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Citigroup lawyer says Guy Hands recollection of his EMI purchase “all over the place”

By | Published on Friday 10 June 2016


The recollections of Terra Firma chief Guy Hands of the days leading up to his audacious purchase of EMI in 2007 have again been questioned in court, as the private equity chief has another go at blaming the bankers at Citigroup for what turned out to be a disastrous dalliance with the music industry.

As much previously reported, Hands accuses Citigroup execs of misleading him about the financial health of EMI as of 2007, and about the intentions of other bidders, arguing that, as a result of that bad information, Terra Firma bid quicker and higher than it might otherwise have chosen to do so.

The EMI purchase, backed by a massive Citigroup loan that couldn’t be restructured post the credit crunch, proved disastrous for Hands, with the British music firm subsequently being repossessed by the bankers and split up for sale to the other music majors.

Terra Firma’s allegations against Citigroup were first presented in the New York courts in 2010, but the bankers won the case. Now fighting the good fight in the London courts, legal reps for the private equity firm recapped the key allegations made at original trial as the new case got underway earlier this week, while also introducing some new claims about the alleged misbehaviour of Team Citi.

That included the allegation that the bank’s then Global Head Of Investment Banking, Michael Klein, totally misrepresented Citi’s general opinion about EMI. Terra Firma’s legal rep Anthony Grabiner claimed that, back in 2007, Klein had told Hands that he so admired the EMI business, that the bank would invest itself if it wasn’t conflicted by it also being an advisor on the sale. But email exchanges between other Citi execs at the time describe EMI as an “old pup” and a “terminal cancer patient on chemotherapy”.

Meanwhile, according to the Telegraph, Terra Firma alleges that, in the bank’s concurrent role as an advisor to EMI, Klein had been told by the then CEO of the music firm, Eric Nicoli, that if the big deal to take the EMI Group back into private ownership failed, there would be “clusterfuck of massive proportions”. Ah, the best kind of clusterfuck.

But speaking for Citigroup, lawyer Mark Howard confirmed to the court from the outset that his client’s case remains the same as in 2010: that Terra Firma is just trying to shirk the blame for a disastrous investment it chose to make. The private equity group’s core claim was “a manufactured claim” said Howard, “because Terra Firma is trying to pin the blame for a disastrous investment onto someone else”.

As Hands himself took to the stand this week, another key line of argument used by Citigroup in the New York case also reappeared, that the Terra Firma boss seemed to have a very clear recollection of the conversations where Citi execs allegedly made their misleading statements, yet a rather hazy memory of everything else going on at that time. In the original trial, Hand’s main memory – beyond the misinformation he alleged he had received – was that chocolate biscuits had been available during the key stages of the deal making.

And more than that, argued Howard, according to The Guardian, there are now “gross discrepancies” between the new testimony and that given in New York. Hands’ recollection is “all over the place”, said the lawyer. “You recognise the consequences of giving perjured evidence”, the legal man said at one point. “Yes I do”, responded Hands.

Among other things, Howard took a shot at Hands’ allegation that Citi banker David Wormsley had told him there was a rival bidder for EMI and therefore he should increase his bid to 265p per share. “You had a confusion in your mind about where the 265 came from and you have sought subsequently to attribute it to Mr Wormsley”, said the lawyer. Hands disagreed.

The case continues.