Courtesy of Pam Martens.
Under the Sarbanes-Oxley Act, publicly traded companies like Citigroup must certify in their filings with the Securities and Exchange Commission that they have adequate internal controls over their financial reporting. Notwithstanding Citgroup’s regular certifications to the SEC that its controls are adequate, we’ve been reading for years now how it claims to be a “victim” of fraud or the “victim” of a wayward employee’s misdeeds.
The latest victimhood to hit Citigroup involves a Mexican oil services firm called Oceanografia. Citigroup’s Mexican banking unit, Banamex, lent $585 million to Oceanografia on the basis of accounts receivables it was to collect on contracts. Citigroup now says it has discovered it is a victim of fraud in that only $185 million of those accounts receivables actually exist at Oceanografia.
Despite all those assurances that it has proper controls for its financial reporting, it had to file revisions with the SEC recently, restating its 4th quarter 2013 and full year earnings downward by a pre-tax $360 million as a result of the mess at Oceanografia.
Citigroup has previously been charged with creating off balance sheet structures to hide the debt of large U.S. firms such as Enron. It has been allowed to pay millions to regulatory bodies and billions to private plaintiffs to settle the charges without an admission of guilt and avoided airing its dirty linen in an open courtroom where the public might get a glimpse of some disinfecting sunshine.
In 2004, Enrico Bondi, the administrator of the bankrupt Italian dairy giant, Parmalat, sued Citigroup in a New Jersey court. Bondi alleged in court documents that Citigroup committed fraud in its dealings with Parmalat, made negligent misrepresentations and diverted corporate assets, had been unjustly enriched, participated in civil and RICO conspiracies, and had failed to disclose Parmalat’s deepening insolvency to the detriment of other creditors and investors.
Citigroup named one of its Parmalat structures Buconero, Italian for “black hole.” Another structure Citigroup set up for Parmalat sold commercial paper, backed by what turned out to be fake invoices, to U.S. money market funds. Citigroup contends it was “the victim” in all matters.
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