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Reports US

US stock market daily report (May 14, 2014, Wednesday)

May 15, 2014, Thursday, 05:33 GMT | 00:33 EST | 09:03 IST | 11:33 SGT
Contributed by Millennium Traders

After an ongoing internal investigation, a $400 million loan fraud was uncovered at Banamex, Mexican unit of Citigroup Inc. (C-NYSE). The fraudulent loans were made to Oceanografia SA, a contractor for Mexican state-owned oil company Pemex, an oil-services firm based in Ciudad del Carmen, were found to be fraudulent. PEMX.UL Oceanografia appeared to have falsified invoices to Pemex that were used as collateral for loans from Banamex. The findings resulted in the bank reducing 2013 profits by $235 million. The U.S. Securities and Exchange Commission and the Department of Justice are investigating the fraud for potential criminal liability.

Corbat said in the memo, “While our internal investigation is ongoing, we have unfortunately identified additional employees across business and functional lines whose actions or inactions failed to protect our company from this fraud.” As the investigation continues, further disciplinary action could be taken against other employees both inside and outside of Mexico.

Failing to prevent or discover the wrongdoing resulted in the firing of 11 people, including four senior executives, according to an internal memo sent to employees on Wednesday, from Citigroup Chief Executive Officer Michael Corbat. Per reports, a junior worker at the bank’s Banamex unit took invoices bearing forged signatures from an office in Ciudad del Carmen on the Gulf Coast after Citigroup discovered the fraud in February. Of those fired, who were all based in Mexico, two were business heads.

The fraudulent activities were initially uncovered in February and thought to be an isolated incident, which proved to be incorrect. In a statement made in February, Corbat said, “There will be accountability for those who perpetrated this despicable crime and any employee who enabled it. All will be held equally responsible and we will make sure that the punishment sends a crystal-clear message about the consequences.”