Deconstructing the Money-Honey mess

NEW YORK (Fortune) -- If you were scripting a Wall Street movie, what kind of characters would you include? Perhaps a perfectly tanned, hard-charging executive with a reputation for wearing his ambition on his sleeve, or a struggling CEO stuck in the shadow of his predecessor, or a glamour-puss anchorwoman who worked her way from cloakroom girl to worldwide celebrity, or a Saudi prince, or a billionaire media magnate plotting a new power play? Add a corporate jet and whispers of shenanigans at 35,000 feet, and you've got a certified blockbuster.

That, of course, describes the saga of Maria Bartiromo and Todd Thomson. And if the story hasn't been optioned yet, well, it's at least been a tabloid smash - as well as the talk at every power-broker venue from the ski slopes of Davos to the swankiest restaurants of Midtown Manhattan. There's reason for the resonance: It's a tale that offers a revealing peek into some of today's more intriguing corporate dramas.

Citigroup chief executive Charles Prince is still struggling to connect with investors.

CNBC anchor Maria Bartiromo on the NYSE floor

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On Jan. 22, Thomson, the chief of Citigroup's wealth-management unit, was publicly axed by Chuck Prince, the company's embattled CEO, for inappropriately showering corporate resources on Bartiromo, CNBC's "Money Honey." Wild rumors flew: Maria and Todd were a longtime couple; she was a frequent flier on the Citi jet; he had kicked other execs off the plane to be with her on a flight from China. Plus, he had a spending problem - his palatial Manhattan office (the "Todd Mahal") had a wood-burning fireplace, a tropical fish tank, and a one-of-a-kind chandelier.

The story forced Bartiromo's bosses to stand by their anchorwoman. In Davos, NBC Universal's Bob Wright came out to defend Bartiromo's journalistic integrity just days before he was to announce his own retirement. Jeff Immelt of NBC parent GE (Charts) weighed in too. "Substantially, I don't think she did anything wrong," he said.

For Jeff Zucker, tapped to succeed Wright, the scandal became a distraction. The Money Honey is CNBC's biggest star, the cable network is coming off its best year ever, and Bartiromo has long been rumored to be considering a defection to Fox. Right on cue, on Feb. 8, News Corp.'s (Charts) Rupert Murdoch formally announced that the long-anticipated Fox Business Channel would debut in the fall, and he took direct aim at CNBC: "We have to recruit some money honeys," chuckled Murdoch. Coincidentally (or not), his usually aggressive New York Post has mostly held fire on Mariagate.

If the brouhaha put pressure on Zucker, it gave some cover to Citi's Prince. Coincidentally (or not), the news broke just three days after the bank reported its latest batch of less-than-stellar earnings. And while beat reporters claimed that some of the initial story's tastiest details were confirmed by Citi, many of them turned out to be exaggerated or false: Thomson's exotic fish tank had just nine goldfish, for instance. And according to flight records obtained by Fortune, no Citi execs were kicked off the plane on the way back from China.

"Sure, it's a fascinating soap opera," says Sanford C. Bernstein analyst Howard Mason. "It's so fascinating, in fact, that no one is looking at the company's financials anymore. All [investors] want to talk about is sex on planes."

Since Prince took the helm from longtime mentor Sandy Weill in 2003, Citi (Charts) has lost significant ground to rivals as its expenses soared and its stock sagged. In 2006, earnings fell 12 percent, to $21.5 billion, while rival Bank of America (Charts) saw its earnings surge 28 percent, to $21.1 billion.

Prince may have taken a cue from an old executive playbook: If you want to send a message, hang someone in the public square. Out-of-control expenses were recently singled out as a problem by one of Citi's largest shareholders, Saudi Prince Alwaleed bin Talal. Thomson became Exhibit A in a public effort to cut costs. But while it appeared Thomson was fired for his flashy behavior, his rift with the CEO was much deeper.

About a year into Prince's tenure, he moved Thomson out of the CFO slot and put him in charge of the wealth-management business. Thomson, who made no secret of his aspiration to be CEO, often clashed with his boss on strategy.

In one big blowup last summer, Thomson said Citi should expand into retirement services. Prince disagreed. And Thomson's subsequent criticism got back to Prince. "That was the beginning of the end," says a former senior Citi executive.

Thomson's public friendship with Bartiromo cemented his fate. Many at Citi thought Thomson was leaking internal gossip to her, including speculation that the board was unhappy with the CEO. In early December, Prince told Thomson to stop spending company money on her. (CNBC says it both preapproved and paid for her flights.) A month later Thomson told Prince he had signed Citigroup up to sponsor a $5 million Sundance Channel series featuring Bartiromo, among others. Within days, Prince fired him.

How does the movie end? Thomson would only say his performance record at Citi speaks for itself, and he's confident "people will see through the smokescreen." Maybe a lucrative private-equity job is in his future. Meanwhile, Bartiromo's name recognition is higher than ever.

As for the Citi CEO, alas, he can't count on the helpful distraction lasting much longer. As analyst Mason says, "Prince will keep his job if earnings improve. It's that simple."