In an annual filing on Monday with the U.S. Securities and Exchange
Commission, the company said the probe includes subpoenas from the
U.S. Attorney's Office for the District of Massachusetts.
Citigroup, the third-largest U.S. bank by assets, also said Banamex
USA had received a subpoena from the U.S. Federal Deposit Insurance
Corp, a civil agency.
The criminal probe follows other problems that have surfaced with
Banamex, which operates Citigroup's largest single consumer bank
outside of the United States and has been portrayed by the company
as a model of its global strategy.
Separately, Citigroup disclosed it had received a grand jury
subpoena seeking information about two mortgage securities that were
issued in the middle of 2007.
It is the first time the bank has raised the prospect of involvement
in a criminal case concerning the sale of mortgage bonds prior to
the 2008 financial crisis. Reuters had reported in December that
U.S. authorities were preparing civil fraud charges against
Citigroup over the sale of flawed mortgage securities.
The bank also said on Monday it had received several subpoenas and
requests for information from several state attorneys general and
the SEC about its mortgage bond business.
Mexico's banking regulator said on Monday it is also investigating
whether Banamex committed crimes or flouted regulations.
"Inside Banamex we are looking at the documentation that they
provided and the operation of the whole bank to determine these
possible crimes or deviations from the regulations," Jaime Gonzalez,
president of the Comision Nacional Bancaria y de Valores (CNBV),
said in an interview on Mexico's Radio Formula.
Gonzalez said he hoped to have conclusions from the investigation in
two to three weeks.
Citigroup disclosed on Friday that it had discovered at least $400
million in fraudulent loans in its Banamex subsidiary in Mexico and
said employees might have been involved in the apparent crime.
[to top of second column]
Law enforcers from the Mexican Attorney General's office and from
the U.S. Federal Bureau of Investigation and SEC are investigating
the transactions, people familiar with the probes have said.
Banamex made the loans to Mexican oil services company Oceanografia
on the basis of payments due for services provided to Mexican
state-owned oil company Pemex.
But Citigroup said it could not validate that Pemex owed $400
million to Oceanografia, or more than two-thirds of the invoices it
had used as collateral for its loans.
In the third quarter of 2013 problems with about $300 million of
loans that Banamex had made to three Mexican homebuilders prompted
Citigroup to book reserves for expected losses.
Citigroup Chief Executive Michael Corbat called the incident a
"despicable crime" when it was first disclosed and said then the
bank believes it was an isolated episode. He also said that criminal
actions by Mexican authorities might allow Citigroup to recover
Because of the fraud, Citigroup said it reduced after-tax net income
by $235 million, or 7 cents a share, from the $13.9 billion, or
$4.42 a share, it had announced in January.
Citigroup shares fell 1.9 percent to $47.70 late Monday afternoon in
(Reporting by David Henry and Jonathan
Stempel in New York, Christine Murray in Mexico City and Aruna
Viswanatha in Washington; Editing by Lisa Von Ahn, Sofina Mirza-Reid
and Richard Chang)
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