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Image courtesy of Oceanografia

The government of Mexico has taken control of one of Pemex’s key service providers, Oceanografia, following allegations by Citibank of alleged fraud, according to Attorney General Jesus Murillo Karam.

State-owned Petroleos Mexicanos (Pemex) said Friday it suspended Oceanografia from all existing and new contracts after finding inconsistencies in how Oceanografia billed, Murillo said in Mexico City.

New York-based Citigroup said a review of loans to Oceanofrafia showed that the company had actually posted only $185 million in collateral and not the $585 million the bank had relied on.

Citibank said Oceanografia had allegedly submitted nearly $400 million of fraudulent invoices for short-term credit which were processed by a bank employee, the Wall Street Journal reported Sunday.

Citigroup was forced to reduce 2013 profit by $235 million because of Oceanofrafia’s alleged fraud.

Mexico’s police are questioning an employee who worked for Citibank’s Mexico unit, Banco Nacional de Mexico, or Banamex. It’s the second biggest bank in Mexico.

The U.S. Securities and Exchange Commission is also reported to be investigating accounting fraud at Citibank.

“The source familiar with the SEC investigation said the probe was in its very early stages and it was too soon to determine whether the regulator will make a referral on the case to criminal authorities at the U.S. Department of Justice,” Reuters said.

Oceanografía SA de CV is a Mexican company with more than forty-five years in the oil industry, according to its website. It “offers integrated services of engineering, diving, installation, inspection and maintenance of marine structures, drilling support services, materials logistic, personal carrier, as well as, inspection, installation and construction of subsea pipelines.”

Pemex board member Fluvio Ruiz told Bloomberg that Ciudad del Carmen-based Oceanografia’s services are “crucial” to Pemex’s operations, especially for activities in the Gulf of Mexico.

Following the government’s seizure of the company, Oceanografia’s assets have been impounded, a Pemex press official told Bloomberg.

More than 40 contracts between Oceanografia and Pemex are now under review.

In mid February, Oceanografia defaulted on a $19 million interest payment to Citibank.

The Wall Street Journal said Citigroup’s Banamex unit has been working with Mexico’s attorney general to bring those responsible for the fraud  to justice.

“I can assure you there will be accountability for those who perpetrated this despicable crime and any employee who enabled it, either through lax supervision, circumvention of our controls, or violating our Code of Conduct,” Citigroup Chief Executive Michael Corbat said in a statement Friday.

Oceanografia has been known as a politically connected but financially weak company. The U.S. ratings firm Fitch warned about Oceanografia’s high leverage, poor cash flow and over-dependence on Pemex in 2009, the New York Time’s Dealbook said.