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Citigroup Employee Questioned by Mexican Police Over Alleged Fraud

March 4, 2014

Citigroup Inc. employee was questioned by Mexican police as a suspect in the alleged theft of $400 million taken from their bank, according to WSJ.Whichever employee stole the money appears to be jnior at the company and worked for the bank’s Mexico unit, Banco Nacional de Mexico or Banamex.

The employee isn’t currently in police custody, the person added. It wasn’t clear whether the person is still working for Citigroup or when the questioning occurred.

Meanwhile in the U.S., the New York field office of the Federal Bureau of Investigation is reviewing the matter for any possible criminal violations, according to a person familiar with the matter. The questioning of a Citigroup unit employee in Mexico and the growing regulatory scrutiny in New York are the latest steps in what has already been an intense investigation for the third largest bank in the U.S. by assets.

On Feb. 11, Citigroup learned that a lending client, Mexican oil-services company Oceanografia SA de CV, had been suspended from being awarded new Mexican government contracts, a statement released by the bank said.

That spurred the bank to begin its own investigation into its dealings with the company. The bank learned on Feb. 20 that Oceanografia allegedly had submitted nearly $400 million of fraudulent invoices for short-term credit from Citigroup that were processed by a bank employee, according to the statement and an internal company memo reviewed by The Wall Street Journal.

The invoices were submitted to finance money that was owed by Mexican state-owned oil company Petróleos Mexicanos, or Pemex.

Oceanografia is an important supplier to Pemex.

Under the agreement between the contractor and the bank, Oceanografia transferred its accounts receivables to Banamex in exchange for cash. That way, Pemex would essentially pay Banamex as the contracts were fulfilled.

The bank had extended a total of $585 million in short-term credit to Oceanografia as of the end of 2013.

The bank said Friday that it was forced to revise downward its fourth-quarter and full-year results by about $235 million, after tax, as a result of the alleged fraud.

The person familiar with the matter said the bank notified Mexican police when it suspected the money had been stolen.

The bank noticed “oddities” coming from one of its own employees, said the person, who declined to elaborate.

The person added that bank officials are looking into the possibility that there may be more than one Banamex employee involved in the alleged fraud, because the person they have focused on is relatively low in the organization and the nature of the alleged fraud was complex. The bank also is speaking with former Banamex employees who may know something about the alleged fraud, the person said.

Mexico Attorney General Jesús Murillo Karam said that the government had seized control of Oceanografia to preserve records and maintain operations as officials investigated the alleged fraud. He said that a preliminary investigation found “inconsistencies in documentation,” but that no arrests had been made.

Pemex said it has no information on details of the investigation but is cooperating. A representative of Oceanografia didn’t respond to requests for comment.

Citigroup’s Banamex unit has been working with Mexico’s attorney general to bring any responsible parties for the loss to justice.

“I can assure you there will be accountability for those who perpetrated this despicable crime and any employee who enabled it, either through lax supervision, circumvention of our controls, or violating our Code of Conduct,” Citigroup Chief Executive Michael Corbat said in a statement.

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Original article and facts courtesy of WSJ.