Citigroup Faces Fraud Suit Claiming $1.1 Billion in Losses
Citigroup Faces Fraud Suit Claiming $1.1 Billion in Losses
By David Voreacos - February 26, 2016 — 8:34 PM CST
Citigroup Inc. was sued for fraud by investors and creditors of a bankrupt Mexican oil services firm over claims they were harmed by a loan scheme that also led the bank to cut 2013 profit by $235 million and fire at least a dozen people.
Citigroup’s loans led to the 2014 collapse of the Mexican firm, Oceanografia SA, and caused Dutch lender Rabobank Groep, with investors and creditors, to lose at least $1.1 billion, according to the lawsuit filed Friday in Miami federal court. Rabobank and other investors separately filed a negligence suit in Delaware state court against auditor KPMG LLP.
Citigroup’s Mexican subsidiary, Banamex, made short-term loans to Oceanografia, which did work for state-run Petroleos Mexicanos, or Pemex. In turn, Pemex repaid the bank. Citigroup Chief Executive Officer Michael Corbat said in February 2014 that $400 million of accounts receivable from Oceanografia were fraudulent. He said the bank was working with Mexican authorities and would find out “who perpetrated this despicable crime.”
Rabobank and the investors claim Citigroup conspired with Oceanografia to accept falsified work estimates even as the oil services firm became increasingly dependent on cash advances to survive. Those Citigroup loans propped up Oceanografia, while Pemex repaid the bank with millions of dollars in interest, according to the complaint....
