EY ‘never even opened the books' in £2bn hospital ‘fraud'
The 'big four' accountancy giant is battling claims that it failed to spot an alleged multibillion-pound fraud at the former FTSE 100 company, which was plunged into bankruptcy in 2020.
Administrators at Alvarez & Marsal have since launched a £2bn lawsuit against EY in the High Court over claims that its shortcomings resulted in NMC's failure.
In court documents released on Monday, EY is accused of allowing three of the company's biggest shareholders to steal billions of pounds.
Lawyers have claimed that EY's accountants 'never even opened the books' during their time auditing NMC Health between 2012 and 2018.
They argued: 'EY never gained access to the group's transaction-level records in a way that allowed them to be meaningfully audited, and did not identify the fact that a massive fraud was being committed by posting manipulated entries.'
NMC Health was founded by Indian entrepreneur BR Shetty in 1974, who floated the business on the London Stock Exchange in 2012.
At its peak, NMC Health owned 45 hospitals and 15 pharmacies throughout the UAE and Europe, including in the UK, Sweden and Latvia.
However, the business collapsed after its three main backers, Dr Shetty, Khalifa bin Butti and Saeed bin Butti, allegedly extracted billions in cash. All three have denied wrongdoing.
Dr Shetty has claimed he was a victim of a wider fraud. The High Court subsequently froze Dr Shetty's assets in 2022, including a luxury London penthouse.
According to the court documents, management of NMC Health at the time put forward 'implausible and contradictory reasons' to prevent EY's auditors from accessing the company's accounts.
EY's auditors instead relied on limited information about NMC Health's finances, obtained by 'looking at a single screen, over the shoulder of an NMC employee'.
'If EY … had obtained proper access to [NMC Health's] general ledgers, the fraud would have quickly become apparent,' the administrators have argued.
'The ledgers were littered with thousands of entries that had been manipulated and were on their face indicative of fraud, including the hidden borrowing.'
US short seller Muddy Waters subsequently raised allegations of fraud in a report published in December 2019.
Shares in NMC Health subsequently fell 32pc.
The administrators have also accused EY's auditors of 'pulling the wool over the eyes' of the firm's own investigators by working to cover up their failures.
EY has denied the claims and instead argued it was the 'principal target and victim' of the alleged fraud, and claims that the case is 'without merit'.
'Everyone to whom EY might realistically have turned for information about the finances of NMC was actually engaged in practising the wholesale deception of EY,' the firm has argued.
EY has also accused the administrators of having 'shied away' from pursuing those who committed the alleged fraud, including the bin Butti brothers.
Khalifa bin Butti said in 2020 that 'any suggestion that I have been involved in wrongdoing is categorically rejected', according to The Times.
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