Citi dumping energy trading unit

NEW YORK (CNNMoney.com) -- Citigroup announced Friday it had struck a deal to sell its Phibro energy trading business to Occidental Petroleum, a move that will likely reduce scrutiny about the compensation of the division's top trader.

While the New York City-based bank declined to disclose the terms of the deal, Occidental (OXY, Fortune 500) said its net investment would be about $250 million.

There had been speculation in recent weeks that Citigroup (C, Fortune 500) was actively shopping the unit in an effort to deflect any potential political anger over a potential $100 million payday for its star trader Andrew Hall.

Citigroup, as well as other banks that were bailed out by the U.S. government on more than one occasion last year, are currently having pay packages of its top executives and most highly compensated employees reviewed by Kenneth Feinberg, the Obama administration's so-called "pay czar."

Occidental, whose business centers on oil and gas exploration and production, is not subject to government scrutiny over compensation. Still, the energy giant said Friday it would defer "significant portions" of any current or future bonuses generated within Phibro.

Hall and other members of Phibro's management team will remain with Phibro after the acquisition is completed by the end of the year, Occidental said.

Phibro has been a profit machine for Citigroup recently, even as the bank has been hit by big losses tied to mortgages and other toxic assets. Over the past five years, the division averaged approximately $371 million in pre-tax earnings a year, according to Occidental.