Citigroup should face $1 billion lawsuit claiming it aided Mexican oil firm fraud

By Jonathan Stempel

(Reuters) -Citigroup should face a revived lawsuit claiming it triggered greater than $1 billion of losses by orchestrating and concealing an unlimited fraud on the now-bankrupt Mexican oil and gasoline companies firm Oceanografia, a U.S. appeals court docket dominated on Thursday.

A 3-judge panel of the eleventh U.S. Circuit Court docket of Appeals in Miami stated 30 Oceanografia distributors, collectors and bondholders adequately alleged that Citigroup considerably aided the fraud, and a decrease court docket choose erred in dismissing the nine-year-old case.

Danielle Romero-Apsilos, a Citigroup spokeswoman, declined to remark. Juan Morillo, one of many plaintiffs’ legal professionals, stated his shoppers have been gratified by the choice.

Citigroup’s Banamex unit had supplied money advances to Oceanografia, which supplied drilling companies to Mexico’s state-owned oil firm Petroleos Mexicanos (Pemex) , and picked up curiosity funds on the advances.

The plaintiffs, together with transport and leasing firms, funding funds and Netherlands-based Rabobank, stated Citigroup superior $3.3 billion to Oceanografia between 2008 and 2014 regardless of figuring out the corporate had an excessive amount of debt and had been forging Pemex signatures on authorization kinds.

Citigroup later discovered almost $430 million of fraudulent money advances, and was fined $4.75 million by the U.S. Securities and Alternate Fee in 2018 over Banamex’s inner controls.

Former Citigroup Chief Government Michael Corbat stated the financial institution fired 12 staff, and Mexican regulators stated 10 financial institution staff have been criminally liable underneath Mexican regulation.

In an 82-page resolution, Circuit Decide Britt Grant discovered adequate allegations that Citigroup withheld key details about Oceanografia from the plaintiffs, with the curiosity funds offering a monetary incentive.

“Citigroup is among the world’s most refined monetary establishments, and it strains credulity to conclude that, assuming the plaintiffs’ allegations are true, Citigroup lacked consciousness of (Oceanografia’s) actions,” she added.

The court docket returned the case to U.S. District Decide Darrin Gayles in Miami, who dismissed it in August 2023.

The case is Otto Candies LLC et al v Citigroup Inc, eleventh U.S. Circuit Court docket of Appeals, No. 23-13152.

(Reporting by Jonathan Stempel in New York; Enhancing by Richard Chang)