Banking & Capital Markets

SEC Expands Citi-Argentina Probe

Only a few weeks ago, a former executive settled SEC insider-trading charges concerning the time in question.
Dave CookFebruary 24, 2006

Citigroup has announced that the Securities and Exchange Commission has expanded an investigation into its operations in Argentina, according to published accounts. In its annual report, the largest U.S. bank said that SEC subpoenas, which had covered only 2001 to 2004, now extend back to 1997.

In May 2004, the SEC began looking at the bank’s 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.

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.

TheStreet.com noted only a few weeks ago that former Citigroup head of emerging markets Victor Menezes had settled SEC insider-trading charges. The commission had reportedly charged him with selling $29 million worth of company stock shortly before the bank disclosed losses for the first quarter of 2002. Without admitting or denying the charges, Menezes agreed to pay nearly $2.7 million in disgorgement, interest, and penalties.