UPDATE 2-NY jury to decide: lies or bad deal over EMI sale

* Closing arguments in buyout house-Citigroup trial

* Word of Terra Firma founder against word of Citi banker

* Case with New York jury after three weeks of evidence
(Adds case goes to jury, closing quotes)

By Grant McCool

NEW YORK, Nov 3 (BestGrowthStock) – Did a Citigroup Inc (C.N: )
banker lie to British buyout boss Guy Hands to trick him into
overpaying for EMI in 2007, or is Hands avoiding responsibility
for a bad deal because his “magic sauce” failed him?

Those were the opposing closing arguments put to eight New
York jurors on Wednesday who will decide a high-stakes dispute
between Hands’ Terra Firma private equity firm and the global
bank over the 4 billion pound ($6.4 billion) EMI purchase.

Hands, 51, testified at trial that he and other Terra Firma
executives had scrambled on a May 2007 weekend to complete
financing for a bid of 265 pence per share for EMI. He said
they worked quickly because Citi banker David Wormsley told him
that rival Cerberus Capital Management LP [CBS.UL] was to bid
262 pence per share and Hands should offer more to win.

But there was no other bidder, and the private equity firm
now owns a company weighed down by its debt, a symbol of the
risks taken in leveraged buyouts during the credit boom.

“Obviously, he couldn’t have made it up if he told other
people at the time,” Terra Firma’s lawyer, David Boies, told
the jury during his closing argument in U.S. District Court in
Manhattan.

He said that if Terra Firma did not have information on
Cerberus from Wormsley, a trusted adviser and friend, “there
was no reason for them to put in this bid … There wouldn’t
have been a point to bidding.”

The jury began deliberations late on Wednesday after
hearing three weeks of evidence on Terra Firma’s December 2009
civil fraud lawsuit claiming Wormsley, 50, made four false
statements to Hands. The panel will return to court on
Thursday.

Jurors have heard how Hands was successful for years at
buying distressed companies and turning them around.

“He was like the guy who says ‘I can turn tin into gold, I
got the magic sauce,'” Citigroup trial lawyer Ted Wells said of
Hands in his closing argument.

“The magic sauce didn’t work this time,” he said.

RESPONSIBILITY

Wells said Hands “is trying to ship responsibility” for a
sour deal by suing Wormsley. The two Englishmen remained
friends until the lawsuit was filed. They went to dinner and
the Royal Opera in London with their wives, the court heard.

They sat feet away from each other during the trial, but
avoided contact.

Wells said Citigroup also made a bad business decision in
providing 2.6 billion pounds ($4.1 billion) in loans for the
EMI acquisition. He said it had written down $2 billion.

“In hindsight, we shouldn’t have loaned the money,” he told
the jury. “We have got to live with our bad business decision
and so does he,” gesturing to Hands. “But there was no lie.”

If Hands lost at trial, Terra Firma might be forced to hand
over EMI to Citigroup, its main creditor bank.

Citigroup, which had business ties to EMI and Terra Firma,
could see its reputation suffer as an honest broker in such
deals if the jury found it had defrauded Hands. Citigroup stood
to earn 400 million pounds ($643 million) in interest payments
on loans and 70 million pounds ($112 million) in fees from the
transaction, the court heard.

The trial has centered on phone conversations over the
weekend of May 18-20, 2007, between the two onetime friends and
emails and testimony by executives. It provided a window into
the high-pressure, multibillion-dollar process leading to the
May 21 bidding deadline for EMI.

Terra Firma initially sought $8 billion in damages, but
presiding Judge Jed Rakoff has effectively reduced the
potential damages against the bank to about 1.5 billion pounds
($2.4 billion). If the jury finds the bank liable, it must
decide damages in pounds sterling, the judge said.

Rakoff, who has described the dispute as “a cat fight
between two rich companies” said punitive damages should not be
considered. [ID:nN01181242]

And in a bizarre twist to the trial on Tuesday, a juror
whose name appears in credits of filmmaker Michael Moore’s
movie critique of the U.S. financial industry, “Capitalism: A
Love Story,” was removed. Rakoff said he believed the juror
lied to him when he questioned her about hearing she had
discussed the case in a courtroom elevator. [ID:nN02239726]

The case is Terra Firma et al v Citigroup et al, U.S.
District Court for the Southern District of New York, No.
09-10459.
($1 = 0.620886 pound)
(Reporting by Grant McCool, editing by Matthew Lewis and
Gerald E. McCormick)

UPDATE 2-NY jury to decide: lies or bad deal over EMI sale