Citigroup Fires 11 More Over Alleged Oceanografia Fraud -- 2nd Update

By Dow Jones Business News, 

By Christina Rexrode

Citigroup Inc. said Wednesday it has fired 11 more employees over the alleged accounting fraud involving its Mexico subsidiary and the oil-services company Oceanografia.

In a memo to employees, Citigroup Chief Executive Officer Michael Corbat said that the fired employees included four managing directors, two of whom are business heads in Mexico. Mr. Corbat, who traveled to meet with Citigroup officials in Mexico this week, also said he expects that "several other employees, both inside and outside of Mexico" may face "disciplinary action."

The disclosure highlighted the widening scope of the internal investigation at the third-largest U.S. bank by assets. Citigroup has previously said it fired one employee over the fraud involving its Mexico unit, known as Banamex, and Oceanografia, a Mexican oil-services company that borrowed from Banamex.

The bank disclosed in February that it had lost as much as $400 million that Banamex lent to Oceanografia.

The bank has described the incident as an accounting fraud, and Mr. Corbat had previously vowed that any bank employees involved would be held responsible.

Citigroup is continuing to review controls in Mexico and "strengthening any area we think falls short of our global standards and best practices, " Mr. Corbat wrote. He said the bank is sharing information with regulators and law enforcement agencies, who "will make any determinations as to criminal liability."

The bank said it reviewed other accounts globally and believes the "issues" are isolated to the Pemex supplier program. Pemex is the Mexican state-owned oil company, and Oceanografia was one of its suppliers. Citigroup has previously said it has discovered a smaller, similar alleged fraud at another Pemex supplier, though it has declined to name the company. The Wall Street Journal has reported that the company is Representaciones y Distribuciones EVYA, according to a person familiar with the matter.

The Oceanografia fraud has been one of the toughest tests of Mr. Corbat's tenure as CEO, raising questions about the bank's ability to manage risk across sprawling international operations. The Justice Department, the Securities and Exchange Commission and Mexico'sNational Banking and Securities Commission are looking into the matter.

In discussing the firing of the dozen employees, Mr. Corbat said the move reflected an earlier promise to "hold accountable any employee who enabled" the fraud, "whether through lax supervision, circumvention of our controls" or other violations.

Mr. Corbat ended his note, sent to all employees, with praise for Banamex, which Citigroup acquired in 2001, calling it a significant source of profit and of "great pride for our franchise."

"While the last few months have been difficult," Mr. Corbat wrote, "Banamex is an institution with a rich, 130-year history of providing exceptional banking services to its clients."

In a separate statement, Banamex Chief Executive Javier Arrigunaga called the alleged fraud an unfortunate and painful event that the bank has confronted head-on. The findings of the investigation "show our errors, but also leave us with valuable lessons that we should take advantage of in the future," he wrote.

Amy Guthrie contributed to this article

Write to Christina Rexrode at

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