EY coughs up over £100m to settle NMC Health court conflict
Big Four giant EY is understood to have paid over £100m to settle a High Court claim brought by former FTSE 100 company NMC Health that collapsed during a fraud scandal.
Both EY and the healthcare provider reached a confidential agreement in February to settle the claims, which were brought four years ago against EY for breaching its contract and duty of care, and for negligence relating to EY’s auditing of NMC between 2012 and 2018.
According to a new progress report from Alvarez & Marsal, the administrators who filed the claim against EY in 2022, the private healthcare provider received £105.5m to resolve the litigation.
The provider reportedly sought £2bn in damages over the allegations, which EY denied.
NMC Health, a major private healthcare provider and pharmaceutical distributor headquartered in Abu Dhabi, United Arab Emirates (UAE), was once a prominent FTSE-100 player but plunged into administration in 2020 following allegations of undisclosed debt and accounting fraud.
Alvarez & Marsal were appointed in 2020 as administrators for the healthcare company following a crisis in which a report by Muddy Waters Research, a US investor, raised concerns over NMC’s accounting and governance issues.
NMC ‘misled investors’ amid scandal
The Financial Conduct Authority (FCA) said in 2023 that it had reprimanded NMC after the provider published a series of “materially inaccurate” announcements about its financial position regarding debt.
Following an investigation, the City watchdog found that NMC had been operating two separate accounting records and that the publicly disclosed statements “misled investors” by understating debt by $4bn.
The company was placed into administration in April 2020, and the FCA and Alvarez & Marsal acquired material to prove the inaccurate financial claims.
At its peak in August 2018, NMC had a market value of £8.6bn, but that had plunged to just £2bn by the time it delisted in February 2020.
The case went to trial last May before Dame Clare Moulder and ran for 15 weeks. But as the case was awaiting judgment, EY confirmed in February that it had drawn a line under the dispute with NMC’s administrators, without commenting on the decision. The Big Four firm previously said that it “denies the claim in its entirety.”
“Health has resolved the claim it brought against its former statutory auditor, Ernst & Young LLP. The claim has been resolved without admission of liability. The settlement agreement and its terms otherwise remain confidential,” an Alvarez & Marsal spokesperson said.