Citigroup Inc. (C) cut its previously reported 2013 earnings for the fourth quarter and full year by $235 million after finding what it described as fraud by a customer of its Mexico subsidiary.

The fraud related to about $585 million in short-term loans the bank made to an oil-services company, Oceanografia SA de CV, to finance accounts receivables due from state-owned producer Petroleos Mexicanos, the New York-based bank said today in a statement. Only about $185 million can be validated, the bank said.

"At this point, we believe this is an isolated incident," Chief Executive Officer Michael Corbat said. The firm is working with law enforcement authorities in Mexico, according to the statement.

Oceanografia was banned on Feb. 11 by Mexico's anti-corruption agency from bidding on government contracts for 21 months because it violated agreements with Petroleos Mexicanos, known as Pemex. Officials at Oceanografia couldn't immediately be reached for comment.

The bank is seeking to determine whether any more of the funds involved are impaired and whether it can recover the losses, Citigroup said.

"There will be accountability for those who perpetrated this despicable crime and any employee who enabled it," said Corbat, 53. "All will be held equally responsible and we will make sure that the punishment sends a crystal clear message about the consequences."

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