Citi CEO says employees broke the rules

February 28, 2014, 10:12 PM UTC

FORTUNE — Citigroup appears to have evidence of wrongdoing at the bank.

On Friday, Citi (C) released a memo that CEO Michael Corbat sent to his staff two weeks ago saying he has knowledge of instances in which a number of the bank’s employees have “violated our Code of Conduct and disrespected our values.”

Corbat didn’t say specifically what activity he was referring to, how many employees at the bank were involved, or when it occurred. He just said that bank officials had uncovered the bad behavior over the past 16 months. Corbat said the activity was an ethical violation, but it wasn’t clear whether Citi had determined if its employees have broken the law. Corbat said if the situation warrants, the bank would refer the case to the proper authorities.

Citi released the memo on the same day that it had to restate its earnings due to a fraud that occurred at a company it lent money to in Mexico. The bank said an employee of its Mexican unit known as Banamex was involved in processing fraudulent documents that led to the bad loans. Citi said it is investigating and that it is working with Mexican authorities. In its most recent financial filing, Citigroup said it was being investigated by the civil division of the Department of Justice in connection with sales of mortgage bonds.

Still, it’s unusual for a bank’s CEO to admit wrongdoing before it has been officially charged. Here’s the whole memo:

February 12, 2014

Citi CEO Mike Corbat’s Message on Ethics

Dear Colleagues,

Last week I met with a group of our senior managers across Citi to review our goals for 2014. Although I expect these to be cascaded throughout the organization, there is one topic in particular we spent a great deal of time on and I want to discuss with you directly: ethics.

Reaching our goal of becoming an indisputably strong and stable institution goes beyond financial performance. Ethics is an area where we must have zero tolerance for breaches.

As much as I hate to say it, it appears that even now — five years after a crisis in which the financial services industry shouldered its fair share of blame — there are some people who still don’t get it. I know that the overwhelming majority of our people always do the right thing. Yet in the sixteen months I’ve been CEO, there have been instances in which people have violated our Code of Conduct and disrespected our values. It should go without saying that even one is too many.

For all the talk about the economic, political and regulatory environments, there is no greater risk to our institution and our industry than ethical lapses. They undermine credibility with our clients, regulators, investors and the public — not to mention the enormous financial costs that can result. Simply put, failures of ethics jeopardize everything we work so hard for.

Our code of conduct ensures the safety and soundness of our institution and anyone who violates it will be held accountable. If the situation warrants, we will refer the case to the appropriate authorities. Furthermore, I see this as a true shared responsibility — it’s not only your responsibility to practice Responsible Finance and follow our Code of Conduct, but also to report any breaches you may be aware of. Turning a blind eye to unacceptable conduct is in itself a violation of the Code and dishonors an obligation we have to ourselves and each other.

I am confident that everyone in this company knows right from wrong. I expect every single one of us to act accordingly so we truly have a culture of Responsible Finance and do our part to protect the 200-year-old institution of which we are custodians.

Thank you for your attention to this critical issue.

– Mike