Oil Firm Accused of Fraud Points Finger at Citibank

(CN) – Now-defunct oil company Oceanografia says Citibank used it as a scapegoat to deflect inquiries into multi-million dollar fraud at Citibank’s Mexican subsidiary, Banamex.

Oceanografia, formerly Latin America’s largest oil and gas company, was reportedly valued at about $3.5 billion shortly before its collapse in 2014.

Citigroup allegedly granted Oceanografia a $585 million credit line, allowing it to obtain hundreds of millions of dollars in cash advances secured by invoices purportedly for work performed for Pemex, the Mexican state-owned oil company.

But in February 2014, Pemex reported to Citigroup that $400 million worth of Oceanografia invoices presented as approved by Pemex were forged. A Banamex employee who processed the invoices was suspected of being involved in the fraud.

This revelation forced the bank to cancel the credit line, precipitating Oceanografia’s collapse.

In a lawsuit filed last year, creditors blamed the company’s auditor, KPMG LLC, for failing to uncover the fraud earlier.

On Monday, Oceanografia pointed the finger at Citibank with a lawsuit filed in Manhattan federal court.

“Citibanamex committed bank fraud in Mexico and, on information and belief, in the United States when it recorded loans to Oceanografía as the purchase of rights to collect on invoices owed by the Mexican national oil company, Petróleos Mexicanos (commonly known as Pemex),” the complaint says. (Parentheses in original.)

The loan description allowed the bank to book the loans at an AAA rating and lend more than it otherwise would have to Oceanografia directly. Citibank allegedly made millions more in profits using this scheme.

“When outside circumstances made it impossible for Citibanamex or Citigroup to continue to conceal Citibanamex’s bank fraud, Citigroup publicly took over the relevant operations from Citibanamex and conducted a purported investigation into Citibanamex’s loans to Oceanografía,” Oceanografia claims.

The lawsuit continues, “Rather than take responsibility for Citibanamex’s misconduct, however, Citigroup chose to portray itself as victim and whistleblower. That plan, however, required a scapegoat – Oceanografía.”

Oceanografia says it had no reason to forge Pemex invoices, when it did not need to present any invoices to obtain a cash advance from the bank and when Citibank had direct access to its books and records. Such a move would have been “farcical on its face,” the company says.

“Citibanamex, on the other hand, had a clear motive to commit the fraud – increase its profits by booking loans to Oceanografía as debts of AAA rated Pemex,” the complaint states.

Oceanografia says its officers and employees who were charged with crimes due to Citibank’s claims have been exonerated, and Mexican courts rejected Citibanamex’s civil claims for debt against the company.

Oceanografia seeks punitive damages for claims of malicious prosecution and tortious interference, and is represented by Mark Maney with Maney & González-Félix in Houston.

Citibank has faced regulatory fines for its failure to implement adequate internal controls at Banamex.

Creditors led by Dutch lender Rabobank Groep also sued Citibank, seeking to hold it responsible for Oceanografia’s collapse, which cost the creditors $1.1 billion, according to the lawsuit.

Citibank spokesperson Danielle Romero-Apsilos said, “We believe the case is without merit,” but declined to comment further.