Citigroup Inc (C.N) said on Friday that it has discovered at least $400 million in fraudulent loans in its Mexico subsidiary and said employees may have been in on the crime.
The bank wrote down bogus loans to a company whose assets Mexican law enforcement officials have now seized. Citigroup's 2013 profit fell by $235 million to $13.67 billion after the write-down. Citigroup Chief Executive Officer Michael Corbat called the incident a "despicable crime" and said the bank believes it was an isolated episode.
The bad loans were made to Mexican oil services company Oceanografia OCNGR.UL, a contractor for Mexican state-owned oil company Pemex PEMX.UL.
Oceanografia borrowed from Citigroup's Mexican unit, Banco Nacional de Mexico, known as Banamex, using expected payments from Pemex as collateral.
In recent weeks, Banamex learned that Oceanografia appeared to have falsified invoices to Pemex that were collateral for loans, Corbat said in a separate memo to employees. The bank wrote down about $400 million of loans backed by the bogus invoices.
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