NMC Health Says Review Turns Up Evidence of Suspected Fraud
NMC Health Says Review Turns Up Evidence of Suspected Fraud
(Bloomberg) --
NMC Health Plc said a probe of financial irregularities discovered evidence of suspected fraud after the hospital operator disclosed a hidden $2.7 billion debt pile.
The company earlier this week said the debt facilities had been used for unknown purposes and had not been disclosed to the board, pushing the largest private health-care company in the United Arab Emirates into a full-blown accounting scandal.
In January, NMC put former U.S. Federal Bureau of Investigation Director Louis Freeh in charge of a review, which reported the evidence of fraud on Thursday. The revelation comes after Freeh told the company last month he’d turned up details of supply-chain financing arrangements with affiliated companies that the board said it was unaware of.
“NMC is fully committed to investigating these activities and has notified the relevant authorities in the U.K. and U.A.E. to determine what action they also consider to be appropriate,” the company said in a statement.
A representative for the U.K.’s Financial Conduct Authority, which said last month that it had opened an investigation, declined to comment. A representative for the Serious Fraud Office wouldn’t confirm or deny whether it was investigating.
NMC has been in freefall since December, when short seller Muddy Waters Capital LLC alleged it had overpaid for assets, inflated cash balances and understated debt. The shares, listed in London, have been suspended since February and the company fell out of the FTSE 100 this month.
Debt Pile
The unknown debt more than doubles NMC’s borrowings to around $5 billion, up from the $2.1 billion that was disclosed in June. The disclosures have raised questions over the company’s future ownership.
As NMC teeters, “fingers will be pointed at its auditors, high-profile management and ultimate owners,” said Hasnain Malik, head of equity strategy at Tellimer. “While the assets are real and the operating business have recurring cash flows, the valuation exercise by potential buyers is impeded by an unclear idea” of the extent of the liabilities.
NMC’s woes are just one of several crises for the hospital chain’s founder, Bavaguthu Raghuram Shetty, who resigned from his role as co-chairman on Feb. 17. Finablr Plc, the owner of currency-exchange businesses including Travelex Holdings Ltd. and another of Shetty’s businesses, said Thursday it’s taking urgent steps to assess its liquidity position and will appoint an independent financial adviser.
Finablr’s stock has been battered because of its ties to NMC, and the company has been exploring strategic options, including whether to introduce a new investor or pursue a take-private transaction, people familiar with the matter have said.
--With assistance from Franz Wild, Amy Thomson and Archana Narayanan.
To contact the reporter on this story: Suzi Ring in London at sring5@bloomberg.net
To contact the editors responsible for this story: Eric Pfanner at epfanner1@bloomberg.net, Thomas Mulier
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