Dubai - A host of law firms in the US had initiated legal battle against hospital operator.
Published: Fri 29 May 2020, 8:31 PM
Updated: Mon 1 Jun 2020, 10:37 AM
NMC Health, the debt-ridden UAE-based hospital operator battered by scandals and allegations of a multi-billion-dollar fraud, has filed for bankruptcy protection in the US where it faces a spate of shareholder lawsuits over financial irregularities.
The company, which had accumulated a total of $6.6 billion in debts, was placed into administration by a UK court in April following a petition filed by ADCB Bank, one of its top lenders.
The healthcare provider with one of the largest network of hospitals and clinics in several countries, filed for protection from its creditors. It is seeking recognition of proceedings in the UK and allowing administrators to "maximize the value of assets owned in the US, including certain medical practices," according informed sources.
The company, which was delisted from the London Stock Exchange amid mounting turbulence, said in US court papers that certain shareholders had commenced litigation against it.
The bankruptcy filing cites total liabilities of $1.873 billion and "possible fraudulent activity leading to the UK proceeding, including the discovery of at least $2.7 billion in previously undisclosed facilities to NMC Group."
NMC Health, which runs private medical facilities across 19 countries, with its primary focus in the Middle East, is also facing either dissolution or liquidation.
The embattled firm's joint administrators from consulting firm Alvarez and Marsal Europe, said on Thursday it would not be possible to conclude the outcome of the process until all investigations into the company have progressed and the liability position is ascertained.
ADCB, the UAE-based lender with an exposure of Dh3 billion, has also begun criminal proceedings against six senior executives, including founder and former chairman BR Shetty and former CEO Prasanth Manghat on charges of fraud and forgery.
A host of law firms in the US had initiated legal battle against hospital operator.
The law firms had filed for class-action lawsuits for violations of some of the rules of the Securities Exchange Act of 1934 and a rule promulgated there under by the US Securities and Exchange Commission.
The law firms actively engaged with the class action suit filing in courts on behalf of US investors alleging securities fraud include Bernstein Liebherd, Bronstein, Gewirtz & Grossman, Gainey, McKenna & Egleston, Pomerantz Law, and Wolf Hadenstein Adler Freeman & Herz, and the Schall Law Firm.
The law firms have been encouraging investors who have lost $100,000 or more on NMC Health American Depository Receipts to join the fray.
According to one complaint, NMC Health made false and misleading statements to the market. "NMC Health failed to maintain effective internal controls. The company engaged in numerous related-party transactions. The company understated its debts while simultaneously overstating its cash-on-hand."
The law firms pointed out that NMC Health's principal shareholders did not accurately report their interest in the company, which did not review the ownership stakes of these principal shareholders, and therefore could not enforce its relationship agreement with them. "Based on these facts, the Company's public statements were false and materially misleading throughout the class period. When the market learned the truth about NMC Health, investors suffered damages."
The US suit filings make a number of allegations, including that the company lacked effective internal controls, that it engaged in "undisclosed and extensive" related party transactions, and that its debts were significantly understated, while cash balances were overstated. At least one filing alleges that previous statements made by the company "were materially false and misleading and/or lacked a reasonable basis."
issacjohn@khaleejtimes.com
E-Paper
Sign In
0°C 
