Six executives accused of involvement in a long-running fraud at NMC Health are blaming each other over the $1 billion accounting scandal that contributed to the company’s collapse, a UK court has heard.
The scale of wrongdoing that led to Abu Dhabi Commercial Bank losing $1bn was “extraordinary”, lawyers told the High Court in London, as it takes legal action against six former directors.
The company was responding to efforts by the six – who include founder Bavaguthu Raghuram Shetty and former chief executive Prasanth Manghat – to quash a worldwide freezing order on their assets and to stop the case being heard in England.
The bank argues that the case should be heard in the UK capital because it is centred around the London-listed company, which collapsed last year, with its auditors and administrators also in London.
The six feuding defendants are not unanimously agreed on where the case should be heard.
“These attempts to blame others, and each other, raise issues that ought properly to be resolved at trial in this court,” counsel for the bank Adrian Beltrami.
He said in court papers that the London-listed company was the “central vehicle for the conspiracy” and the bank had a “good arguable case” that each of the executives “had been engaged in a major fraud that was concealed for a number of years”.
NMC Health collapsed last year after a report by activist investor Muddy Waters alleged that the company had inflated its cash balances and understated its level of debt.
A subsequent investigation revealed more than $4bn of hidden debt that led to the company’s failure.
Investigators said documents were destroyed by executives as they tried to discover the scale of the fraud and who was responsible.
They said that executives at NMC Health were using loans to the company from 2013 to boost share price and their own pay packets rather than benefit the company, while creating false documents to suggest it was in rude health.
The National has previously reported that payments were made to a struggling food business set up by BR Shetty’s daughter.
The bank claims that it was duped over the company’s real position that prompted it to lend about $1.2bn to entities in the health care group.
Mr Shetty has long argued that he was a victim of fraud and has brought legal action against ex-directors, two banks and the company’s former auditors in New York.
He accused the directors, including Mr Manghat, of creating false invoices to artificially boost NMC Health revenue.
Mr Shetty has been "arguably the most liberal of the defendants in attributing blame elsewhere”, including criminal complaints against former colleagues in India – where he is believed to have remained since February 2020 – and the UAE, the London court was told.
The New York action by Mr Shetty and two of the other defendants “appears to be designed to deflect blame … and to assign blame to those further down the hierarchy who are said to have had a more direct role in implementing the conspiracy”, Mr Beltrami said.
The former NMC executives say the freezing order secured in London should be quashed and most say the case should be heard in the UAE.
The health care provider aims to exit administration and start operations under new ownership before the end of the year.