03/30/14 (written by cmolzahn; see updates below) — News broke in early March that Mexican oil services company Oceanografía’s assets had been seized by the Mexican government following revelations of a multi-million dollar fraud involving Citigroup’s Mexican subsidiary Banamex and falsified receipts from Mexico’s state-owned oil company Pemex. The revelations forced Citigroup to revise its 2013 earnings downward by $235 million (USD), and has attracted criticism of the previous two presidential administrations of Vicente Fox (2000-2006) and Felipe Calderón (2006-2012), during which time Oceanografía saw an unprecedented increase in contracts with Pemex. The news comes at a delicate time, as the Mexican government pushes for at least a partial privatization of its energy industry. It is also a difficult situation for Citigroup, which relies on the Mexican market for about 13% of its revenue as reported by Credit Suisse, and whose CEO, Michael Corbat, has been at the helm of the company for just a year and a half.
Oceanografía has been in operation since 1968, and employs around 4,500 people, with locations in the states of Tabasco and Veracruz. The company was started by the current head of the company and holder of 76% of Oceanografía stock, Amado Yáñez Osuna, who, as a Pemex employee, saw a need for outside companies to provide support to Pemex in its activities. According to El Universal, Marta Sahagún, wife of Vicente Fox, reached out to Yáñez to support her husband’s presidential campaign in 2000. It was during the Fox presidency that Oceanografía established itself as a successful enterprise, supplying Pemex with platform maintenance, transportation of crude oil and well drilling. According to Jaime González Aguadé, president of the National Banking and Stocks Commission (Comisión Nacional Bancaria y de Valores, CNBV), 97% of Oceanografía’s earnings are from contracts with Pemex, Mexico’s state-owned oil company. Moreover, Pemex currently has 19 active contracts with Oceanografía, and its operations could be compromised if Oceanografía is not able to recover from the recent fraud and money laundering allegations.
Mexico’s Superior Auditor (Auditoría Superior de la Federación, ASF) had sounded an alert as early as 2006 about violations on the part of Oceanografía, though it was not until February 11 of this year that the government accountability office (Secretaría de la Función Pública, SFP) announced that it had halted the company’s ability to carry out government contracts for 21 months after finding irregularities in contracts from 2011 and 2012. The SFP also fined the company $24 million pesos (roughly $1.83 million USD). On February 28, Citigroup announced that it had detected fraud committed against Banamex involving $585 million (USD) in credit awarded by that bank to Oceanografía.
In response to the revelations, Mexico’s Attorney General’s Office (Procuraduría General de la República, PGR) assumed control of the company, designating as administrator the System of Administration and Alienation of Assets (Sistema de Administración y Enajenación de Bienes, SAE). The government also seized control of the Gallos Blancos de Querétaro soccer team, owned by Amado Yáñez. Following the revelation of the government’s actions toward Oceanografía, Banamex performed a review of its transactions with the company, upon which it found a number of fraudulent loan transactions. Based on falsified estimates for Pemex, Banamex reportedly loaned Oceanografía $585 million (USD), in addition to $33 million in direct financing to the company. Government contracts are generally seen as ironclad investments by banks across Latin America. This was also the case with Oceanografía accounts, despite the company’s almost exclusive reliance on Pemex for its contracts. Financial experts have said that it will be nearly impossible for Banamex to recuperate its losses through legal means.
The PGR is investigating Oceanografía for possible money laundering in connection with the alleged fraud, according to Attorney General Jesús Murillo Karam. He added that the investigation is focusing on the falsification of some estimates for work to be performed for Pemex, which Oceanografía allegedly used to secure the loans from Banamex. Murillo Karam said that Pemex did not recognize some of these quotes. He also emphasized that his agency’s investigations have not yet implicated Jorge and Manuel Bribiesca Sahagún, sons of Marta Sahagún, who some have accused of being involved in the fraudulent transactions. Amado Yáñez is currently under a 40-day arraigo, a step that Attorney General Murillo Karam said was taken to allow for investigators sufficient time to gather evidence. However, instead of being held at a federal arraigo center as is customary, Yáñez is under house arrest, which the PGR reportedly requested for the convenience of the investigation. In addition to Yáñez, six other Oceanografía executives are being investigated by the PGR, including assistant director Leonardo Olavarrieta Tinoco; legal representative Manuel Mayoral Piana; Virginio Valentín Ángeles Dino, a former employee in the company’s finance department; Zaidel Terán Sandoval, a shareholder, as well as auditor for the company; accountant Alfredo Vicente Briceño Perera; and Miguel A. Zenteno Woolrich, the president of the Atlético Coatzacoalcos professional soccer team. All of these individuals reportedly had access to a Banamex bank account in Ciudad del Carmen, Campeche, which has become a focal point of the PGR’s investigation. On the U.S. side, Citigroup is carrying out an internal investigation to determine the administrative failings that allowed the fraudulent loans to transpire, and there have been reports that the Securities and Exchange Commission is also looking into the case.
The bulk of Oceanografía’s success came during the previous two presidential administrations of Vicente Fox and Felipe Calderón, thanks almost exclusively to lucrative contracts awarded by Pemex. In 2000, then-president Fox appointed Raúl Muñoz to head the state run oil company, and during his ensuing tenure Pemex and Oceanografía signed 61 major contracts. During the Fox administration, accusations of favoritism toward Oceanografía also surfaced, as well as alleged links between the company and Martha Sahagún’s sons. Meanwhile, during the six- Calderón administration, two men headed Pemex—Jesús Reyes Heroles González Garza (2006-2009) and Juan José Suárez Coppel (2009-2012)—and 27 Pemex contracts were awarded to Oceanografía, less than half the number awarded under the Fox administration. In all, over the past 13 years, Pemex, through its Exploration and Production (Exploración y Producción) subsidiary, has approved 111 contracts worth just under $38.3 billion pesos (roughly $2.9 billion USD).
The Mexican Senate has approved the creation of a special committee of 11 senators for investigating the allegations into money laundering and bank fraud by Oceanografía. The committee consists of four members of the Institutional Revolutionary Party (Partido Revolucionario Institucional, PRI), three each of the National Action Party (Partido de Acción Nacional, PAN) and the Party of the Democratic Revolution (Partido de la Revolución Democrática, PRD), and one from Mexico’s Green Party (Partido Verde Ecologista de México, PVEM). The senate committee has already encountered problems, however, with the stepping down of its president, Senator Arely Gómez of the PRI. Gomez removed herself from the committee when it was revealed that one of the principle persons of interest in the investigation, former Oceanografía CFO and number two shareholder, Martín Díaz Álvarez, has familial ties with the congresswoman through marriage. Gómez is expected to be replaced on April 1 by another senator from the PRI.
Since the publication of this article, Mexican courts provisionally suspended the case against Amado Yáñez Osuna by a federal order on the grounds of an amparo, or court-ordered injunction.
Since the publication of this article, the First Circuit’s Seventh Associate Court in Criminal Matters reportedly granted Martin Díaz Álvarez an injunction (amparo) cancelling the arrest warrant in the federal attorney general’s embezzlement case against him, owing to a lack of evidence that he had any formal appointment with Oceanografía.