Citigroup Inc. Revises Income Down $360 Million Due to Fraud in Mexican Operations

Citigroup will lower its 2013 pre-tax income by $360 million as a result of charges taken from loans it issued to an oil company in Mexico.

Feb 28, 2014 at 11:01AM

Today Citigroup (NYSE:C) announced it will be reducing its fourth-quarter and full-year results due to fraudulent activity found in its subsidiary in Mexico. As a result of the fraud, Citigroup will be revising its pre-tax income down by $360 million, and its after-tax income by $235 million. As a result, Citigroup is lowering its full-year 2013 net income from $13.9 billion to $13.7 billion.


Banamex building in Mexico City. Source: Thelmadatter.

According to the company, at the end of 2013 Citi had extended roughly $585 million in short-term credit to an oil services company in Mexico called Oceanografia S.A. ("OSA") through its Banco Nacional de Mexico ("Banamex") subsidiary. Banamex issued the credit through an accounts receivable program. OSA was a supplier to the state-owned oil company in Mexico, Petróleos Mexicanos ("Pemex").

Yet on Feb. 11, Citi found out OSA had been suspended from new government contracts from the Mexican government, Citi said. Upon a review of its credit exposure to OSA, with the assistance of Pemex, Citigroup determined only $185 million of the $585 million in accounts receivables owed to Banamex by Pemex were legitimate. Citigroup will charge the $400 million difference as an operating expense to its Transaction Services business. In addition, Citigroup will in turn offset compensation expenses of $40 million as a result of the variable compensation plan at Banamex, resulting in the $360 million pre-tax expenses.

"Although our inquiry into this fraud is continuing, we have been responding forcefully over the past week by assessing the overall exposure to Citi, coordinating with law enforcement, pursuing recovery of the misappropriated funds, and seeking accountability for anyone involved," noted CEO Michael Corbat in the company's press release. The company said the fraud is seemingly isolated to its involvement with OSA.

Corbat said the company is conducting a "rapid review" of all lending programs throughout its global operations similar to the one between OSA and Banamex. In addition, it is working with legal and law enforcement personnel in Mexico and it said this could result in the recovery of the damages as a result of the fraud.

"I can assure you there will be accountability for those who perpetrated this despicable crime and any employee who enabled it, either through lax supervision, circumvention of our controls, or violating our Code of Conduct," concluded Corbat in the press release. "[W]e will make sure that the punishment sends a crystal clear message about the consequences of such actions." 


Patrick Morris has no position in any stocks mentioned. The Motley Fool owns shares of Citigroup. Try any of our Foolish newsletter services free for 30 days. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy.

Money to your ears - A great FREE investing resource for you

The best way to get your regular dose of market and money insights is our suite of free podcasts ... what we like to think of as “binge-worthy finance.”

Feb 1, 2016 at 5:03PM

Whether we're in the midst of earnings season or riding out the market's lulls, you want to know the best strategies for your money.

And you'll want to go beyond the hype of screaming TV personalities, fear-mongering ads, and "analysis" from people who might have your email address ... but no track record of success.

In short, you want a voice of reason you can count on.

A 2015 Business Insider article titled, "11 websites to bookmark if you want to get rich," rated The Motley Fool as the #1 place online to get smarter about investing.

And one of the easiest, most enjoyable, most valuable ways to get your regular dose of market and money insights is our suite of free podcasts ... what we like to think of as "binge-worthy finance."

Whether you make it part of your daily commute or you save up and listen to a handful of episodes for your 50-mile bike rides or long soaks in a bubble bath (or both!), the podcasts make sense of your money.

And unlike so many who want to make the subjects of personal finance and investing complicated and scary, our podcasts are clear, insightful, and (yes, it's true) fun.

Our free suite of podcasts

Motley Fool Money features a team of our analysts discussing the week's top business and investing stories, interviews, and an inside look at the stocks on our radar. The show is also heard weekly on dozens of radio stations across the country.

The hosts of Motley Fool Answers challenge the conventional wisdom on life's biggest financial issues to reveal what you really need to know to make smart money moves.

David Gardner, co-founder of The Motley Fool, is among the most respected and trusted sources on investing. And he's the host of Rule Breaker Investing, in which he shares his insights into today's most innovative and disruptive companies ... and how to profit from them.

Market Foolery is our daily look at stocks in the news, as well as the top business and investing stories.

And Industry Focus offers a deeper dive into a specific industry and the stories making headlines. Healthcare, technology, energy, consumer goods, and other industries take turns in the spotlight.

They're all informative, entertaining, and eminently listenable. Rule Breaker Investing and Answers are timeless, so it's worth going back to and listening from the very start; the other three are focused more on today's events, so listen to the most recent first.

All are available for free at

If you're looking for a friendly voice ... with great advice on how to make the most of your money ... from a business with a lengthy track record of success ... in clear, compelling language ... I encourage you to give a listen to our free podcasts.

Head to, give them a spin, and you can subscribe there (at iTunes, Stitcher, or our other partners) if you want to receive them regularly.

It's money to your ears.


Compare Brokers