t-.&e I7 131 a< Iilr~lv tn he r~irrkd 19 wealthv white annlirantc in lQ% 
Lending Record by Race and Income of Neighborhood: ACORN examined more than 

800 loans Citibank made in Manhattan, Brooklyn, Queens and the Bronx and determined that 

Citibank makes very few loans to low income and minority neighborhoods at all. makes the 

majority of its loans on Manhattan, and makes essentially no loans to the minority and low income 

areas on Manhattan. Only 3% of Citibank’s loans went to neighborhoods where minorities made 

up more than 90% of the population, even though these neighborhoods represent 15% of the MSA 

__ a fivefold under representation. Of the 21 loans made to these neighborhoods, none were made 

on Manhattan. Citi made only 5% of its loans to census tracts where minorities made up more than 

75% of the population, even though they represent 28% of the MSA. Only 1 of these loans, less 

than a tenth of one percent of Citi’s mortgages in 1996, was made on Manhattan even though there 

are 76 census tracts on the island with these demographics. 

Even in the other boroug~hs, Citibank’s record of lending to minority neighborhoods is weak. 

Only 22% of its lending m Brooklyn, Queens, and the Bronx went to census tracts where 

minorities make up the majority of the population. Even fewer (10 %) went to neighborhoods 

where minorities make up more than 75% of the population. 

In contrast, the very whitest neighborhoods in the city received the majority of loans. Across all 

boroughs examined, neighborhoods where whites made up more than 85% of the population 

received 53% of the loans, although they only make up one third of the &ISA. In Manhattan, this 

is even more distinct, where these 85% white areas received 75% of the Citibank’s loans. 

The same pattern is evident in Citibank’s lending to low income areas. Although 18.2% of the 

metropolitan area is low-income, it made only SIX loans in these areas -- fewer than one percent 

(0.7%) of all of Citibank’s mortgage loans. Moderate income census tracts, between 50% and 

80% of the median income, represent more. than a quarter of the metropolitan area yet Citibank 

made only 10.0% of its loans to these neighborhoods. In contrast, while less than twenty percent 

of the census tracts in the metro area exceed 120% of the median income, Citibank made 48.0% of 

its loans to these areas - nearly two and a half times their proportion in the city. 

Again, the extreme focus of Citibank’s lending went to Manhattan’s upper income areas and the 

lending on Manhattan tended to go more towards wealthier areas than in Brooklyn, Queens or the 

Bronx. Only 0.2% of Citibank’s loans on Manhattan went to areas below 50% of the median 

income and only 5.8% of its loans went to areas below 80% of the median income. In contrast, 

67.2% of its loans went to upper income census tracts on Manhattan. There were 86 low-income 

census tracts on Manhattan that received no loans from Citibank. In Brooklyn, Queens and the 

Bronx, 17.3% of the loans went to areas under 80% of the median income and only 1.5% of 

Citibank’s loans went to areas under 3% of the median income. 

Oakland 

Lending Record by Race and Income of Applicant: There has been a dramatic decline in 

the number of applications from and loans to minorities in Oakland. African American applications 

fell from 144 in 199.5 to 29 in 19% - a 79.9% decline. Similarly, Latin0 applications fell from 

199 in 1995 to 38 in 19% -- an 80.9% drop. Loans to minorities have also dropped precipitously, 

the share of loans to African Americans fell 74.4% from 24.0% of Citibank mortgages in 1995 to 

6.1% in 1996. The share of Latin0 loans has fallen from 32.1% in 1995 to 7.89% of Citibank 

originations in 19% - a 75.4% decline. Over the same period the share of loans to the wealthiest 

borrowers has soared. 

Citibank’s rejection ratios are higher than at average Oakland lenders. Citibank rejected African 

Americans nearly three times (2.82) as frequently as whites in 1996, compared to ACORN’s 1997 

finding that average lenders in Oakland rejected African Americans 2.28 times as frequently as 

whites. Latinos were rejected 2.63 times as frequently as whites at Citibank in 1996, compared to 

the city average of 1.64. Even upper income African Americans were rejected more than five 

(5 14) timec TAP frennentlv 2~ affluent white< in 19% 
Lending Record by Race and Income of Neighborhood: The whitest areas received the 

majority of Citibank’s lending in Oakland. Census tracts comprised of more than 90% white 

residents make up only 12% of the metropolitan area, but these areas received 30% of the 

mortgages -- nearly two and half times their representation in the MSA. Neighborhoods where 

behveen 80% and 90% of the residents are white received nearly twice the share of Citibank loans 

as their proportion in the MSA. In stark contrast, the neighhborhoods with the highest 

concentrations of minorities, more than 75% of the residents were minorities, made up 16% of the 

MSA (more than the whitest neighborhoods) but received only 4% of the Citibank mortgages made 

in the metro area -- a 400% under representation. 

