NEW YORK — Citigroup disclosed Wednesday it had fired 12 employees in Mexico, including some senior executives, in connection with a $400 million fraud involving a Mexican oil services company.
In an internal memorandum to Citigroup employees, the bank’s chief executive, Michael L. Corbat, revealed the terminations. Two of the fired executives were business heads at the bank’s Banamex unit.
“Additionally, before our investigation concludes, we expect that several other employees, both inside and outside of Mexico, may receive forms of disciplinary action as well,” Corbat said in the memo.
Only 1 of the 12 employees — a lower level worker — had been fired earlier by the bank and arrested by authorities in Mexico around the time the bank first disclosed the fraud in February.
The bank fired the other 11 Banamex employees “for not doing enough to protect the company” from the fraud, Corbat said in his memo. Citigroup’s investigation had not turned up any evidence that the 11 employees had benefited from the fraud, through bribes or other means, according to a person briefed on the matter.
The fraud involved a short-term loan that Banamex extended to the oil services firm Oceanografía, which the company could not pay back. Oceanografía, whose business is almost entirely dependent on the Mexican government’s oil monopoly, has had a history of financial trouble and has been accused of having political ties to the ruling elite.
See: GMOs Killed the Mexican Monarchs
Citigroup has not fired any employees based in the United States in connection with the fraud, though the bank’s investigation is continuing, people briefed on the matter said.
Citigroup has turned over the early results of its examination to prosecutors in Mexico.
The fraud has also sparked an investigation in the United States, overseen by the FBI and prosecutors from the US attorney’s office in Manhattan. That investigation is focusing in part on whether holes in the bank’s internal controls contributed to the fraud.
The bank also faces a parallel civil investigation from the Securities and Exchange Commission’s enforcement unit.
In an acknowledgment of the lax controls on its accounts receivables program — under which the bank gave short-term credit to Oceanografía backed by invoices from Pemex, Mexico’s state-owned oil monopoly — that program has been restructured with stronger controls, according to a person familiar with the matter.
Banamex discovered the fraud when it checked the invoices with Pemex and found that some of them were fraudulent.
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The Globe's Mexico coverage has been leaving me a bit sour lately. Sorry.
NEXT DAY UPDATE: Mexico arrests businessman in Citigroup fraud case
NEXT DAY UPDATE: Mexico arrests businessman in Citigroup fraud case
