Investigation reveals loan changes before Citi Mexican loan fraud

|By:, SA News Editor

Mexican authorities are asking why Citigroup's (C +0.4%) Mexican unit extended due dates and raised credit limits for Oceanografia more than a year before the fraud was discovered. "You could argue they were being flexible," says Jamie Gonzalez, head of Mexico's CNBV, which is conducting the probe. "What is surprising is that the controls weren't there."

In 2012, Citigroup extended the time between when it lent funds to Oceanografia and when Pemex repaid to 90 days from 20, and the next year it boosted to amount of financing available. "While the flow of resources was coming in, everybody was happy," says Gonzalez.

The bulk of the disputed $400M was lent within about 90 days before the fraud was discovered.