| NEW YORK/MEXICO CITY, March 7
NEW YORK/MEXICO CITY, March 7 The company at the
center of an alleged fraud that forced Citigroup Inc to
cut its 2013 profit won billions of dollars in contracts from
Mexico's state oil monopoly over the past decade, even after
Mexican officials and private lawsuits raised red flags about
the contractor's activities.
From 2003 to last year, Oceanografia SA, a
provider of engineering and maintenance services on offshore oil
platforms and pipelines, signed more than 100 contracts worth
nearly $3 billion with state-owned Pemex, according to
a Reuters review of Mexican government contracts.
As those deals were being made, Mexico's Federal Audit
Office, known as the ASF, was raising questions about Pemex's
contracting relationship with Oceanografia. It audited the
state-run oil firm in 2006 over alleged irregularities in
several multi-million-dollar contracts with Oceanografia.
The ASF said in a report it found cases in which
Oceanografia appeared to have received favorable treatment from
Pemex. It urged Pemex's internal control office to examine
whether Pemex officials improperly changed contracting terms at
Oceanografia's request and favored the firm over competitors.
The ASF's power is limited: It can only investigate
government entities and does not have the authority to sanction
A spokesman for Pemex did not reply to Reuters' requests for
comment on how it responded to the ASF report. Oceanografia said
in a statement last month that it had always acted within the
law in its dealings with Pemex.
After the ASF's report appeared in 2006, Oceanografia went
on to win $2 billion in contracts. The firm says it receives
about 97 percent of its revenue from government contracts,
almost all of it from Pemex.
Oceanografia found itself in the spotlight again in 2008
when opposition lawmakers began calling for a federal
investigation into its Pemex contracts.
Former Congressman Jesus Gonzalez Schmal said he and fellow
legislators raised allegations that Oceanografia falsified Pemex
receipts to secure loans in 2005 from state-backed Banco
Nacional de Comercio Exterior, known as Bancomext. The
allegations were based on information from someone inside the
bank, he told Reuters.
When the lawmakers asked Bancomext for more information,
they were told Oceanografia had already paid back the loans, he
said. Nothing came of their request for the government to
investigate the allegations of falsified receipts.
A Bancomext spokeswoman referred all questions to the
attorney general's office, which did not respond immediately to
requests for comment.
Oceanografia did not reply to a list of questions sent by
Reuters to its investor relations officer.
SHIPS, PLANES AND LAWSUITS
A Reuters review of court documents found that Oceanografia,
based in the Gulf state of Campeche, has been sued at least 19
times in U.S. federal courts since 1994.
While the number of lawsuits may not be unusual in the
corporate world, most of them have a common theme - alleged
non-payment of lease agreements for ships and planes. Some of
the cases were settled, some were dismissed, some resulted in
judgments against Oceanografia, and others are still pending.
McDermott, a Houston, Texas, engineering company, sued
Oceanografia in 2009 in U.S. district court in Alabama for
allegedly failing to pay more than $5 million on a leased
vessel, according to court documents.
The Texas company succeeded in repossessing its ship but was
never able to collect on the back payments, said Matthew
McDonald, a lawyer for Jones Walker who represented McDermott.
Oceanografia filed a countersuit against McDermott to recover
equipment that was on the ship but it was dismissed.
In a separate case, Louisiana-based oilfield construction
firm Diamond Services Corp sued Oceanografia in 2010, claiming
the Mexican company fell delinquent on nearly $1.4 million in
rental fees for a charter vessel.
Oceanografia has opposed Diamond's request for a default
judgment in the case, which is still pending in federal district
court in Louisiana.
Alfred Rufty, a New Orleans-based attorney who has
represented Oceanografia in the McDermott, Diamond and other
cases, declined to comment on the cases on Friday.
In its 2006 report, the ASF said Oceanografia requested that
Pemex modify the terms of a 2005 contract worth more than 385
million pesos (around $29 million today). The report alleged
that Pemex changed the specifications of a vessel - reducing the
required speed capacity - and pushed forward the start date of
the work to accommodate Oceanografia.
The ASF said changing the terms of the contract
unjustifiably would be against the law, so it asked Pemex to
investigate whether the contract - which was awarded as an
international public tender - was changed improperly.
The audit watchdog said Pemex "must verify that the
modifications to the tenders were authorized only with just
cause and not as a result of negotiations with the contractors."
The ASF also singled out a 969 million peso contract ($73
million today) for oil platform maintenance granted by Pemex to
Oceanografia in 2005. It found that Oceanografia failed to turn
in records to verify the job was completed, as required by law.
Pemex "did not ensure compliance of all obligations by the
supplier (Oceanografia)," the report said.
The ASF urged Pemex's internal control office to also
investigate whether company officials favored Oceanografia over
other companies in awarding a service contract worth $15 million
Mexican authorities began looking into Oceanografia's
business practices after local media reports about the firm's
alleged connections with the administration of President Vicente
Fox, in power from 2000 to 2006.
A son of Fox's wife told a Mexican magazine in a 2004
interview that he (the son) and some relatives had helped
Oceanografia win Pemex contracts.
Oceanografia has not responded to the allegations and
Reuters was unable to reach the son.
Fox told reporters this week that his family had "nothing to
hide" when asked about its possible ties to Oceanografia.
In mid-February, the national Comptroller's Office announced
it had suspended Oceanografia from bidding for government
contracts for 21 months and 12 days. The office did not give
reasons for the move.
Banamex, Citigroup's Mexican subsidiary, said last week it
learned after the suspension that most of its $585 million in
short-term loans to Oceanografia were based on what appeared to
be falsified invoices from Pemex used as collateral.
The same day, the attorney general's office said it was
launching a criminal investigation into Oceanografia and that it
had seized the company's assets and appointed an administrator
to steer the business.
Citigroup said that as a result of the alleged fraud it had
discovered at its subsidiary, it had to write down about $400
million of loans backed by bogus invoices, resulting in a $235
million downward revision to its 2013 profit, to $13.67 billion.
Oceanografia has not commented on the attorney general's
actions or its loans with Banamex. Banamex said it could not
comment on a case under investigation.