GUY Hands, the founder of private equity group Terra Firma, was yesterday granted permission by a judge in New York to sue US bank Citigroup for fraud over his £4bn acquisition of the record label EMI.
Hands alleges Citigroup misled him into believing there was another bidder for the troubled record label during the auction process in 2007 causing him to overpay.
The record label’s value has halved to around £2bn since then.
Hands decided to sue Citi last year after falling out with the bank when it refused to write off some of the £3bn of debt he used to finance the deal.
While Judge Rakoff threw out two of Terra Firma’s claims he ruled the firm could press ahead on two other counts of fraud despite Citi’s attempt to have the entire case thrown out. The case will now go to a jury trial with the first hearing slated for 18 October.
A Terra Firma spokesman said: “We are pleased that judge Rakoff has rejected Citi’s attempt to avoid a trial on both of Terra Firma’s fraud claims. We look forward to the trial on 18 October when Citi will have to answer to a group of New York Jurors”.
Citigroup said: "We are pleased that Judge Rakoff has dismissed two of the four claims in the case. We believe this case is entirely without merit, and we are confident that Citi will prevail at trial on the remaining two claims."
While EMI is a British company Hands opted for the case to be heard in the US because many of Terra Firma’s investors are based in America. Hands, who is a tax exile, also told the court he did not want to jeopardise his tax status by having the case heard in London.