Citigroup Inc., the U.S. bank investigating a $400-million loan fraud at its Mexico unit, fired 11 people for failing to prevent or discover the wrongdoing and said more would face punishment.
The dismissals affect four managing directors, including two heads of business units in Mexico, according to a memo Wednesday signed by Chief Executive Michael Corbat. All 11 are based in that country, said a person briefed on the investigation who asked to remain anonymous because the information isn't public. The bank, based in New York, previously fired one person.
"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," Corbat said in the memo. More people inside and outside Mexico may be punished, he wrote.
Citigroup said in February that invoices backing loans to Oceanografia, an oil-services firm based in Ciudad del Carmen, were found to be fraudulent. That forced Citigroup to reduce previously reported earnings for 2013 by $235 million, casting doubt on the bank's controls and management.
Those dismissed include the chief of risk for the institutional clients group in Mexico and the head of trade in the nation, according to a person briefed on the matter.
Citigroup has shared information with law enforcement and regulatory agencies and left it up to them to determine criminal liability, Corbat wrote. The U.S. Securities and Exchange Commission and the Department of Justice are investigating.
"Investors will like to see people being held accountable for this," said Jeff Harte, an analyst at Sandler O'Neill & Partners. "They may be surprised that it's 11 people; that's a wider net than I would have expected."