Mexico Accuses 10 Citi Workers in Probe, Reforma Says

Mexico has accused 10 current or former Citigroup Inc. employees in connection with a fraud probe involving loans to oil-services provider Oceanografia SA, Reforma reported.

The people include former senior executives of the bank’s Banamex unit who are suspected of helping Oceanografia engage in the fraud, the Mexico City-based newspaper reported today, citing internal case documents. Three people were arrested at the direction of the Attorney General’s office, Reforma said.

Citigroup, which disclosed the $400 million fraud in February and is conducting its own investigation, said it reduced last year’s profit by $235 million. The New York-based bank dismissed at least a dozen employees in connection with the case. Oceanografia Chief Executive Officer Amado Yanez was arrested on charges related to the fraud and posted bail last week of at least 80 million pesos ($6.1 million).

Banamex agreed to make the loans secured by promises the bank would be repaid by Petroleos Mexicanos, the state-owned oil company for which Oceanografia was doing work. Most of the loans were supported by fraudulent invoices, Citigroup said in February.

Strengthening Mechanisms

Some Banamex employees reached a September 2012 agreement with Yanez to add a clause to a contract releasing the bank from responsibility for verifying whether Oceanografia’s documents were valid, Reforma reported, citing the documents.

Paulo Carreno, a Banamex press official, declined to address a question about the Reforma article during a press conference called to highlight the bank’s commitment to social and community programs.

Banamex officials also were asked about the bank’s response to a recent credit-rating downgrade by Moody’s Investors Service, which cited the alleged fraud and the potential for further risk-management issues.

“We have the confidence that the actions that we’re taking were actions sufficient to strengthen the different mechanisms that we’re operating,” said Jose Maria Zubiria, a corporate director of administration for Banamex.

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