Mexican Authorities Arrest Head of Company Tied to Bank Fraud

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Two ships owned by Oceanografía, the company at the center of a $400 million fraud against a Mexican Citi affiliate, Banamex.Credit Adrian Virgen/Reuters

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Amado Yáñez Osuna, who headed Oceanografía, the oil services company at the center of a $400 million fraud involving Citigroup’s Mexico subsidiary, has been arrested, according to Mexico’s attorney general’s office.

The announcement, made late Wednesday, suggests that prosecutors are close to building a case against Mr. Yáñez in the scheme, which forced Citi to reduce its 2013 earnings by $235 million.

The arrest warrant was issued against Mr. Yáñez “for his involvement in committing crimes that are under investigation in the case of Oceanografía,” particularly those covered by banking laws, the attorney general’s office said, without elaborating on the charges.

Mr. Yáñez had been under house arrest at his Acapulco beach house under a provision of Mexican law that allows authorities to hold a suspect for up to 80 days without formal charges. He underwent emergency intestinal surgery on May 20 and remains under guard in a Mexico City hospital.

Citi’s Mexico subsidiary, Banamex, discovered the fraud in February after a review of Oceanografía’s accounts receivable program with the bank. The investigation found that Oceanografía had borrowed $585 million based on its contracts with Pemex, Mexico’s state-owned oil company, but that only $185 million was backed by authentic invoices. The remaining invoices were found to have been falsified. Banamex had advanced credit to Oceanografía expecting Pemex to honor those invoices.

As part of the investigation, a unit of Mexico’s Finance Ministry took control of Oceanografía on Feb. 28.

Banamex has fired 11 employees, including four senior executives, for failing to spot the fraud. A 12th employee, who worked in a regional branch and is believed to have approved the fake invoices, was charged, released on bail and has disappeared.

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