Citigroup Inc. co-president Manuel Medina-Mora has been telling colleagues that he is close to retiring as the Mexican unit he helped build fights fraud allegations, according to a person familiar with his thinking.

Chief Executive Officer Michael Corbat, who on Tuesday described a fraud discovered in Mexico as "appalling," respects Medina-Mora and the business he developed, the person said. Medina-Mora turns 65 in August, and his retirement at that age wouldn't be a shock, the person said. The decision could be made in coming months, the person said.

Banamex, the Mexican division that has been held up as an example of profitable banking business at Citigroup, has suffered this year from fraud accusations, including one disclosed yesterday. The unit's CEO, Javier Arrigunaga, resigned this month "in light of the difficult challenges our franchise in Mexico has faced over the past year," Medina-Mora said in an Oct. 3 news release.

While there are people within Citigroup and the company's board who would like to see Medina-Mora depart from the New York-based bank, the decision will be up to Medina-Mora and Corbat, said the person, who requested anonymity to speak about private discussions.

Citigroup is encouraging Medina-Mora to retire, although Citigroup Chairman Michael O'Neill and Corbat don't want to damage relationships that have made Medina-Mora crucial to the bank's success in Mexico, the New York Times reported. Still, O'Neill has told members of the board privately that he doesn't think Medina-Mora always communicated with the New York headquarters about problems in the Mexican unit, according to the report published on the newspaper's website late yesterday.

"Manuel Medina-Mora is a highly valued and well-respected member of the management team, who has an outstanding track record globally in consumer banking, as today's results show," Mark Costiglio, a company spokesman, said in an e-mailed statement yesterday.

Medina-Mora didn't respond to an e-mailed request for comment, and Citigroup declined to make him available for an interview.

In February Citigroup disclosed a loss related to loans made to Mexican oil-services company Oceanografia SA in an alleged fraud. The Mexican mediator handling Oceanografia's bankruptcy rejected at least 2 billion pesos ($149 million) of Citigroup's claims, a person familiar with the matter said this week.

Citigroup cited control issues unrelated to the Oceanografia fraud when it cut Medina-Mora's 2013 pay to $9.5 million from $11 million in March.

Citigroup said Tuesday that it discovered that Banamex's private-security unit had been engaged in illegal and unauthorized activities. Citigroup disbanded the unit, which was formed in 1994, after finding a $15 million fraud that began around 2000 and lasted through last year, a person with knowledge of the matter said.

The fraud, which Citigroup reported to Mexican and U.S. authorities after conducting an independent investigation, included inflating gasoline expenses, obtaining recorded phone calls and setting up shell companies to launder proceeds, according to two people briefed on the probe's findings.

While the unit was supposed to provide security to Banamex executives and board members, it also served clients and other parties who had relationships with the bank, one of the people said. Vendors were overcharging the unit, and the people in charge are suspected of having received kickbacks, the person said.

Medina-Mora, who was named Banamex CEO in 1996 and became chairman in 2010, has made money for his companies. Citigroup's global consumer-banking division that he has run since 2011 earned $7.1 billion last year, more than half of the company's net income. Banamex profits ballooned to 18.5 billion pesos last year from 4.1 billion pesos in 2004.

That performance helped Mexico's second-largest lender maintain autonomy. Medina-Mora opposed a 2007 companywide rebranding that could have changed Banamex's name, a person involved who wasn't authorized to talk said in March.

Banamex also resisted efforts by New York to improve governance and controls, four people with direct knowledge of the conflict said earlier this year.


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