Citibank lending also focused on the wealthiest areas in Oakland. Upper income areas represent 

one fifth of the metro area, but Citibank made 62.3% of its loans to neighborhoods over 120% of 

the median income -- a more than 300% over-representation. Low-income areas are twenty percent 

of Oakland’s census tracts, but Citibank made only 14 loans there, a mere 3.8% of its loans. 

St. Louis 

Lending Record by Race and Income of Applicant: Between 1995 and 1996, the 

number of African American applicants to Citibank fell by 75%. from 15 to 6. The share Citibank 

lending to African Americans declined even more sharply over the samtiperiod decreasing from 

2.64% of all of its loans in 1995 to 133% of its loans in 1996. In all, Citibank made 8 loans to 

African Americans in 1995 and only 3 in 1996. It only took 2 applications from Latinos between 

1995 and 1996, and made 2 loans. 

The Citibank rejection ratio for St. Louis was the $ghest of the ten cities examined and markedly 

higher than the areas averaGe lender. In 19%. African Americans were ten and half times as likely 

to be rejected as white apphcants by Citibank. The analysis ACORN performed in 1997 found that 

the average lender in St. Louis rejected African Americans only slightly more frequently than white 

applicants, the citywide rejection ratio was 1.34 in 1996 about eight times lower than the Citibank 

ratio. 

San Jose 

Lending Record by Race and Income of Applicant: African American applications fell to 

only four in 1996 from 18 in 1995. The share of African American applicants slid from 3.8% in 

1995 to 0.8% in 1996. Latin0 applications fell from 114 to 19, and the share of Latin0 

applications fell 83.9% from 243% to 4.9%. Lending to minorities has also fallen fast. In 1995. 

Citibank made 68 loans to African Americans and Latinos. By 1996, the figure had fallen to 11 -- 

more than an 80% decrease. The share of loans to African Americans fell from 33% in 1995 to 

0.6% in 1996. Latinos received 18.9% of Citibank’s mortgage loans in 1995, by 1996 they 

received only 2.6% of the loans. 

Latinos were rejected more than four and a half times (4.59) as frequently as white applicants at 

Citibank in 1996. African Americans were rejected more than four times (4.33) as frequently as 

whites in 1996. In 1995, upper income Latinos were rejected nearly four times (3.95) as 

frequently as wealthy whites and in 1995 upper income African Americans were rejected more than 

four (4.30) times as frequently as upper income whites. 

Washington, DC 

Lending Record by Race and Income of Applicant: Applications from African Americans 

fell from 194 to 76 between 1995 and 1996. The share of applications from African Americans fell 

from 32.7% in 1995 to 11.1% in 1996 -- a 65.9% decline. Latin0 applications fell from 57 to 15 

between 1995 and 1996, representing a 77.1% decrease in the share of Latin0 applicants from 

9.6% to 2.2%. Minority borrowers received nearly 40% of Citibank’s mdrtgages in 1995 but only 
10.4% in 1996. Citibank lending to African Americans fell from 116 in 1995 to 41 in 1996 

Lending to Latinos fell from 32 m 1995 to 8 in 1996. 

Citibank’s rejection ratios exceed the average of Washington. DC lenders ACORN examined in 

1997. Citibank rejected African Americans more than three (3.39) times as frequently as whites in 

19%. compared to the city average of 2.31. It also rejected Latinos more than three (3.23) times 

as frequently as white applicants m 1996, compared to the area average of 1.83. Even upper 

income minorities were rejected more than three times as frequently as whites with similar incomes 

in 1996 (3.3 1 for African Americans and 3.37 for Latinos). 

Lending Record by Race and Income of Neighborhood: Citibank made few of its loans 

to minorities in Washington, DC. Although 28% of the Washington, DC census tracts are 

minority majority, these tracts received only 9% of Citibank’s mortgages in the metro area -- a 

300% under representation. Conversely, neighborhoods where more than 80% of the residents are 

white received more than 70% of Citibank’s lending. despite making up only 46% of the metro 

area. 

