Citigroup Inc Fires 11 Amid Fraud Probe


Eleven Citigroup Inc (NYSE:C) employees have been fired over alleged accounting fraud with its Mexican subsidiary Oceanografia.

In a memo obtained by the Wall Street Journal, Citigroup Inc (NYSE:C) Chief Executive Officer Michael Corbat said  “I expect every one of our colleagues to act with the highest ethical standards and be fully committed to the safety and soundness of our institution.”

Financial impact beyond immediate balance sheet

Corbat notes “the financial impact of this fraud has been significant, causing a reduction of our 2013 net income and increasing our credit costs for the first quarter of 2014,” he said, just before hitting on the biggest hit. “But as I said to you in February, the impact to our credibility is harder to calculate. Arguably, it is more damaging than the financial costs.”

Citigroup: Fraud uncovered in February

In February Citigroup Inc (NYSE:C) uncovered “significant fraud in the Pemex accounts receivable supplier financing program.” Since then the company has been “aggressive” on three fronts.

First the company conducted a rapid review of accounts receivable financing programs globally and determined this to be an isolated incident. “We concluded that none had issues similar to the Pemex supplier program,” the memo said. Second, the bank reviewed controls and processes in Mexico and is “strengthening any area we think falls short of our global standards and best practices.”  Fraud being one of those items that doesn’t meet best practices.

Citigroup: Hold individuals responsible

Third, the company is engaged in a “rigorous internal investigation, supported by external counsel, to determine how the fraud occurred.”  The goal of the effort is to “hold accountable any employee who enabled” the fraud. “I have committed to you that we would hold accountable anyone who perpetrated the crime. We are sharing information with our regulators and law enforcement agencies, which will make any determinations as to criminal liability for the fraud. We’ve previously said that we terminated one employee, who we believe was directly involved in the fraud.”  Today’s termination indicates the investigation is going much deeper.

Citigroup Memo by ValueWalk

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About the Author

Mark Melin
Mark Melin is an alternative investment practitioner whose specialty is recognizing a trading program’s strategy and mapping it to a market environment and performance driver. He provides analysis of managed futures investment performance and commentary regarding related managed futures market environment. A portfolio and industry consultant, he was an adjunct instructor in managed futures at Northwestern University / Chicago and has written or edited three books, including High Performance Managed Futures (Wiley 2010) and The Chicago Board of Trade’s Handbook of Futures and Options (McGraw-Hill 2008). Mark was director of the managed futures division at Alaron Trading until they were acquired by Peregrine Financial Group in 2009, where he was a registered associated person (National Futures Association NFA ID#: 0348336). Mark has also worked as a Commodity Trading Advisor himself, trading a short volatility options portfolio across the yield curve, and was an independent consultant to various broker dealers and futures exchanges, including OneChicago, the single stock futures exchange, and the Chicago Board of Trade. He is also Editor, Opalesque Futures Intelligence and Editor, Opalesque Futures Strategies. - Contact: Mmelin(at)

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