After spending almost three months describing his strategy for changing the companys culture, the Chief Executive Officer of Citigroup Inc. – Mr. Michael Corbat finally took action. According to a memo to the companys employees, which was signed by the CEO, 11 people were dismissed from their jobs, including four managing directors, in relation with the alleged accounting fraud involving Citigroups Mexico subsidiary.
The reason for the lay-offs is Citigroup employees inability to “prevent or discover” a fraud in the companys division in Mexico, which amounted to 400 million dollars. Chief Executive Officer Corbat revealed that the investigation in the banks unit is still in process, which may result in more people being disciplinary punished.
As reported by the Financial Times, Mr. Corbat said: “Before our investigation concludes, we expect that several other employees, both inside and outside of Mexico, may receive forms of disciplinary action as well.”
Both Citigroups investors and analysts have been criticizing the banks Chief Executive Officer for having mercy upon the senior managers for their part of the banks recent problems. Now Mr. Corbat finally took some action in response to the disapproval he faced recently. Moreover, he reorganized some managers roles after the capital plan of the bank was rejected by the Federal Reserve in March for a second time in three years.
The fraud costed Citigroup Inc. 400 million dollars, which according to the information disclosed by the company were lent to the Mexican oil-services company Oceanografia by its Mexican division, known as Banamex. In February 2014 the company revealed that the invoices supporting loans to Oceanografia were false. As a results, the previously reported 2013 earnings of Citigroup were cut by 235 million dollars.
Earlier in May, the company reported that a formal investigation had been started by the U.S. Securities and Exchange Commission. The Mexican National Banking and Securities Commission also takes part in the assessment of the case. The reported fraud is also investigated by the Department of Justice and the Federal Bureau of Investigation.
Citigroup Inc. was 0.63% down to close at 47.12 dollars per share yesterday, marking a one-year change of -5.93%. According to the information published on CNN Money, the 29 analysts offering 12-month price forecasts for Citigroup Inc. have a median target of 58.00, with a high estimate of 68.00 and a low estimate of 51.00. The median estimate represents a +23.09% increase from the last price of 47.12.
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