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SEC
investigates Citigroup over fraudulent Mexican loans: source
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[March 03, 2014]
NEW YORK (Reuters) — The U.S.
Securities and Exchange Commission is investigating Citigroup for
accounting fraud after it disclosed bogus loans in its Mexican
Banamex unit, a source familiar with the investigation said.
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 The securities regulator is also examining whether Citigroup
violated the Foreign Corrupt Practices Act, the source said.
An employee at Banamex has been questioned by Mexican police after
being suspected by the bank of involvement in the loan scheme,
another source familiar with the police investigation said.
It was unclear whether more than one person was involved, that
source said.
Citigroup said on Friday it had found $400 million in bad Banamex
loans and was reducing its full year profit by $235 million to
$13.67 billion, after the bank had first reported its 2013 earnings
more than one month ago.
The source familiar with the SEC investigation said the probe was in
its very early stages and it was too soon to determine whether the
regulator will make a referral on the case to criminal authorities
at the U.S. Department of Justice.
A person familiar with the matter said on Friday the U.S. Federal
Bureau of Investigation was monitoring the situation for possible
criminal activity.
The bad loans were made to Mexican oil services company
Oceanographic, whose assets Mexican law enforcement officials have
now seized. The oil services company was a contractor for Mexican
state-owned oil company Pemex.
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Citigroup Chief Executive Officer Michael Corbat called the incident
a "despicable crime" and said the bank believes it was an isolated
episode.
Corbat said in a statement on Friday that Banamex is exploring legal
options.
Criminal actions "may allow us to recover damages," he added.
(Reporting by Emily Flitter and David
Henry; writing by Jeanine Prezioso; editing by Sophie Hares)
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