Dubai tycoon slaps $8 bn suit on BoB, EY in New York for ignoring 'fraud'

Founder of Dubai-based firm NMC Healthcare, B R Shetty, claims it sank because the two entities turned a blind eye to a series of allegedly fictitious transactions.

Dubai-based billionaire BR Shetty has sued Bank of Baroda (BoB) and audit firm Ernst & Young (EY) in a New York court, accusing them of ignoring fictitious and fraudulent transactions that resulted in NMC Healthcare going bankrupt.

Shetty is seeking $8 billion in damages in the suit that also names the top management of NMC Healthcare, and Netherlands-based Credit Europe Bank.

A top NMC Healthcare official confirmed the development to Business Standard and said despite several meetings, senior BoB officials in India did not take remedial steps for fear of getting involved in an international ponzi scheme perpetrated by then senior management officials.

Dubai-based NMC was placed under bankruptcy in April last year, when more than $4 billion of hidden debt was discovered.

Shetty, who was then non-executive chairman, denied any involvement, saying he had left the management to professionals.

He flew to India in February last year to meet his ailing brother and was stuck due to the Covid-induced lockdown.

BoB sued Shetty in India and issued a travel ban against him, preventing Shetty from travelling to Dubai to take care of his business.

The Karnataka high court rejected an appeal filed by Shetty against the ban

BoB did not reply to an emailed questionnaire.

In his suit, Shetty alleged that BoB, EY, and Credit Europe Bank participated in a coordinated and deliberate conspiracy.

More than $5 billion was stolen from BR Shetty’s companies this way, say the suit.

“If BoB had complied with existing anti-money laundering laws and investigated the suspicious transactions, the massive accounting fraud and theft would have been discovered in its infancy and the plaintiffs would never have sustained their financial injury,” the suit said.

According to Shetty, BoB breached its fiduciary duties and violated the international anti-money laundering laws by processing thousands of related-party transactions and did not file any suspicious activity report with the US regulators.

Shetty decided to drag BoB, EY and Credit Europe Bank to court after receiving a clean chit from a Dubai-based forensic auditor, Wisehouse Consultancy, which investigated funds transfer among various BR Shetty (BRS) group companies.

The forensic audit report said Shetty was the victim of a complex financial scam involving his group’s top officials and was unfairly targeted as a "defaulter" by banks and the media.

In the forensic audit dated May 1, 2021, auditor Mohhammed Soliman Omar of Wisehouse investigated the debt crisis announced by NMC Hospitals, the Dubai-based flagship company of the BRS group, and concluded that Shetty did not issue any financial statements and there was no relationship between him and any undeclared debts.

The auditor also investigated transactions from Shetty’s personal account at BoB, and found that the senior management of NMC, led by its former chief executive office (CEO) Prasanth Manghat, had made a series of fraudulent transactions by transferring funds from NMC to Shetty's personal account and then transferring them again to third parties using fraudulent and forged bank transfer orders.

“It became clear to us that both Promoth Manghat, former CEO of UAE Exchange, and Pradeep Kumar, former CFO of UAE Exchange, opened account in the name of Shetty in National Bank of Fujairah (NBF), using an account opening form using what was proved to be a forged signature, and they embezzled UAE Exchange money by transferring its funds to NBF account.

"Prasanth Manghat, the then CEO of NMC Hospital, also transferred funds to this account and later transferred it to themselves and to their affiliates,” the report said.  UAE exchange is a BRS group company.

The forensic report also examined the account in the name of Guide Contracting and General Maintenance Company with Bank of Baroda, and found inconsistencies in the account opening form.

Extended authorities were granted to few employees while Shetty had granted them only  a “read access”.

The auditor found that Prasanth and Promoth Manghat transferred funds from NMC and Neopharma, another BRS group company, to this account.

The Manghat brothers have denied their involvement in any fraud.

“We have concluded from our overall research, that the facts represented the embezzlement and wasting of both companies' funds.

"This took place by a plan executed by the brothers Promoth and Prasanth Manghat, and with the assistance of other employees.

"It was also evident that the senior management of Finablr, the fintech services group company, as well as Abdul Rahman Basadiq (member of the Board of Directors of Finablr, NMC, and UAE Exchange) have received large sums and payments from the embezzled money," the report said.

"We believe that the total embezzlement in the books of the two companies is large and was done by the same group of people, but we did not examine the books of the two companies as our mission did not include that," the report said.

Photograph: NMC Healthcare via Twitter