As a costly fraud continues to haunt Citigroup’s Mexican unit Banamex, the chief executive of the unit’s holding company, Javier Arrigunaga, has resigned.
Mr. Arrigunaga, a 12-year veteran of Banamex’s management team, is the most prominent executive to leave the bank after a $400 million fraud involving a large Banamex client. Citigroup disclosed the fraud in February.
“In light of the difficult challenges our franchise in Mexico has faced over the last year, Javier Arrigunaga feels it is the right time for new leadership,’’ Banamex’s chairman, Manuel Medina-Mora, said in a statement on Friday.
The fraud involved loans to a Mexican company, Oceanografía, which has a long history of questionable finances and most of its revenue came from government contracts. This year, when the government suspended its contracts to Oceanografía, the company had trouble paying its debts. The $400 million in loans, Citigroup later learned, were extended to the company based on falsified invoices.
Mr. Arrigunaga’s departure follows the firing of 11 Banamex employees in May, including the bank’s head of corporate banking, head institutional risk officer, head of trade finance and head of trade and treasury solutions.
The bank also fired one Banamex employee, who was arrested in February and is suspected of processing the falsified documents that helped Oceanografía obtain the loans.
The fraud raised questions about Citigroup’s financial controls and ability to manage its sprawling global operations.
Mr. Arrigunaga, who was recently named president of the Mexican Bankers Association, joined Banamex in 2002.
He previously helped negotiate international assistance to support Mexico during the macroeconomic crisis during 1995 and he served as chief executive of the Deposit Insurance Agency starting in 1997. The agency was responsible for managing the Mexican banking crisis, according to Citi’s website.
Mr. Arrigunaga is being replaced at the head of Banamex’s holding company by the current chief executive of Banamex’s retail bank Ernesto Torres Cantú, a 22-year employee of Citi.
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