PREVIEW-Guy Hands, Citi to face off at trial over EMI

* Trial starts Monday with jury selection

* Still time for settlement to be reached

* Onetime friends Hands and banker Wormsley in dispute

By Grant McCool and Simon Meads

NEW YORK, Oct 14 (BestGrowthStock) – Outspoken British financier
Guy Hands and his onetime top Citigroup (C.N: ) banker friend
David Wormsley will take their bitter dispute over whether
Hands was duped into overpaying for the legendary EMI music
company to a jury trial on Monday.

Barring a last-minute settlement over a 4 billion pounds
($6.4 billion) agreement in 2007 that came to epitomize the
perils of loading companies with debt and the associated risks,
Hands will be called to testify in Manhattan federal court.
(For a Special Report on EMI, click on [IDnLDE6591MS])

Hands’s Terra Firma [TERA.UL] buyout house bought EMI in
2007, backed by Citi loans of 2.6 billion pounds, but the
ensuing downturn and the high debt burden quickly left EMI
scrambling to keep it out of the bank’s clutches.

The case centers on phone conversations between Hands and
Wormsley on a weekend in May 2007. Hands says Wormsley told him
that if he did not make a strong bid for the record company,
rival Cerberus Capital Management LP would win with a higher
offer.

Wormsley denies telling Hands of any Cerberus bid. As it
turned out, there was never a bid from Cerberus or any other
competitor of Terra Firma.

A month ago, presiding U.S. District Judge Jed Rakoff
allowed Terra Firma’s claims for fraudulent misrepresentation
and fraudulent concealment to proceed to a jury. Rakoff granted
judgment in favor of Citi on two of Terra’s claims.

Both Terra Firma and Citigroup declare they are confident
of success at the trial.

“Terra Firma’s allegations are categorically untrue,” a
Citi spokeswoman said in an emailed statement. “Citi and Mr.
Wormsley have treated Mr. Hands and Terra Firma at all times in
a forthright and honorable fashion. We look forward to our day
in court and are confident that we will prevail.”

Citi is scheduled to report its earnings on Monday.

Terra Firma’s 2009 lawsuit against Citigroup accuses the
bank of inflating the price of EMI by not revealing that
Cerberus had pulled out of the auction. Citigroup denies the
claims.

“From the beginning, we have said this case was about
fraud committed by Citi and we have strong evidence to support
our claims,” said a spokesman for Terra Firma in an emailed
statement.

Part of Citi’s defense is that Hands maintained a personal
relationship with Wormsley after the deal, and continued to
employ him on other transactions, according to court papers.

A settlement to halt the trial at the eleventh hour could
be possible, despite mediation talks last month between lawyers
failing to result in a deal.

Lawyers for Terra Firma and Citi are likely to hold
informal talks even after the trial has started, and could halt
the process at any point, one private equity lawyer said.

TRIAL SCHEDULED

The civil trial starts Monday in U.S. District Court with
jury selection to be followed by opening statements from each
side. It could last several weeks.

The judge has significant experience in white collar
business tussles. One of Rakoff’s most highly publicised cases
was a dispute between U.S. securities regulators and Bank of
America over its January 2009 takeover of Merrill Lynch.

Terra Firma’s legal team is led by David Boies, chairman of
law firm Boies, Schiller & Flexner, who represented former Vice
President Al Gore in the 2000 presidential election recount.

Citi is being represented by experienced white-collar
defence lawyer Theodore Wells Jr. at Paul, Weiss, Rifkind,
Wharton & Garrison LLP, who defended financier Michael Milken.

Guy Hands is expected to be the first witness called.

Prospective jury members are expected to be asked about
their past involvement with the private equity or investment
banking industry (Read more about the banking industry recovery.), and any prior experience with auctions.

EMI breached the terms of debt held by Citigroup at the end
of March, capping a torrid period for the business after it
unveiled in February a 1.56 billion pound net loss for the
previous year.

EMI’s fortunes have improved thanks to hits from artists
including rapper Tinie Tempah and country group Lady
Antebellum, but a tightening of the terms on Citi’s loans has
forced Terra Firma back to investors for more money.

(Reporting by Grant McCool in New York and Simon Meads in
London. Additional reporting by Megan Davies in New York.
Editing by Robert MacMillan)

PREVIEW-Guy Hands, Citi to face off at trial over EMI