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Citi faces criminal probe - report

Thursday, April 03, 2014 - 01:20

April 3 - Regulators are reportedly looking into whether holes in Citigroup's controls contributed to a $400 million fraud at its Mexican unit, Banamex. Fred Katayama reports.

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Another blow for Citigroup. Just one week after the Fed axed its plan to issue a payout, regulators have launched a criminal probe. The New York Times says the FBI and prosecutors are looking into whether holes in Citi's internal controls contributed to a $400 million fraud at its Mexican unit, Banamex. Just yesterday, sources told Reuters that that same unit had fired two bond traders after it uncovered rogue trading. This probe grew out of Citi's disclosure two months ago that Banamex employees may have been involved in making fraudulent loans. The loans were made to a Mexican oil services contractor to the state oil company, Pemex. Mexico is important to Citi because it accounts for 13 percent of its revenue. The Times notes that Citi has not been accused of wrongdoing. A Citi spokesman didn't respond to our request for comment. Sterne Agee downgraded the stock to neutral from buy partly because of greater regulatory risk. Analyst Todd Hagerman said, "Citigroup's legal risk remains high, notably outstanding claims and investigations tied to private-label securitization, money laundering, foreign exchange, and LIBOR." Citi's stock, off 7 percent this year, lost further ground in early trading.

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Citi faces criminal probe - report

Thursday, April 03, 2014 - 01:20