Citibank made only 6 loans to low-income areas in Washington. even though 16% of the census 

tracts are low-income. Though nearly thirty percent of the metro area is moderate income Citibank 

made only 14% of its loans to these neighborhoods. Instead, it made the majority of its loans 

(55%) to census tracts over 120% of the median income even though th&e neighborhoods are only 

17% of the metro area - a three fold over-representation. 

The Trouble with Travelers 

Though there is no comparable data that is publicly available on Travelers record of serving lowincome and minority communities, there are recent events and studies which indicate that tts record 

may be no better than that of Citibank’s, indeed it could be worse. There is evidence that Travelers 

underwriting guidelines for homeowners and automobile insurance are structured in such a way as 

to make insurance more expensive, less comprehensive or unavailable in these communities. 

The National Fair Housing Alliance has recently filed a Fair Housing Act complaint with HUD 

against Travelers for underwriting guidelines that disparately impact minority communities. In 

Washington, DC, for example, Travelers will not insure homes worth under $250,000 which 

effectively makes its insurance unavailable for 90% of homes in Latin0 and African American 

neighborhoods. It also refuses to underwrite policies for homes older than 45 years, which 

excludes 38% of the homes in minority neighborhoods -, nearly twice the share of homes excluded 

in white neighborhoods. Additionally, Travelers requires a credit check to acquire its insurance 

product, even though credit history is not an indicator for riskier policyholders who might file 

more claims. 

Travelen also makes little commitment to service the minority communities in Washington. Like 

many insurers, its agents have all but disappeared from minority and integrated neighborhoods, the 

complaint alleges. The National Fair Housing Alliance used matched-pair testers to verify bias in 

the underwriting of policies at Travelers and found differential treatment against African 

Americans. 

The lack of service in low-income, minority inner city neighborhoods can be seen in other lines of 

Travelers business as well. It’s Commercial Credit Corporation, which originates mortgages. 

home equity loans and consumer loans, operates in Illinois, New York, New Jersey, Ohio, and 

Pennsylvania. The vast majority of its 257 offices are located in the suburbs and small towns. In 

fact only one office was located in a major city, Philadelphia. 

Its auto insurance products also suggest redlining low-income and minority communities. In New 

York City, the Department of Consumer Affairs found that although 1.26% of the states insured 

automobiles were in the Bronx and Queens, but Travelers seemed to avoid servicing these areas. 
Only 0.46% of Travelers’ 303,COO policies were for cars in the Bronx or Queens, 63% less than 

the two borough’s share of cars. 

The reliance on anecdotal evidence of Travelers record of serving low-income and minority 

neighborhoods fairly only underscores the need for further disclosure of Travelers business 

activities. The disclosure of lending and banking industry information has been critical to making 

the industry fairer to all consumers and borrowers. 

Conclusion: 

The formation of Citigroup from the merger of Citibank and Travelers will create the largest 

financial entity in the world. Given the magnitude and complexity of the merger, ACORN urges 

diligence and scrutiny of this deal. ACORN believes Citibank and Travelers’ poor record of 

servmg low-income and minority individuals and communities must be weighed heavily as 

regulators consider granting historic powers to Citigroup. 

The merger will create a banking institution which would be in violation of current banking law, 

namely Glass-Steagei and the Bank Holding Company Acts which prohibit the merging of 

depository institunons with insurers and securities firms. Additionally, the merger application 

needs to be considered with respect to the impact the acquisition will have on local communities as 

well as carefully consider Community Reinvestment Act issues. Local cbmmunities especially 

need assurances that this merger will not dram capital and resources out of their communities 

through deposits and insurance premiums to finance the expansion of Citigroup here and across the 

world. 

All appropriate regulators with jurisdiction over th.is merger should hold public hearings in their 

communities to both ask the companies to more fully elucidate their record and to give citizens and 

community groups the opportunity to express their concerns and opinions. 

Methodology: 

ACORN examined Citibank’s lending activity in nine metropolitan areas between 1995 and 19%. 

ACORN analyzed Home Mortgage Dtsclosure Act (HMDA) data released from the Community 

Right to Know Network. HMDA requires depository institutions with more than $30 million in 

assets to report annually to the Federal Fmanciai Institutions Examination Council (FFIEC). The 

1997 data will not become available until the middle of the summer. The reporting includes the 

number and type of loans correlated by race , gender and income of the applicants, the disposition 

of those applications in each Metropolitan Statistical area where loans are originated. 

