NMC Health hires former FBI head to investigate Muddy Waters allegations

In its last month's report, US short seller argued the healthcare provider's profits were "too good to be true"

An NMC Speciality Hospital in the UAE. The company's administrators have appointed a new board whose priority will be to "implement corporate governance changes" at the UAE's biggest healthcare operator. ReutersShow less

Abu Dhabi-headquartered NMC Health has appointed the former Federal Bureau of Investigation director Louis Freeh and his risk management firm Freeh Group International Solutions to look into allegations made by short seller Muddy Waters Capital.

NMC which is one of the largest healthcare groups in the Middle East with a network of clinics, hospitals, and long term care centres across 19 countries announced the appointment in a regulatory filing to the London Stock Exchange where its shares trade.

Last month, Muddy Waters released a report alleging that the healthcare group had inflated cash balances, overpaid for its assets and understated its debt. NMC has repeatedly dismissed the allegations, which have hurt its share price, and called them “unfounded, baseless and misleading”. It also appointed a committee to carry out an independent third-party review to restore investor confidence.

“The committee chose Freeh Group to provide a completely independent, unbiased, comprehensive and transparent report that will address all of these allegations,” said Jonathan Bomford, chairman of the independent review committee.

The Muddy Waters report argued the firm's profits were "too good to be true", especially when compared to similar listed companies operating in the same sector.

NMC’s shares have plunged 44 per cent since December 16, the day before Muddy Waters published its report. They closed up 8 per cent on Friday.

The company said the committee is undertaking an independent review of all allegations, focusing initially on confirmation of the group's cash balances on December 15, 2019 and that it intends to publish findings of the review into all primary allegations made, particularly all those of a financial nature, in advance of the release of the company's 2019 financial results.

NMC is the latest target of short seller Carson Block’s Muddy Waters. Short-sellers borrow shares, pay the lender a fee and sell them on, betting that the price will fall before buying them back and returning them to the original lender – pocketing the difference, minus the fee.

NMC and another firm Finablr are both founded by UAE-based Indian billionaire BR Shetty. Travelex, a company belonging to Finablr, was hit by a ransomware attack on December 31, while NMC’s shares fell sharply towards the end of 2019 following the Muddy Waters allegations.

In 2019, NMC reported first half net profit of $138.1 million (Dh506.8m) while revenues for the reporting period climbed 33 per cent year-on-year to $1.24 billion.