UPDATE 1-Citadel's Griffin stepping down from E*Trade board

Fri Mar 22, 2013 9:44am EDT

March 22 (Reuters) - E*Trade Financial Corp said Friday that Citadel LLC founder Kenneth Griffin, its one-time rescuer, would not seek reelection to the bank and discount brokerage company's board.

The Citadel hedge fund, which had been E*Trade's largest investor, unexpectedly announced last week that it was selling its 9.6 percent stake in the company through a secondary offering, sparking a selloff in the stock.

Griffin, who had pushed for a sale of New York-based E*Trade, is the third member of its 12-person board to announce he will step down at its May 9 annual meeting. Chairman Frank Petrilli and director Ronald Fisher said earlier this month that they would not serve.

Petrilli is being replaced by former Fidelity Investments President Rodger Lawson, who had been lead director last year.

The departures coincide with the exits of several E*Trade executives, including marketing chief Nicholas Utton, who have left since Paul Idzik took over as chief executive officer in February. Idzik is the company's seventh CEO since 2007.

Griffin led Citadel's investment of $2.6 billion in E*Trade in 2007, when it was flirting with bankruptcy as a result of troubled mortgage loans and its shares were trading below $1. Sources said his investment, which included senior notes paying 12.5 percent, yielded well over $800 million for Citadel.

Citadel sold its final stake of 27.3 million shares through Citigroup at $11.28 each. Shares of E*Trade, which did not receive any proceeds from the offering, were up 0.8 percent at $10.72 in early trading.

E*Trade has not announced new nominees to replace the departing board members.

A couple walks along the rough surf during sunset at Oahu's North Shore, December 26, 2013. REUTERS/Kevin Lamarque

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