Banking & Capital Markets

SEC Probes Citigroup Argentine Business

In 2002, the bank took $1.7 billion of pretax charges related to Argentina.
Stephen TaubMay 7, 2004

The Securities and Exchange Commission has launched an investigation into Citigroup’s accounting practices in its Argentine operations, according to the company’s most recent quarterly regulatory filing.

The world’s largest bank reported that the SEC is looking at Argentina-related investments, business activities, and loan loss allowances in the fourth quarter of 2001 and first quarter of 2002, at the height of the country’s fiscal crisis.

During that period, Argentina defaulted on part of its $140 billion of debt, devalued its currency, and converted some dollar-denominated debt into pesos, leaving foreign banks stuck with billions of dollars of bad loans, noted Reuters.

Citigroup played a pivotal role in the country’s sweeping privatizations in the 1990s and has been a leading player in Argentine industries as diverse as financial services, telecommunications, real estate, and electronic media, observed The New York Times.

In 2002, the bank took $1.7 billion of pretax charges related to Argentina, including credit losses, write-offs for certain investments, and the devaluation of the peso, which wiped out $595 million of equity, according to Reuters. Altogether, Citigroup wrote off about $2 billion in bad Argentine loans and investments.

“Citigroup’s so big I can’t imagine the probe having a lasting impact on the company, unless there was criminal activity we don’t know about by an individual,” said Shelly Meyers, who helps manage about $100 million, including Citigroup shares, at Pacific Global Investment Management, according to Bloomberg.

In its filing, Citigroup also stated that it will begin providing non-public testimony to the SEC sometime this month.

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