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Citigroup lowers 2013 profit on Mexico fraud

Citigroup (C) said a fraud at its Mexican banking unit will slice $235 million from last year's net income.

The bank said on Friday that Mexican oil services company Oceanografia SA de CV apparently submitted falsified invoices to get loans it wasn't entitled to. The invoices were supposed to back $585 million in loans, but Citi could only verify the backing for $185 million.

Citi's large Mexican bank, Banco Nacional de Mexico, had been lending money to OSA to cover work that OSA was doing for Mexico's state-owned oil company Petróleos Mexicanos, or Pemex.

The invoices were falsified to show that Pemex had approved the work, and then were processed by a Banamex worker, Citi CEO Mike Corbat said in statement Friday. The invoices were then processed by a Banamex worker.

Citi said it learned of the problem on Feb. 11 after OSA was suspended from getting more Mexican government contracts. Citi has been working with Pemex and said its investigation is ongoing. It said it believes "the fraud is isolated to this particular client" within Banamex's program for lending money against accounts receivable.

"We have been responding forcefully over the past week by assessing the overall exposure to Citi, coordinating with law enforcement, pursuing recovery of the misappropriated funds, and seeking accountability for anyone involved," Corbat said.

He said Citi is doing a "rapid review" through Banamex, and all of Citi, of programs similar to the one involved in this case.

In January, Citi reported 2013 net income of $15.8 billion. The changes dropped its full-year profit to $15.56 billion. Its full-year profit is now $4.26 per share, a decline of 7 cents per share versus what it previously reported.

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