Citigroup Inc., soon to be one-third owned by the U.S. government, is asking the Treasury for permission to pay special bonuses to many key employees, according to people familiar with the matter.

The request comes as Citigroup is grappling with broad government pay restrictions that could break apart its legendary energy-trading unit. People at that unit, Phibro, are threatening to leave because of pay caps tied to the U.S. bailout of Citigroup. Phibro has been the source of hundreds of millions of dollars in profits for the bank, and has paid out hefty compensation to its employees, including a roughly $100 million windfall last year for the unit's leader, Andrew Hall. Citigroup is looking for ways to free Phibro from the federal restrictions, including a spinoff of the unit, according to people familiar with the matter.

Meanwhile, Citigroup is trying to get U.S. approval for special bonuses for many employees in the rest of the company. In a meeting earlier this month with Treasury Secretary Timothy Geithner, Citigroup Chief ****utive Vikram Pandit made the case for the stock-based bonuses. ****utives are describing the bonuses as "retention" awards designed to perk up demoralized employees who the company worries are vulnerable to poaching by rival firms, people familiar with the matter said.

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