Citi says no to $45 million jet

Treasury Department disapproves of Citigroup's plan to spend $45 million on a corporate jet after receiving TARP funds.

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By Ed Henry, CNN White House Correspondent

What is hurting you the most?
  • Housing meltdown and foreclosures
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WASHINGTON (CNN) -- Citigroup reversed course Tuesday, a day after a Treasury Department official called the struggling company and "told them it was unacceptable" to accept delivery of a new $42 million corporate jet, a senior administration official said.

The move comes as new Treasury Secretary Timothy Geithner tries to quickly bring more accountability and oversight to the much-maligned TARP program he now oversees.

Under that program, Citigroup has already received some $45 billion in government bailout funds, which is why a New York Post report about the scheduled delivery of the new jet sparked outrage.

White House Press Secretary Robert Gibbs said Monday the president believes private jets aren't "the best use of money at this point" with America facing a financial crisis.

Citibank spokesman Michael Hanretta told CNN Tuesday the company has "no intent to take delivery of any new aircraft."

This came after the company initially said on Monday it could not comment on whether it was purchasing the jet, citing security reasons. Hours later it reversed course, issuing a statement saying it signed a contract in 2005 for a replacement aircraft as part of a plan to reduce the number of planes it owns and cut operating costs. "Refusing delivery now would result in millions of dollars in penalties," it said. "Citi is exploring all its options for these assets, including the potential sale or lease of the aircraft."

Citigroup (C, Fortune 500) paid $42 million for the corporate jet, according to a source familiar with the situation. The company will get most of that money back, but is likely to have to pay a penalty in the range of $3 million to $4 million, the source told CNN. The exact amount and terms were still being negotiated.

The luxury jet that was to be purchased is a Dassault Falcon 7X, which seats 12. It is so exclusive that Dassault says only 21 are operating around the world. It said the price is listed at $45 million.

-- CNN's Mary Snow and Emily Anderson contributed to this report.

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