Dec. 17 (Bloomberg) -- Citigroup Inc. Chief Executive Officer Vikram Pandit appointed Don Callahan, his former colleague at Morgan Stanley, to replace the bank's departing chief administrative officer.

Callahan, 51, will be responsible for marketing, corporate affairs and operations and technology, Pandit wrote today in an internal memo confirmed by Shannon Bell, a spokeswoman for the New York-based bank. David Bushnell, 53, held the position for three months after being appointed in September by former CEO Charles O. ``Chuck'' Prince, who was ousted on Nov. 4.

Pandit, promoted last week to replace Prince, is lining up new management while embarking on his promised ``front-to-back'' cost review of all the bank's business units. Callahan was an ally at Morgan Stanley, where Pandit spent 22 years before quitting in 2005 amid a power struggle under then-CEO Philip Purcell.

``Don has been a close business partner of mine for many years and will help me drive our agenda for change at Citi,'' Pandit, 50, wrote in the memo.

Citigroup, which has lost 45 percent on the New York Stock Exchange this year, gained 7 cents today to $30.77 in composite trading at 4 p.m.

Pandit joined Citigroup in July as head of alternative investments after selling his hedge fund, Old Lane LP, to the bank for $800 million.

Morgan Stanley Job

In September, prior to the series of promotions that brought him to the top post, Pandit hired Callahan as chief administrative officer of the alternative investments business. Callahan worked at Morgan Stanley from 1993 to 2006, when he quit to join Credit Suisse Group. At the Swiss bank, he oversaw marketing to private-wealth and fund-management clients.

Callahan is one of at least three of Pandit's former associates from Morgan Stanley to take on management roles at Citigroup. Others include John Havens, who succeeded Pandit as head of the alternative investment business, and Guru Ramakrishnan, now CEO of Old Lane, which remains as a hedge fund managed within the alternative investments unit.

Citigroup announced the retirement of Bushnell on Nov. 16, the same day the bank stripped him of his additional role as chief risk officer.

The company had warned earlier in the month that it might have to record more than $8 billion of writedowns in the fourth quarter because of falling prices for investments in subprime mortgages and related securities known as collateralized debt obligations.

Lewis Kaden

Bushnell took over as chief administrative officer on Sept. 6 from Lewis Kaden, who stayed at the bank as a vice chairman. Now, Kaden will get back some of his old responsibilities, including personnel and the legal department, according to Pandit's memo.

Kaden, 65, will share responsibility for corporate strategy and acquisitions with Chief Financial Officer Gary Crittenden. He also will oversee the bank's Japanese business, with Citi Japan CEO Doug Peterson reporting to him.

Chief spokeswoman Leah Johnson will now report to Callahan under his new responsibility for corporate affairs. She previously reported to Nicholas Calio, who was chief global public affairs and communications officer. Calio retains his job as head of government affairs, reporting to Kaden, according to the memo.

To contact the reporter on this story: Bradley Keoun in New York at bkeoun@bloomberg.net.

Last Updated: December 17, 2007 16:17 EST