Executive Turnover at Citadel Creates Opportunity Tinged With Peril

Citadel's latest high-level departure opens more than an opportunity for a seasoned executive to fill the role of securities division chief vacated by Patrick Edsparr this week. It also opens a window on the two-way risk of casting one's lot with an employer where management turnover is a way of life.

"Citadel always had tremendous turnover," says investment banking headhunter Richard Lipstein of Boyden Global Executive Search. He says Edsparr's departure and those of at least three business-unit heads since last October repeat a pattern that became evident some years ago when Citadel built a technology equity fund operation in California.

"It's a great firm, they do marvelous things, and are reasonably well managed," adds Lipstein, who has never recruited for Citadel. However, "Turnover has always been part of the growth of the firm."

Successor Probably Will Be in New York

The Wall Street Journal reported Tuesday that Edsparr was forced out after clashing over corporate strategy and culture with Ken Griffin, CEO of Chicago-based parent Citadel Investments, and Chris Boas, head of capital markets for Citadel Securities. The firm is "in discussions about doing an external search to fill the job," the WSJ says.

While Edsparr ran Citadel Securities from London, his successor will likely be based in New York, the division's headquarters. "Citadel Securities is a rapidly growing, client-facing business that is best served by highly engaged, U.S.-based leadership," a spokeswoman told Bloomberg News.

Edsparr joined Citadel as global head of fixed income and head of the European business in July 2008 after 12 years at JPMorgan Chase, where he had led foreign-exchange operations, proprietary trading and principal investments. He was named CEO of Citadel Securities business last October when predecessor Rohit D'Souza left just a year after coming over from Merrill Lynch.

Other recent high-profile departees include investment banking head Todd Kaplan in January and institutional markets head Peter Santoro in December.

Management turmoil hasn't stopped Citadel from seizing a foothold in underwriting and trading high-yield debt and other corporate securities, at a time when many large global institutions retreated amid the financial crisis. Citadel reportedly has hired more than 50 bankers in the past two years to serve some 500 institutional customers, and also has moved into mortgage-backed securities.

Meanwhile, the parent company's mainstay $12 billion hedge fund operation reportedly has yet to recoup all its 2008 losses. It's also had difficulty lately raising money for new funds, according to the WSJ.