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The fallout continued to spread last week in the wake an investigation into a $400 million bank fraud tied to Citigroup’s Mexican Banamex unit, The New York Times DealBook blog reported Friday.
On Wednesday, Mexican authorities announced that they had arrested Amado Yáñez Osuna, the former head of Oceanografia SA de CV, the oil services company at the center of the alleged Banamex fraud, which Citi first disclosed in February.
The scandal stems from allegations that Banamex lent $585 million to Oceanografía based on invoices supposedly to be paid by Pemex, Mexico’s state-owned oil company, according to the Times. Only about $185 million worth of legitimate, and the rest of the invoices were phony, the Times reports.
Since the fraud claims first surfaced, Citi has fired twelve Banamex employees, four of them senior managers, for not doing enough to prevent the fraud. The company has said the investigation into the matter could lead to additional firings, in Mexico and in the U.S. The incident prompted Citi to write down its first-quarter earnings by $235 million.
Aside from investigations taking place in Mexico, U.S. authorities, including the Federal Bureau of Investigation and the Securities and Exchange Commission, are also investigating the alleged fraud. Citi’s internal inquiry is being led by Shearman & Sterling.
The Times reported Friday that “the arrest warrant was issued against Mr. Yáñez ‘for his involvement in committing crimes that are under investigation in the case of Oceanografía,’ particularly those covered by banking laws, the attorney general’s office said Wednesday, without elaborating on the charges.”
As part of the investigation, a unit of Mexico’s Finance Ministry took control of Oceanografía on Feb. 28, the Times noted.