FINANCIER Guy Hands yesterday lost his “irresponsible” $2bn (£1.25bn) fraud case against Citigroup linked to his purchase of struggling music group EMI.
A New York federal court jury took four hours to decide unanimously last night that David Wormsley, one of Citigroup’s top bankers, did not lie to Hands during his £4.2bn bid for the group in May 2007.
The decision is a blow for Hands, who said in court that 60 to 70 per cent of his wealth is tied up in EMI.
The Guernsey-based British tycoon originally sued for $8bn, and claimed Wormsley repeatedly misled him about a rival bid to trick him into raising his offer for the music label, which owns the Beatles’ back catalogue and the Abbey Road studios.
Citi provided £2.6bn in last-minute loans to help fund the takeover, netting the bank tens of millions of pounds in fees.
Hands’ private equity company Terra Firma struggled to turn the debt-laden music group around, and he moved to place blame with his former friend Wormsley.
Terra Firma said after the judgement it believed the lawsuit was “an important action to bring and we had a responsibility to our investors to bring it. We will continue to focus on achieving the right result for them and EMI.”
The decision by controversial US judge Jed Rakoff could force Terra Firma to hand EMI to Citigroup, its main creditor, if the firm starts to breach banking covenants. Hands asked investors for £105m in June to meet key repayments, and has asked Citi several times to consider refinancing its £3bn debt pile.
Citigroup said: “The jury’s verdict makes clear that Terra Firma’s irresponsible accusations of fraud were nothing more than a misguided attempt to gain leverage in debt restructuring negotiations.”
During the heated three-week trial, jurors heard Hands argue that Wormsley had fabricated a rival bid by Cerberus Capital during three phone calls the weekend before the deal. Wormsley said he couldn’t remember the details of the calls.
“I think Mr Wormsley was put through a terrible ordeal. He was totally innocent, he did nothing wrong,” Citigroup trial lawyer Ted Wells told reporters outside the courtroom. “He is a man of honesty and integrity.”
Wells told the court that Hands “can’t shift responsibility for his bad business decision from his company to Citigroup.” Citi stock shot up 3.3 per cent after the verdict to close at $4.33.