Visa resumed its defense in the antitrust trial Monday, and once again testimony centered on the role that John Reed, the former Citigroup Inc. chairman and chief executive officer, played in the battle between Visa and MasterCard.

The card associations have repeatedly cited as the truest sign of their intense competition Citigroup's decision to move over to MasterCard after Visa declined to change policies as Citi had asked.

Carl Pascarella, Visa U.S.A.'s president and CEO, testified Monday that Mr. Reed's public spat with Visa, which culminated in 1998 with the shift in allegiance, marked "the most difficult" in his 17 years at the card association.

Earlier in the trial witnesses spelled out some of the other behind-the-scenes maneuvers by Mr. Reed that were aimed at taking more direct control of policies at the associations. In one such instance, Discover president David Nelms testified, Mr. Reed floated the idea of a joint bid to take over MasterCard outright.

In Monday's testimony, Mr. Pascarella said that Mr. Reed asked him in December 1997 to attend a meeting in New York with the chief executives of six major banks: First Chicago, Bank of America, NationsBank, Bank One, Chase Manhattan and Citi. All of the banks except Chase were members of Visa's board, and Mr. Pascarella said they accounted for 65% of Visa's volume.

The group of banks wanted to make changes in matters ranging from Visa's branding strategy to product development and membership fees.

"I went to the meeting with a lot of concern," Mr. Pascarella said. "This was the life blood of Visa, and they were challenging me."

The challenge, spearheaded by Mr. Reed, included the idea of establishing a completely new network. In a letter from Mr. Reed to Hugh McColl, his counterpart at NationsBank, in April 1998, he wrote, "If a number of us want to get together we can create a new network, and gain full merchant acceptance."

During this time, Visa met extensively with its member banks to hear if they agreed with these ideas, and Mr. Pascarella said he was relieved to find out that they did not.

"John was clearly at one pole, Hugh was one closer to him, but everyone else understood the value Visa brought as a brand," Mr. Pascarella said.

Some changes were made. In June 1998, Visa USA reduced its board from 17 to 10, and offered board representation to any bank with over 10% of volume.

But the Visa board did not vote for the changes that Citi required - namely the chance to increase its own brand presence by moving Visa's name to the back of the card.

Citibank subsequently resigned from the Visa board and signed an agreement to move its card base to MasterCard, generally perceived as the more flexible association.

Mr. Pascarella said these events were the catalyst for "the overall guided principles for the partnership program we have today."

Both Visa and MasterCard now have programs in place offering banks incentives to shift their portfolio to one brand over an allotted period.

In cross-examination, lead prosecutor Melvin Schwarz returned to the topic of rule 2.10e, a provision barring Visa member banks from issuing American Express or Discover cards that has been a main focus of the Justice Department's case. He asked Mr. Pascarella about several occasions in which large member banks approached the association about overturning the rule. In addition to Citibank, he cited a case in 1993 when Bank One made a similar request.

"At that time Bank One was in talks with Amex about some business opportunities," Mr. Pascarella said. "Bank One wanted to know if we were flexible."

Though the bylaw was not altered, Mr. Pascarella said, Visa took the request seriously. "When you have a large member who asks for your help on something, you certainly respond to it."

The Justice Department contends that MasterCard and Visa compete only in superficial ways, because they are both owned and governed by the same banks. It also contends that they established these programs only after it launched its investigation; Visa has worked to prove this incorrect.

Mr. Pascarella said the partnership program - which in most cases calls for a bank to shift 90% of its portfolio to Visa - has "given us the opportunity to reenergize our relationships with banks."

"We've got de facto nonduality, " he said.

Visa also used Mr. Pascarella's testimony to unveil American Express' agenda in CEO Harvey Golub's well-known speech to banks in 1996. Mr. Golub had urged banks to consider whether Visa's sports sponsorships and cobranding deals were a help to banks.

At the same time, Mr. Pascarella said, Visa and Amex were engaged in a bidding war for the prized NFL sponsorship, which Visa won, and a cobranding deal with Delta Airlines, which Amex won. After Mr. Golub's speech, Visa sent its employees to visit banks across the country to gauge their opinion.

"Based on their feedback, we felt there was no reason to change 2.10e," Mr. Pascarella said.

In an appeal to circumvent possible remedies that Judge Barbara S. Jones might be considering in this case, Mr. Pascarella was asked to describe the effect that an end to bylaw 2.10e would have on the card industry.

"Amex would come in and go after select banks and select products even at select banks," he said. "We've done everything we can at Visa to separate ourselves from the MasterCard brand. This would send a message that everyone can do what they want and dilute the brand."

In answer to another remedy the judge might order, which would force only the governors of Visa and MasterCard's board to remain loyal to that brand, Mr. Pascarella said, "Why then would a bank want to sit on Visa's board?"

Such a decision would create "a schism between what board banks would be doing and what others in Visa would want," he said.

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