"Mexico issues arrest warrants in Citibank case" by Elisabeth Malkin and Michael Corkery | New York Times June 02, 2014
NEW YORK — Mexican authorities have issued arrest warrants for former executives of Citigroup’s Mexican subsidiary, Banamex, in an investigation of a $400 million fraud scandal.
Attorney General Jesús Murillo Karam of Mexico confirmed Friday that authorities were seeking the former executives. He declined to say how many were involved.
“Yes, there are warrants, but I won’t say who,” Murillo Karam told reporters.
Why not?
The fraud involved a politically connected marine oil services company, Oceanografía, which borrowed $585 million in short-term loans from Banamex against contracts it said it had with Pemex, Mexico’s state-owned oil monopoly. A Banamex investigation determined that $400 million of those contracts did not exist only after Mexico’s federal comptroller barred Oceanografía from doing further business with the government.
The head of Oceanografía, Amado Yáñez Osuna, was arrested Wednesday on fraud charges. Murillo Karam confirmed that his bail had been set at about $6.2 million.
In response to questions, Murillo Karam declined to say whether authorities were seeking additional employees of Oceanografía or Pemex.
Citigroup is aware of the warrants, but Mexican authorities have not told the bank who is named, said someone briefed on the matter who was not authorized to speak on the record.
The bank fired 11 people about two weeks ago, including four managing directors, and later took disciplinary action against additional employees at Banamex, the person said.
At the time, Citigroup’s chief executive, Michael L. Corbat, said that the fired employees’ “actions or inactions failed to protect our company from this fraud.”
A 12th employee, who worked at a regional branch near Oceanografía headquarters on the Gulf Coast of Mexico, was fired and arrested in February, shortly before the fraud was made public, but was released on bail and has disappeared.
The bank is likely to take disciplinary action against other employees, including some in the United States, before it completes its internal investigation into the fraud, said the person briefed on Citigroup’s investigation.
I find it interesting that banks are allowed to investigate themselves before the authorities step in.
A Citigroup spokesman declined to comment.
The fraud involved Banamex’s accounts receivable program with Oceanografía, which did almost all its business with Pemex.
Banamex would advance short-term credit to Oceanografía based on invoices from Pemex that the oil company would then repay. But Banamex’s internal review found that most of the invoices had been falsified.
Banamex accounts for 13 percent of Citigroup’s revenue and has been an important part of its global portfolio. But the Oceanografía scandal has tarnished its reputation, prompting criminal and regulatory investigations in Mexico and the United States.
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