EY accused of negligence at £2b trial over UAE's NMC Health debt pile

EY continued to audit NMC Health Plc despite suspicions that management withheld key documents that revealed its true debt position, lawyers for the collapsed firm argued at the start of a £2 billion ($2.7 billion) London trial.

NMC’s administrator, Alvarez & Marsal sued EY in London alleging negligence and failure to spot the billions of hidden debt between 2012 and 2018 when EY was the auditor. NMC was put into administration in 2020 following allegations of fraud at the health care provider. 

“It is remarkable that EY continued to conduct the audits despite its suspicions that management was lying about being unable to provide access to the group’s general ledger,” lawyers for NMC said on the first day of the London trial. 

EY denies the allegations and said the claims were “unfounded.”

The collapse of NMC Health sparked a flurry of lawsuits and investigations in the UK and US as different sides point the finger of blame. The UK’s markets watchdog previously censured the fallen Middle Eastern hospital operator, saying the once-FTSE100 listed firm misled investors about its debt position by as much as $4 billion.

NMC’s case is “enormously inflated” and the “true losses, if any, are far less than its headline claim,” lawyers for EY said in court filings. “NMC’s pleaded case depends on both an exaggerated conception of the scope of EY’s duty and an unrealistic premise as to how auditors faced with challenging client circumstances should behave.”

The health care company was put into administration in 2020 by a London court as the scale of the firm’s troubles emerged following a short seller’s report. 

“This was a complex, pervasive and collusive fraud, and responsibility for it lies squarely with its perpetrators, including NMC’s owners, directors and the treasury and finance team,” EY’s spokesperson said in a statement.

The firm’s founder B.R. Shetty, who is not a party to the case, has previously denied any wrongdoing saying he was a victim of the fraud. Shetty, who was sued separately by NMC, blamed former senior executives and EY for the alleged fraud. Shetty’s lawyers didn’t immediately comment on the trial.

“NMC is confident in its audit negligence claim against EY, and that the trial will lead to a significant recovery for NMC’s creditors,” Aidan O’Rourke, a lawyer for NMC lawyer, said in a statement.