UPDATE 2-Jurors told to sort out truth in EMI buyout spat

* Terra Firma claimed fraud by Citi over buyout of EMI

* Principal witnesses Hands and banker Wormsley to testify

* Opening statements focus on allegations of lies
(Adds Terra Firma CEO Pryce testimony on Cerberus)

By Grant McCool

NEW YORK, Oct 18 (BestGrowthStock) – A New York jury was asked on
Monday to decide who may have lied in a dispute between British
financier Guy Hands and Citigroup (C.N: ) over Hands’s $6.4
billion buyout of legendary music company EMI in 2007.

Hands and his onetime Citigroup banker friend David
Wormsley sat feet away from each other as the trial, which is
expected to last three weeks, began in U.S. District Court.

Hands’s Terra Firma Capital Partners [TERA.UL] accuses
Wormsley, 50, and Citigroup of duping Hands into thinking there
was a rival bid in the offing by private equity firm Cerberus
Capital Management for the EMI company he coveted.

As it turned out, there were no other
offers.[ID:nN13263886]

Both men are expected to testify, with Terra Firma founder
Hands, 51, taking the witness stand as early as Tuesday.

The two had kept up a personal and business relationship
after the May 2007 deal, according to court papers. Terra Firma
sued two years after the deal was consummated.

Wormsley “was playing two sides of the street at the same
time,” Hands’s lawyer, David Boies, told the nine-member jury
in a 45 minute-long opening statement.

Boies said email evidence to be presented by Terra Firma at
the trial would show that Wormsley “secretly promised EMI to
use his relationship with Guy Hands and Terra Firma to help
EMI” obtain added value.

Citigroup backed the EMI acquisition with 2.6 billion
pounds in loans. The 4 billion-pound ($6.4 billion) deal came
to epitomize the perils of loading companies with debt and the
associated risks.

Citigroup Inc denies the allegations that Wormsley, one of
its top European bankers, had misled Hands in telephone
conversations on the weekend of May 19-20, 2007 or otherwise
before the May 21 deadline for bids.

FIRST WITNESS

The bank’s lawyer, Ted Wells, argued that Citigroup’s
evidence would show that as time went on, Hands realized that
his purchase of EMI was not a good business deal, so he sued
the bank in 2009.

“After a while Mr. Hands had a new story,” Wells told
jurors. “There was no fraud, no lies. Nobody tricked him,”
Wells, of Paul, Weiss, Rifkind, Wharton & Garrison LLP, said in
his opening statement.

Terra Firma was pressured into making a higher bid for the
company than it would have if it had known there were no other
offers, said Boies, chairman of law firm Boies, Schiller &
Flexner.

He called Tim Pryce, Terra Firma’s chief executive and
former general counsel, as the first witness.

Pryce testified that he spoke to Wormsley on the phone on
May 17 about EMI, four days before the auction. “He said we
would have to move very quickly,” Pryce told the jury.

Pryce testified that Hands told him later that year that he
had heard Cerberus had not submitted a binding bid for EMI “and
asked me to investigate to find out whether or not that was
true.”

Presiding U.S. District Judge Jed Rakoff noted that Terra
Firma called the EMI deal process Project DICE. “Was this
intended to convey this was a dicey transaction?” Rakoff asked
Pryce after the jury had been sent home for the day.

“No, absolutely not,” Pryce replied.

Settlement talks between Citigroup and Terra Firma broke
down last Wednesday, the Wall Street Journal reported on
Saturday, citing two people familiar with the matter.
[ID:nN16241584]

Lawyers are likely to hold informal talks even during the
trial and could halt the process at any point.

Citigroup, which is struggling to distance itself from its
near collapse in the financial crisis, reported a
higher-than-expected quarterly profit on Monday
[ID:nN18138072].

The case is Terra Firma et al v Citigroup et al, U.S.
District Court for the Southern District of New York, No.
10-10459.

$1 = 0.6294 pound
(Reporting by Grant McCool, editing by Matthew Lewis and Ted
Kerr)

UPDATE 2-Jurors told to sort out truth in EMI buyout spat