Citigroup Inc., the U.S. bank investigating a $400 million loan fraud at its Mexico unit, fired 11 people for failing to prevent or discover the wrongdoing and said more will face punishment.
The dismissals affect four managing directors, including two heads of business units in Mexico, according to a memo sent today and signed by Chief Executive Officer Michael Corbat. All 11 are based in that country, said a person briefed on the investigation who asked to remain anonymous because the information isn’t public. The New York-based bank previously fired one person.
“While our internal investigation is ongoing, we have unfortunately identified additional employees across business and functional lines whose actions or inactions failed to protect our company from this fraud,” Corbat said in the memo. More people inside and outside Mexico may be punished, he wrote.
Citigroup said in February that invoices backing loans to Oceanografia SA, an oil-services firm based in Ciudad del Carmen, were found to be fraudulent. That forced Citigroup to reduce previously reported earnings for 2013 by $235 million, casting doubt on the bank’s controls and management.
Those dismissed include the chief of risk for the institutional clients group in Mexico and the head of trade in the nation, according to a person briefed on the matter.
Federico Solorzano, the risk executive and a managing director, and Alfonso Ortega Brehm, head of treasury and trade services for Mexico, were among those dismissed, said the person, who requested anonymity because the information isn’t public. The bank also fired Emilio Granja, a managing director, and Sergio Torres, who worked under Brehm, the person said.
The four employees didn’t immediately reply to messages sent through their LinkedIn Corp. accounts and Mark Costiglio, a spokesman at Citigroup, said the company had no comment.
Citigroup has shared information with law enforcement and regulatory agencies and left it up to them to determine criminal liability, Corbat wrote. The U.S. Securities and Exchange Commission and the Department of Justice are investigating.
“We continue to believe this was an isolated incident,” Corbat wrote in his memo. “We are reviewing our controls and processes in Mexico and are strengthening any area we think falls short of our global standards and best practices.”
Corbat, 54, will spend time this week in Mexico, where he plans to show support and provide encouragement to employees, according to the memo. After disclosing the fraud almost three months ago, he repeatedly vowed to discipline anyone implicated.
“There will be accountability for those who perpetrated this despicable crime and any employee who enabled it,” he said in a Feb. 28 statement. “All will be held equally responsible and we will make sure that the punishment sends a crystal-clear message about the consequences.”
The previously fired employee left the bank’s offices with documents related to the suspected fraud, two people briefed on the incident said last month. The junior worker at the bank’s Banamex unit took invoices bearing forged signatures from an office in Ciudad del Carmen on the Gulf Coast after Citigroup discovered the fraud in February, said one of the people.
Citigroup ranks third by assets among U.S. banks. The shares dropped 9 percent this year through yesterday, compared with a 0.8 percent slide in the KBW Bank Index, and dropped 37 cents to $47.05 at 1:46 p.m. today in New York.
“Investors will like to see people being held accountable for this,” Jeff Harte, an analyst at Sandler O’Neill & Partners LP, said in a phone interview. “They may be surprised that it’s 11 people; that’s a wider net than I would have expected.”