The surprise resignation of Citigroup CEO Vikram Pandit last week seemed suspect to many observers, but a new report in The New York Times explains how Pandit was actually given an unsavory choice: Quit or be fired. The story by Jessica Silver-Greenberg and Susanne Craig makes the case that the chairman of Citi's board, Michael O'Neill, had been plotting Pandit's overthrow for months and then dropped the bombshell on him last Monday, just as Pandit was enjoying his first good news in a long while. 

The story opens with a scene right out of a dramatic movie about a guy whose life is about to be turned upside down. Citi had released its quarterly earnings report that morning and Pandit went to the Chairman's office for their regular meeting, expecting a hearty pat on the back:

Instead, Mr. Pandit, the chief executive of Citigroup, was told three news releases were ready. One stated that Mr. Pandit had resigned, effective immediately. Another that he would resign, effective at the end of the year. The third release stated Mr. Pandit had been fired without cause. The choice was his.

Pandit obviously chose option one, stunning Wall Street with the news the next morning. Before he could even clean out his desk, three other board members also went to his chief ally and COO John Havens and gave him the same deal. Havens chose to resign too. The two men had been railroaded by O'Neill, who orchestrated the coup from the inside, privately collecting other board members who were unhappy with the CEO, "then drawing in others until Mr. Pandit had virtually no allies left." 

The plan had been in place almost from the moment O'Neill became chairman earlier this year, and slowly came to fruition over the summer. O'Neill even recalled Michael Corbat, Pandit's eventual successor, from the London office (while Pandit was out of the country) telling Corbat he might soon be called on to take the helm. However, it's likely the plan goes back even further that, perhaps even to 2007, when Pandit beat out O'Neill to win the CEO job.

Not only have the heavy-handed tactics stunned outside observers, but other executives at Citi are now concerned for their own futures. After all, Pandit had taken the thankless job of shepherding the bank through the financial crisis and done reasonably well at it. Now the board looks vindictive and petty and there are fears of a talent drain from those who might decide they don't want to end up being treated like their old boss was. Today's other bit of bad news—a $2 million fine for an analyst who leaked classified information about the Facebook IPO—won't help morale either. Both the analyst and his boss have been fired.

There is also the matter of whether Citi was wrong to tell the world that Pandit resigned when he was clearly fired. Business Insider's Henry Blodget argues that Citi's public announcement may have technically been true, but at its heart their press release was "basically fraud". Investors have been misled by this shady behavior and now that the truth is out, how can they trust the bank in the future? Can the bank even trust itself?