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In today's environment, the government has never more aggressively regulated, investigated, pursued and prosecuted white collar crime. If you or your company becomes embroiled in any type of federal or state government investigation, you need experienced trial lawyers who have gone toe-to-toe with prosecutors and government agents.

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    Citigroup Adjusts 2013 Financials Based On Mexican Loan Fraud

    On Friday, Citigroup Inc. announced that it was downwardly adjusting its 2013 financial results by $360 million due to a recently discovered fraud affecting a Mexican subsidiary.  Citigroup's disclosure stated that its subsidiary, Banco Nacional de Mexico, known as Banamex, had made $585 million in short-term accounts receivable loans to Oceanografia S.A. de C.V. ("OSA"), a Mexican oil services firm.  Citigroup now reports that the account receivables that served as the basis for those loans were fraudulent. 

    According to Citigroup, until February 2014, it believed that OSA was an approved supplier to a Mexican state-owned oil company, Petróleos Mexicanos.  Based on OSA’s representation that it was an approved supplier, it obtained approximately $585 million in accounts receivable loans from Citigroup over the past several years and, at the close of 2013, had $33 million in loans outstanding to Citigroup.

    On February 11, 2014, however, Citigroup learned that OSA was barred from being awarded new contracts with the Mexican government, leading Citigroup to investigate the loans made to OSA in recent years.  The investigation revealed that many of the accounts receivable claimed by OSA to backed by accounts with Petróleos Mexicanos were fraudulent and worth substantially less than the $585 million loaned to OSA.  In fact, only $185 million of the $585 million loaned to OSA was supported by actual accounts receivable.  This $400 million difference led Citigroup to downwardly adjust its full year 2013 and fourth quarter 2013 financial results by an estimated $235 million after taxes and $360 before taxes.

    Yesterday, in an annual filing with the SEC, Citigroup reported that it and Banamex have received subpoenas from the FDIC and the U.S. Attorney's Office for the District of Massachusetts related to compliance with the U.S. Bank Secrecy Act and other federal anti-money laundering requirements.  Citigroup indicated it is complying with the subpoenas.

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