Citi Scrutiny Deepens

Regulators expand a probe of Argentine books.
Author:
Publish date:

A regulatory investigation is expanding into the accounting treatment

Citigroup

(C) - Get Report

has used for its numerous business operations in Argentina.

The world's biggest financial services company disclosed Friday that the

Securities and Exchange Commission

is seeking information about its accounting practices for its Argentine operations for as far back as 1997. The inquiry previously focused on a period from 2001 to 2004.

The SEC investigation began with a focus on Citigroup's earnings reports for the fourth quarter of 2001 and first quarter of 2002. Those six months coincided with the height of Argentina's fiscal crisis, during which many U.S. banks, including Citigroup, were forced to write off billions in unpaid loans and other investments in the South American nation.

But the investigation, which Citigroup first disclosed last year, appears to have gotten bigger as regulators dig deeper into the bank's bookkeeping. A Citigroup spokeswoman declined to comment on the investigation.

Citigroup says the "SEC has subpoenaed witness testimony and certain accounting and internal controls-related information for the years 1997-2004." The bank made the new disclosure in its 2005 annual report, which was filed Friday morning.

News of the expanding investigation comes just weeks after a former Citigroup senior executive who oversaw the bank's Latin American operation paid a $2.7 million fine to settle an SEC insider trading investigation.

Last month the SEC charged Victor Menezes, the former head of the bank's emerging markets group, with selling $29 million in Citigroup shares a few weeks before the bank reported that its Argentine operations incurred more than $500 million in losses during the first quarter of 2002. The bigger-than-expected Argentine loss was one reason Citigroup's earnings fell short of Wall Street expectations that quarter.

When the bank did report earnings on April 15, 2002, it took a $519 million charge to write down its poor-performing Argentina loans and investments. The banks' earnings came in 4 cents shy of analyst estimates in the first quarter of 2002.

Citigroup rose a penny Friday to $46.81.