The lending record by applicant analysis covers applications for all conventional, single family 

owner occupied mortgages. Citibank took 13,899 of these applications in 1995 and 19% and 

made 9,505 loans in the following MSAs: Baltimore, Chicago, Las Vegas, Los Angeles, Miami, 

New York, Oakland, San Jose, St. Louis and Washington, DC. The lending record by 

neighborhood analysis covers all single family, owner occupied mortgages, mcluding FHA and 

VA loans, in six MSAs including: Baltimore, Chicago, New York, Oakland. and Washington DC. 

For both analyses Citibank operations which were examined included Citibank NA, Citibank FSB, 

Citibank Mortgage, Citibank Nevada, and Citibank New York State. 
Traveling to Travelers: Travelers Homeowners 

Insurance Agents Located Far from Inner City Homes 

Summary 

Travelers homeowners insurance business primarily operates in the 

suburban, wealthier, whiter neighborhoods and caters to these 

customers while leaving minority and inner city neighborhoods 

alone. Its agents are located away from inner city neighborhoods 

and frequently at some distance from downtown areas. It markets 

its products and services aggressively on the internet but weakly 

in the yellow pages. These factors suggest that Travelers is 

actively pursuing wealthier clientele while ignoring inner city 

minority communities. 

In general, the pattern of locating agents beyond inner city 

minority neighborhoods effectively redlines those areas out of 

Travelers' business. Most of an agent's business comes within 3 

miles of their office location, according to industry studies, and 

agent location was a key element of the Justice Department's Fair 

Housing suit against American Family in 1995i. Ma y academic 

studies have demonstrated the correlation between ! gent location, 

service, and race. ACORN's preliminary look at the locations of 

Travelers agents and its advertising practices raises serious 

concerns about the company's commitment to inner city, and 

particularly, minority neighborhoods. 

Findings 

. The racial composition of the zip codes where Travelers agents 

are located are measurably whiter than the overall racial 

breakdown of the cities studied. Three out of four Travelers 

agents are located in zip codes where whites make up more than 

85% of the population. The metropolitan areas of the ten cities 

on average were made up of 76% white residents and 16% African 

American residents. In comparison, Travelers agents were 

located in sip codes which were 06% white and only 6% African 

American, meaning the agent locations are in sip codes that 

markedly whiter and more than two thirds less African American 

than the overall makeup of the metropolitan areas. 

* Travelers agents are located predominantly in suburban areas, 

particularly whiter more affluent areas. In the metro areas 

studied, fewer than one third of the agents were located within 

city limits. Some cities were particularly ignored: only 2% of 

.Travelers agents were within Philadelphia city limits, 8% within 

the borders of Bridgeport, and only 13% within the District of 

Columbia. 

* Travelers agents are located some distance from inner city 

minority neighborhoods. On average, Travelers agents were more 

than 17 miles away from ACORN offices, typically located to be 

accessible to our low- and moderate-income constituency. In New 

York, the average distance from ACORN's centrally located 

Brooklyn office was over 24 miles. In Philadelphia Travelers 
agents were an average of more than 20 miles away from ACORN's 

North Philadelphia office. Importantly, the vast majority of 

the Travelers agents are located further than three miles from 

ACORN neighborhoods, which is the range where agents do the bulk 

of their business. On average, 93% of all of Travelers agents 

studied were further than three miles from ACORN neighborhoods. 

Even in Dallas, the city with the highest density of Travelers 

agents within three miles, less than 20% of the agents were 

within that distance. 

Little information about Travelers is available for average 

consumers. Travelers has a paltry presence in commercial 

telephone directories with few agents listed at all and a 

complete lack of advertising (including the absence of the 

company umbrella logo unlike its competitors Prudential, State 

Farm, Nationwide, MetLife). To the extent there is a presence 

in the phone book, it is more likely to be in suburban editions 

than the city directories, 

. In contrast, the company's internet home page lists many more 

agents than in the phone book. An extensive examination of 

inner city and suburban telephone directories iQ Chicago and 

Philadelphia found that there were three and two and a half 

times as many agents respectively on the internet than in the 

phone book. This demonstrates Travelers focus on white clients, 

who make up the majority of internet users. 

