Citigroup Inc's contract with an energy trader who may be owed up to $100 million in compensation this year is exempt from rulings by the Obama administration's pay czar, a source close to the bank said on Wednesday.

While pay czar Kenneth Feinberg has authority over Citi's 100 top-paid employees' -- and Hall surely ranks among those -- the source said Hall's contract will be exempt from review because it was signed before a cut-off date of February 11, 2009.

But not everyone who has examined the issue agrees that trader Andrew Hall's contract will escape scrutiny. A separate source familiar with the matter told Reuters Feinberg will have flexibility in applying his authority on a case-by-case basis, potentially impacting future outsized payments to employees.

As the debate raged over what power the pay czar will possess, two leading U.S. lawmakers warned on Wednesday of signs that companies bailed out by taxpayers were resuming risky pay practices and urged the Obama administration to act on limiting bonuses.

The warning arrived two days before Feinberg is expected to begin reviewing compensation structures at several companies that received bailouts, including Citi, which has taken $45 billion from the U.S. Treasury's Troubled Asset Relief Program, known as TARP.

Congress and taxpayers alike are rightly alarmed that companies would enrich their executives while deferring repayment of the federal financial assistance that helped them avoid financial catastrophe, House of Representatives Speaker Nancy Pelosi and Representative Barney Frank, both Democrats, said in a letter to U.S. Treasury Secretary Timothy Geithner.

Feinberg has been consulting with seven companies that have yet to pay back money they borrowed from the government, including Citigroup, American International Group Inc, Bank of America Corp, Chrysler Financial, Chrysler Group LLC, General Motors Co and GMAC Inc, a Treasury spokesman has said.

PAY FLEXIBILITY

According to compensation rules announced in June, TARP recipients are permitted to make bonus payments required under written contracts executed on or before February 11.

The source close to Citigroup said that clause in the rules would apply to Hall, the top trader at Phibro LLC, the bank's Connecticut-based energy trading arm, which has become famous for outsized profits in the oil markets.

Citigroup declined to comment about its submission to the pay czar, but said in a statement that Phibro operates under a pay-for-performance contract, with compensation determined by year-end profits produced by the unit.

A Treasury spokesman said the department would not comment on the pay reviews of individual companies.

Laura Thatcher, who leads law firm Alston & Bird's executive compensation practice in Atlanta, said she expects that the rules will allow flexibility for Feinberg to revisit Hall's contract, should he so choose.

Compensation of that size -- you would think he would be looking at it, Thatcher said.

The source familiar with the matter said a whether a contract is considered grandfathered under the rules depends on a case-by-case review.

The pay czar can't force a TARP recipient to break a contractual obligation that is grandfathered under the statute, but he can consider payments under those contracts when determining what future payments to approve for that employee, the source said.

Treasury officials have said Feinberg will have broad authority to ensure appropriate compensation, although he cannot force companies to break contractual obligations not covered by rules that govern pay restrictions.

Last month, White House spokesman Robert Gibbs responded to questions about Hall's possible pay package, saying: One could easily come to the conclusion that that's probably a bit out of whack on any pay scale.

(Reporting by Steve Eder; additional reporting by David Lawder, Karey Wutkowski and Kevin Drawbaugh in Washington; editing by Gerald E. McCormick and Andre Grenon)

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