NEW YORK (TheStreet) -- Citigroup (C) CEO Michael Corbat minced no words after his firm announced that its Mexican subsidiary, Banco Nacional de Mexico, commonly called Banamex, lost about $400 million as a result of receivables 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. All will be held equally responsible and we will make sure that the punishment sends a crystal clear message about the consequences of such actions," Corbat said in the company's press release.
According to Citigroup, Banamex lent $585 million to Oceanografia S.A. de C.V. ("OSA"), a Mexican oil services company, with the loans secured by accounts receivable. Banamex also had $33 million in loans made directly to OSA or letters of credit issued on behalf of OSA.
OSA had been a "key supplier" to Petroleos Mexicanos, or Pemex, Mexico's state-owned oil company. OSA in Februry was suspended from new Pemex contracts. After Citigroup and Pemex reviewed OSA's accounts receivable securing the loans, "Pemex asserted that a significant portion of the accounts receivables recorded by Banamex in connection with the Pemex accounts receivable financing program were fraudulent and that the valid receivables were substantially less than the $585 million referenced above," Citigroup said.
While it is unclear just how Banamex's loan committee was swindled into thinking that all of OSA's receivables collateral was legitimate, Brian Fox, president of Confirmation.com, provided plenty of insight in a telephone interview Friday afternoon.