Hands’ reputation damaged by EMI buyout, UK court hears

Private equity tycoon Guy Hands told a London court yesterday that he lost €200m of his personal fortune on his ruinousdeal to purchase EMI.

On the third day of the trial between Hands, his buyout business Terra Firma and Citigroup, the parties are revisiting their long-running legal battle regarding the US bank’s role in Hands’ infamously ruinous buyout of EMI in 2007.

According to The Guardian, when Hands was asked if it had severely damaged his reputation in financial markets, he said: “It has, yes.”

Guy Hands

During the Thursday hearing Citigroup’s barrister Mark HowardQC questioned Hands on whether his behaviour was honest in suing Citi over his claims for fraud.

Hands and Terra Firma claim they were tricked into acquiring EMI for £1.75 billion in 2007 afterbeing told a bidding war for the then major label was underway. Hands asserts Citigroup falsely claimed New York investment firm Cerberus was among the bidders (Citi said it wasn’t) and advised Terra Firma to increase the level of its equity investment by £205 million. Citi has denied all allegations.

Hands unsuccessfully sued Citigroup in New York over such claims in 2010 when a jury rejected the case. But in 2013 the case was overturned on appeal over a misinterpretation of English law. It was due to go to retrial that year before both sides agreed to hear the case in London under English law, starting June 7.

According to The Guardian, Mark HowardQC accused Terra Firma of “surreptitiously” filing legal proceedings in the UK in 2013 for this High Court proceeding.

“You, Mr Hands, are prepared to lie and put forward false claims against individuals and against Citi in order to further your own ends and your own interests,” said Howard.

“This is what one would call, if one were out on the street, a shakedown.”

During the hearing yesterday, Howard called Hands’ memory of key events “hazy” during his cross-examination. According to Wall Street Journal, Howard said Hands’testimony was “confused” and “very very different” to the evidence given in the New York case in 2010.

Hands is targeting Citibank’s former head of global banking and markets Michael Klein, its former European head of investment banking David Wormsley and former head of global credits market, Chad Leat. He claims the former Citi executives made false claims about EMI’s financial health and was ‘duped’ into purchasing EMIalmost a decade ago.

Much of Hands’ testimony relies on his recollection phone calls. WSJ reports Citi disputes some of those calls ever took place.

Over the next six weeks the case will be heard by Justice Michael Burton, who will decide a verdict without a jury. Hands is suing for damages estimated to be between €650 and €800 million.

Citi released a statement following yesterday’s hearing: “As with the previous clam this case is entirely without merit. Citi did not make any dishonest statements to Guy Hands or Terra Firma throughout the auction process for EMI and is confident the UK trial will confirm this.”