October 14, 2014 / 1:55 PM / 5 years ago

UPDATE 2-Banamex uncovers new $15 mln fraud in Mexican bank unit

(Adds details throughout on investigation, board members)

By Elinor Comlay and David Henry

MEXICO CITY/NEW YORK, Oct 14 (Reuters) - Citigroup Inc said on Tuesday it had uncovered a $15 million fraud at its troubled Mexican unit Banamex related to a security services company the bank operated.

The company was originally set up only to protect Banamex board members and their families from kidnappers and other attackers, a person familiar with the investigation said. Citi said the company was also found to have been offering its services to third parties.

The fraud was related to expenses claims submitted by the company to the bank, the person added.

Banamex’s board, which had access to the security services, included former Chief Executive Javier Arrigunaga. Current board members include Banamex President Manuel Medina-Mora as well as top business leaders such as Televisa chief Emilio Azcarraga and Juan Beckmann, owner and president of tequila company Jose Cuervo.

Arrigunaga oversaw the unit in his role as chief administrative officer. He resigned from Banamex earlier this month, shortly after the bank concluded its internal investigation into the security company.

Banamex discovered the fraud when Federico Ponce, a former official in Mexico’s attorney general’s office who had been running the unit since its inception in 1994, stepped down at the end of 2013 and the bank began an internal review of the business, the same person familiar with the investigation said.

That review uncovered transcripts and audio recordings of intercepted phone calls from about 80 different people, another source said, adding that the phone tapping appeared to have been mostly for personal reasons and in only a few cases was it related to Banamex.

Citigroup said it has informed Mexican and U.S. authorities of its findings.

BANAMEX FRAUD

The loss is the latest in a string of problems at Banamex. Citigroup said in February it uncovered at least $400 million in fraudulent loans that Banamex made to Mexican oil services company Oceanografia. That figure has since increased to over $500 million.

The unit also fired two bond traders after uncovering rogue trading last year and has taken writedowns related to bad loans to Mexican homebuilders extended in the last few years.

Banamex USA is facing a U.S. criminal investigation involving possible violations of money-laundering laws, a source has told Reuters.

The security company tied to the latest fraud was set up after the kidnapping of Banamex board member Alfredo Harp. It is now being wound down and its services will be provided by Citi’s global security group, Citigroup said in a statement.

According to Ponce’s profile on LinkedIn, he is now running a telecommunications company called Megatelmx. His image on the social networking site shows him greeting Mexican President Enrique Peña Nieto.

Many international companies provide top executives in Mexico with kidnap insurance and some form of security services, usually from outside contractors. Violence in Mexico has increased in recent years as the government has stepped up its fight with drug cartels.

Peña Nieto took office two years ago, pledging to end the violence that has killed about 100,000 people since the start of 2007. Although homicides have fallen during his presidency, other crimes, including extortion and kidnapping, have increased. (Reporting by Elinor Comlay and David Henry; editing by Dan Wilchins, Walker Simon, Simon Gardner and G Crosse)

0 : 0
  • narrow-browser-and-phone
  • medium-browser-and-portrait-tablet
  • landscape-tablet
  • medium-wide-browser
  • wide-browser-and-larger
  • medium-browser-and-landscape-tablet
  • medium-wide-browser-and-larger
  • above-phone
  • portrait-tablet-and-above
  • above-portrait-tablet
  • landscape-tablet-and-above
  • landscape-tablet-and-medium-wide-browser
  • portrait-tablet-and-below
  • landscape-tablet-and-below