International Fraud a Foul

Lego_Millennium_Falcon_from_FlickerSeveral days ago, CitiGroup settled on penalties (reportedly $7 Billion) for wrong doings. What will come of this is hard to say. Perhaps the business schools will realize that monolithic corporations encounter too much risks to be viable.

As for fraud and how it might affect a startup and entrepreneurs, it is not always obvious. We, of course, know of the random fraud by con-men hawking vaporware; there is even the occasional CXO f’ing friends and family, and the even rarer CXO committing consumer fraud.

A broader fraud internal to the system is worst. Yes Bernie Madoff is the classic example, but a fraud that spans international borders, internal safe guards, buckles regulatory framework, and sends waves throughout the system, that is worse. Such is the fraud within Citicorp.

Banamex ATM in  Barra de Navidad, Jalisco complements of tomzap.com

Banamex ATM in
Barra de Navidad, Jalisco
complements of tomzap.com

In 2001, Banamex was acquired by Citigroup. From 2001 to 2014 Citigroup tried to get the Mexican bank group to modernize so it could place modern safety checks in place. It did not happen. Late in 2013, Citigroup realized a serious issue. Early in 2014, it made it known to the world that $400 million was missing. By May it had no choice but to fire eleven executives without PENSION! This issue will cause Citigroup and the rest of the industry regulatory issues for years.

If that was not enough on June 11, 2014, the New York Times reported suspicions on large stockpiles of copper and aluminum sitting at port. The suspicions are that a Chinese company pledged the same stockpiles as collateral for multiple loans. The division with this issues is Citic Resources, part of the state-controlled conglomerate Citic Group. This is worrisome since China has an estimated total outstanding credit of more than 220 percent of gross domestic product last year — up from 130 percent in 2008. The worry, of course, is how many others have done this.

image complements of flicker Ingot in fort Lauderdale, Fl.

image complements of flicker
Ingot in fort Lauderdale, Fl.

The report said Decheng Mining was suspected by the authorities of having pledged the same stocks of the metals — about 100,000 tons of aluminum and 2,000 to 3,000 tons of copper — as collateral for multiple loans, amassing bank debt exceeding 1 billion renminbi ($160 million). Phone calls and emails to Decheng’s parent company, Dezheng Resources, went unanswered on Wednesday.

 


Meet Benedict Van, the con man of Silicon Valley
http://venturebeat.com/2012/04/10/silicon-valley-con-man/
Silicon Valley Hustle: Former Motionloft CEO Accused Of Defrauding Investors
http://techcrunch.com/2013/12/30/motionloft-jon-mills/
Silicon Valley tech bigwig arrested for fake barcode Lego scam
http://m.digitaltrends.com/home/silicon-valley-tech-bigwig-arrested-for-fake-barcode-lego-scam/#!NysRD

Banamex Said to Snub Citigroup Oversight as Fraud Mounted – Bloomberg
http://mobile.bloomberg.com/news/2014-03-08/banamex-said-to-snub-citigroup-oversight-as-fraud-mounted.html
Citi Fires 11 More in Mexico Over Fraud – NYTimes.com
http://dealbook.nytimes.com/2014/05/14/citigroup-says-it-has-fired-12-in-mexico-over-fraud/
Banks Fear Missing Collateral in China – NYTimes.com
http://dealbook.nytimes.com/2014/06/11/lenders-fear-spread-of-chinese-commodities-fraud-case/?_php=true&_type=blogs&_r=0
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