Methodology 

ACORN examined Travelers agent locations in ten cities across the 

country both through a survey of business telephone directories as 

well as an analysis of the company's agent locations provided by 

its internet home page. The telephone directory survey consisted 

of comparing the agent listings in inner city and suburban 

directories. The internet site survey consisted of comparing the 

locations of the agents listed on its "Travelers Agent Locator" 

site within a fifty mile radius of an inner city location. The 

site provides addresses which were plotted on maps to show the 

geographic spread of its agents. Fifty miles was chosen to ensure 

as many agents within the metropolitan area could be examined as 

possible. 

The cities studied were Bridgeport, Chicago, Dallas, Denver, 

Houston, Milwaukee, Minneapolis-St. Paul, New York, Philadelphia, 

and Washington DC. A phone book survey was additionally compiled 

for New Orleans. The zip codes of ACORN offices were used to 

measure the distance from Travelers agents. In general, ACORN 

offices are either located in central business districts or 

minority communities. The racial composition of the zip codes 

where Travelers agents are located was determined from census 

bureau data. 

Internet "Travelers Agent Locator" Survey 
In general, Travelers agents were located far from inner city 

residents and well beyond the distance most agents would conduct 

business. Agents primarily solicit business through direct mail, 

cold calling and telemarketing within three miles of their 

location. On average, 93% of Travelers agents are further than 

three miles from ACORN neighborhoods. Philadelphia and Houston 

have no agents within three miles of ACORN neighborhoods. Even 

the city with the highest concentration of agents within city 

limits was less than 20%. This demonstrates a pattern of racial 

redlining on the part of Travelers to avoid serving these 

communities. 

The average distance to a Travelers agent was more than 17 miles 

from ACORN neighborhoods. Bridgeport had the highest average 

distance of nearly 35 miles, New York ranked second averaging 24 

miles, and Philadelphia was third averaging more than 20 miles. 

Only in Houston and Minneapolis-St. Paul was the average under 10 

miles, averaging 8 miles each. On average, more than two thirds 

of the Travelers agents were located outside the city limits, a 

figure which is somewhat inflated by the high density of agents in 

Houston and Dallas which have very large city boundaries. The 

average without Houston and Dallas would be 20%,?and none of the 

other metro area examined had the majority of agents within its 

boundaries. 

Telephone Directory Survey 

ACORN examined the Travelers telephone listings in the major 

commercial yellow'pages in each city and surrounding suburbs and 

found that there were more listings in suburban directories than 

those in the inner city directories. In all cases, Travelers had 

very limited advertising presence. It did not purchase 

advertising space, instead listing only the company name and a 

list of its agents. In some cases the agents were set apart from 

other listings with a box. Clearly one could easily overlook the 

limited Travelers listing in a section of the phone book which is 

often thirty pages long. 

For example, there were two listings for Travelers agents in the 

Philadelphia Bell Atlantic Yellow Pages 1999 directory. One of 

those was downtown, the other was in the Northeast, a 

predominantly white and upper-middle class area of the city. 

However, there were twelve listings in the suburban Montgomery 

County and Bucks County directories. A thirty year examination of 

the county seat of Montgomery County shows Travelers increasing 

its suburban presence. In 1966, the Norristown phone book listed 

no Travelers agents, in 1978 it listed two, and in 1997 it listed 

five. 

In Chicago's Consumer Yellow Pages, there are three Travelers 

agents listed, but four are listed in the suburban Winnetka, Lake 

Forest and Oak Park directories. In Manhattan, New York, there 

are eight agents listed for Travelers, but there are only four 

agents listed in Brooklyn and none in the Queens directory. In 

comparison, there are twelve agents listed in the suburban Nassau 
county directory. There were 67 agents listed on the Travelers 

home page for Denver, but there were no listings for Travelers in 

the Central Denver US West 1996-1997 yellow pages. 

Recommendations 

. Department of Justice and Housing and Urban Development should 

start a Fair Housing investigation of Travelers agent location 

and underwriting practices along with an aggressive matched pair 

testing program and bring charges against any and all violations 

of the law. 

- The Federal Reserve should reject the application for Travelers 

to merge with Citibank. The pending merger should be rejected 

on Community Reinvestment Act grounds since neither partner has 

an acceptable service record. ACORN documented Citibank's 

record in a study released last month. 

* The state insurance commissioners should investigate Travelers 

for fair housing violations to determine whether there are 

patterns of discrimination or bias around service and underwriting 

guidelines. (. 
City by City Analysis 

Bridgeport: While there is one agent located in Bridgeport, 

there are no other agents located within twenty miles of the city. 

