Legal claim initiated against Ernst & Young by NMC Health's administrators
More than $4 billion were never entered in Abu Dhabi hospital operator's books
Dubai: Legal action has been initiated against Ernst & Young, the auditor at NMC Health when more than $4 billion plus was taken out as bank loans and never entered into the books.
A “preliminary notice of potential claim” has been issued against the auditor, the administrators of NMC Health - Alvarez & Marsal - state in an update. A regulatory entity in the UK had earlier initiated an investigation into how E&Y failed to account for the missing billions.
As and when it happens, the formal claim against E&Y will be filed be in London. "Those investigations and formulation of claims identified are ongoing," Alvarez & Marsal said in the update. "Strategies are in the process of being developed to prioritise such claims in order to recover assets for the benefit of creditors."
Incidentally, E&Y was also the auditor at UAE Exchange Centre, which too went into turmoil as debts never showed on its books.
Get tough
The filing of initial claims against E&Y shows that the administrators are not just content with going against the individuals who had directly siphoned off the company funds. That the NMC auditor systematically failed to notice the missing funds through the years had come as a shocker.
Initial charges have already been brought against former shareholders and management at NMC with authorities in Abu Dhabi. Prosecuting them – and more importantly, recover the funds – is by no means going to be easy, more so as most of the accused are no longer in the country.
We have been co-operating with various regulatory bodies and authorities when required, in order to assist them with their investigations
Going in depth
As per the new update, this is the strategy the administrators are engaged in:
• Continuing to review the company’s financial data, systems and books and records;
• Conducting interviews with former officeholders, employees and advisers, and preparing evidence and witness statements in anticipation of launching claims;
• Consultation with our legal advisers in relation to the investigation findings and strategies; and
• Assessing claims based on legal merit, evidence available, assets owned by potential defendants and jurisdictional aspects.
“It remains our view that given the complexity of the investigation and legal claims/asset recovery strategy, it is not possible to provide an accurate prediction of potential recoveries or the time and costs required to complete the claims recovery strategy,” the A&M report notes. “It remains likely that the investigation and claims recovery strategy will require significant resources over a period of time.”
According to a senior banker associated with the NMC fracas, "People leading audit and financial reporting at NMC and working closely with the E&Y are equally culpable. There was also a former official at the audit firm who later became a member of the NMC Board of Directors."
Two track policy
While on the one side the administrators are going after the missing funds and individuals involved, it is chalking up a strategy that will see NMC Health shed non-core businesses and focus on its hospital and clinic network in the UAE and Oman. Then, at a time deemed opportune, that entity itself will find a buyer.
According to one business owner who met the administrators recently to file claims against the former management, “A&M was willing to look into all the details related to my case and I have submitted all documentary evidence from my side.
“Other creditors too have done so as well. There is serious intent to recover the funds.”