EY faces $2.5bn lawsuit over NMC Health audit
Big Four accountancy firm EY faces a $2.5bn (£2bn) lawsuit over its audit of collapsed healthcare company NMC Health, after bankruptcy administrators yesterday said they had filed a claim against the auditor.
The lawsuit comes after Abu Dhabi firm NMC Health went into administration in 2020, after the firm was accused of understating more than $2.7bn in debt on its balance sheet.
Bankruptcy administrators Alvarez & Marshal is now suing EY for audit negligence, in relation to work the accountancy firm carried out in auditing MNC Health’s accounts between 2012 and 2018.
The lawsuit is aimed at maximizing any returns to creditors, after the multi-billion-dollar healthcare business was placed into administration after short sellers accused NMC of manipulating its balance sheet.
At the time, investment firm Muddy Waters Research shorted NMC, as it cast doubt on its relationship with EY and the credibility of its financial statements.
The short seller claimed “the company’s relationship with its auditor, Ernst & Young raises flags,” as the accountancy firm also faced allegations it had “actively” concealed fraud.
The claims resulted in company founder B.R. Shetty exiting NMC’s board, amid doubts over the size of the Indian entrepreneur’s share in the Emirati company.
In an email to Morning Wire an EY spokesperson said: “We are aware a claim has been submitted to the court by the administrators of NMC Health Plc. We will defend the claim vigorously.”
Alvarez & Marshal said its decision to file against EY was the result of a “wide ranging investigation” into the firm.