The majority of the agents are located in wealthy suburban areas 

including Danbury, Waterbury and Stamford. 71% of the agents are 

located in zip codes where whites make up more than 85% of the 

population. 

Chicago: Of the four Travelers agents located within the city 

border, one is in the Loop, two are on the far north side and one 

is in the southwest on the border with Burbank. The majority of 

the agents are located in the suburbs, on average 18 miles from 

downtown. There are offices in River Forest, Hinsdale, and Lake 

Bluff but none in the predominantly minority areas of the south 

side and west side of Chicago. 

Dallas: There are no Travelers' agents in the "southern sector" 

except for one office in the suburb of Cedar Hill. There are no 

offices in Oak Cliff, with a population of over 300,000. The 

southern sector is also the area with the largest concentration of 

minorities and low- and moderate-income families.* In contrast, 

the exclusive enclaves of Highland Park and University Park, where 

the average house price is three times as high as for the metro 

area, each have a Travelers agent. 85% of the Travelers agents 

are located in zip codes where whites make up more than 85% of the 

population. 

Denver: Travelers has dozens of branches in the predominantly 

white and affluent south east Denver and none in the African 

American and Latin0 areas of north and north east Denver. In 

comparison, in the mountain town of Evergreen there are three 

agents. 82% of the Travelers agents are located in zip codes 

where whites make up more than 85% of the population. 

Aouston: The Travelers offices are primarily located in more 

affluent areas of the Memorial or Galleria along with Bellaire, an 

upper middle class suburb. A few other agents are clustered in 

West Houston, another more affluent area. 64% of the Travelers 

agents are located in zip codes where whites make up more than 85% 

of the population. 

Milwaukee: Travelers agents are primarily located in the more 

affluent suburbs like West Allis, Brookfield, and Wauwatosa. None 

are located in the minority and low- and moderate-income areas. 

The average agent is located 15 miles from downtown. Every single 

agent is located in zip codes where whites make up more than 85% 

of the population. 

Minneapolis-St. Paul: The majority of Travelers agents 

wealthier and whiter suburbs including Minnetonka and Eden 

Prairie. Of the agents in St. Paul, one of the two is located in 

the posh Macalester-Groveland neighborhood. 64% of the Travelers 

agents are located in zip codes where whites make up more than 85% 

of the population. 
Hew Orleans: From a phone book survey ACORN found that 66% of 

the Travelers agents are located in zip codes where whites exceed 

85% of the population. One of the two offices located in a more 

integrated zip code is instead in a central business district with 

a markedly smaller population. ACORN made several test calls to 

Travelers agents and found that they would not provide Travelers 

policies for properties valued under $50,000, which is above many 

inner city home values in New Orleans. 

New York: The vast bulk of Travelers agents are on Long Island 

and north of Westchester County. The majority of the 20% of 

Travelers agents which are located within the five borough area 

are in downtown Manhattan. Two more are in Staten Island, one is 

in Brooklyn Heights, with two more in Brooklyn, two in the Bronx, 

and two in Flushing. 71% of the Travelers agents in the metro 

area are located in sip codes where whites make up more than 85% 

of the population. 

Philadelphia: The only Travelers agent located within the city 

limits is in the Northeast, well over three miles from the 

concentrations of African Americans in the north and west of the 

city. 98% of the agents are located in the suburbs. There are 

six agents in Bucks County's seat, Doylestown, and three in 

MOntgOmeq County's seat, Norristown. 91% of Travelers agents in 

the metro area are in zip codes where whites make up more than 85% 

of the population. 

Washington: Only two agents are located with the city boundary, 

one just north of the White House and one in Georgetown. The 

remainder of the metro area's Travelers agents are in suburban 

Maryland (College Park, Wheaton, and Bethesda) and even further 

away in Virginia (including Manassas, Woodbridge, King George, and 

Montross). Three out of four agents are located in zip codes 

where whites make up more than 85% of the population. 

i Ritter, Richard 3., "Racial Justice and the Role of the US Department of 

Justice in Combating Insurance Redlining," printed in Insurance Redlining: 

Disinvestment, Reinvestment, and the Evolving Role of Financial Institutions, 

1997. Also, Gregory Squires, William Bellows, Karl Taeuber, "Insurance 

Redlining, Agency Location, and the Process of Urban Disinvestment." Urban 

Affairs Quarterly, 1991, vol. 26, no iv, pp 567-588.