False invoices and forged documents covering hundreds of millions of dollars worth of purported medicine sales are at the centre of a new investigation into fraudulent raising of debt at NMC Health.
NMC, the largest private healthcare provider in the UAE, was once a rising star on the London Stock Exchange but it collapsed spectacularly earlier this year as it disclosed billions of dollars in unreported debt. Creditors placed it into administration in April.
Now Neopharma, a pharmaceuticals company controlled by NMC founder BR Shetty, is investigating whether false invoices relating to fake medicine sales underpinned large-scale debt raising at NMC.
According to documents seen by the Financial Times and people briefed on the situation, the invoices were at the centre of a scheme that is believed to have funnelled billions of UAE dirhams of loans to NMC via Neopharma and one of its partners.
NMC allegedly used fake documents to simulate orders for pharmaceutical supplies from Neopharma, and its joint-venture Nexgen, to obtain credit from banks and factoring agents that financed the fabricated sales. Thousands of irregular financing transactions amounted to more than six times the value of Neopharma’s real sales, the documents claim.
The disproportionately high volume of transactions raises questions over banks’ oversight of money flowing in and around Mr Shetty’s companies, people briefed on the probe said.
The investigation will create another problem for EY, NMC’s auditor, they added. EY resigned in March as the auditor for financial services group Finablr, another company founded by Mr Shetty. It has also disclosed unreported debts and is investigating potential theft.
EY, which signed off on Neopharma’s accounts ending March 31 last year, was not reappointed to complete the 2020 audit, the people said.
Mr Shetty has accused various former executives of NMC of carrying out the “serious fraud” at NMC, claiming that they used his companies and accounts without his knowledge. NMC and Finablr have disclosed about $5bn in unreported debts.
Mr Shetty has a controlling stake in Neopharma, which he founded in 2003.
The investigation comes as the Indian entrepreneur faces repayment claims and freezing orders from various creditors, including Bank of Baroda, one of India’s largest lenders, and Netherlands-based Credit Europe Bank. Mr Shetty has rejected any liability for repayment, saying the transactions underlying the facilities were fraudulent, according to court documents.
Neopharma has called on lenders that extended loan facilities to NMC, including Credit Europe Bank to preserve documents and communications to assist the investigation into the alleged scheme, the people said.
The probe’s findings include claims that NMC provided Credit Europe Bank with apparently counterfeit delivery notes purportedly from Neopharma and Nexgen as supporting documents for loan drawdowns. The forgeries may have been drawn up by NMC executives, the investigators believe.
Neopharma, which has traced payments made by Credit Europe Bank in 2019, is now investigating a vast number of earlier transactions routed through Bank of Baroda and the UAE’s Al Masraf bank, the people added.
The probe has traced payments from NMC lenders to a Neopharma account at Al Masraf that were transferred to another of the company’s accounts with Bank of Baroda and ultimately into NMC’s Bank of Baroda accounts.
Payments to Nexgen were transferred to its Bank of Baroda account and immediately transferred back to NMC accounts held at the Indian lender.
One person briefed on the probe said it appeared “lenders were making hundreds of millions of payments without verifying the real movement of goods”.
“The money would flow to Neopharma,” the person added, “and hours later it would be transferred straight back to NMC or other entities involved in the round-tripping scheme. Which supplier pays back the buyer? It’s all bogus.”
Mr Shetty, Neopharma, Nexgen, NMC’s administrators and EY declined to comment. Bank of Baroda, Credit Europe Bank and Al Masraf did not respond to requests for comment.
Additional reporting by Tabby Kinder in London
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