EY labels former head of EY Abu Dhabi a ‘fraudster’ in £2.7bn legal battle
EY UK’s lead barrister described the former head of EY Abu Dhabi as “plainly a fraudster” in the opening submissions at the £2.7bn legal battle against the firm over the collapse of NMC.
Abdulrahman Basaddiq, who previously headed up EY’s operations in the United Arab Emirates and served as the country managing partner, was nominated by Sheikh Khadem Bin Butti in 2014 to join the NMC board as an independent director.
At the High Court in London today the firm’s lead barrister named the “fraudsters” that the Big Four firm alleged were responsible for NMC’s losses, and Basaddiq was named to the court.
His name followed the founders of NMC Health, BR Shetty and Bin Butti.
In its written skeleton documents, the audit giant stated that Basaddiq “came to have a significant influence on other representatives of NMC” and used this to “deliberately deflect investigations into the fraud.”
EY’s legal team at RPC outlined in the firm’s defence that Basaddiq also received additional remuneration from NMC beyond the payments due to him as a director, the total of which seems to have been more than £2m between 2014 and 2018.
The UK arm of the Big Four brand also alleged that “EY Middle East’s documentation of the work it was doing left something to be desired”.
NMC was listed on the London Stock Exchange but was headquartered in the United Arab Emirates, so EY Middle East, a different firm from EY UK, audited its accounts.
The big four giant stated it “properly relied on the work of EY Middle East as auditor of those components under the relevant professional standard”.
However, the claimant’s lawyers at Quinn Emanuel state, “although formally separate entities, EY and EY Middle East are part of the EY Global network.
“They conducted the audits together through an ‘Integrated Primary Team,'” the claimant’s legal documents alleged.
“It is common ground that relevant auditing standards provided that EY was responsible for the direction, supervision and performance of the group audit engagement and for the audit opinion that was issued and that it was not permitted to include any reference to component auditors in a UK audit report,” the legal arguments added.
London-listed health giant NMC Health Plc collapsed in April 2020 following a Muddy Waters report that raised queries about the group’s financial performance and accounts.
EY was the group’s auditor from 31 December 2012 until NMC was placed into administration.
The administrators of NMC at Alvarez & Marsal launched a £2.7bn legal action against the Big Four firm, accusing their audit team of conducting “fundamentally flawed” work.
Draft report revealed
The legal battle kicked off at the London court on Monday. A draft report by the accountancy regulator stated that EY’s audit of NMC “was deficient in multiple respects” and that “these failings are extremely serious.”
The Financial Reporting Council (FRC) is investigating the firm for its role in NMC’s audits. However, a draft report was outlined in the court battle, which EY stated didn’t show its “very detailed responses” to the regulator.
The court battle is set to last 15 weeks, and due to the summer term it will conclude in October.
Elsewhere, Basaddiq also made the headlines in 2020 when he stepped down as director of Finablr, and EY resigned as an auditor. The payments firm was placed into administration in March 2022.