Confidential information that was allegedly fed by Citigroup banker David Wormsley to Terra Firma was “set out” in handwritten notes, but not in writing to the boards of directors of the General Partners of the relevant Terra Firma funds, said Guy Hands, Terra Firma’s founder and chairman, yesterday afternoon.
Hands was facing cross-examination on the second day of his firm’s case against Citi, which he alleges tricked him into making a bid for music company EMI in 2007.
“None of what Mr Wormsley said is recorded in writing to the GP?” asked Mark Howard QC, counsel for Citigroup, in a line of questioning that suggested to Hands that the information he claims to have been told by Wormsley was not documented anywhere or told to anyone, and that his claims were not true.
“It is set out in writing but not the GP notes. There are some hand written notes at the time,” Hands said from the stand.
Terra Firma alleges that it was misled by Citigroup in its acquisition of the then-listed record company EMI, including regarding the ongoing involvement of Cerberus Capital Management in an auction for the company and the price offered. Hands is seeking damages of around £1.6 billion ($2.3 billion; €2 billion). Citi rejects the allegations.
Hands did not disclose to the GP board that he had the “inside track”, the Terra Firma boss said.
When Howard suggested that “material facts” were withheld from the GP board regarding the decision to pursue EMI, Hands replied: “To me, the material fact was that I was in favour of spending money on due diligence.”
He added: “It was my decision and my recommendation and the directors follow what my recommendation is”.
Hands disagreed with Howard’s suggestion that he “flouted” the rules of the then regulator, the Financial Services Authority, by not recording or telling anyone, including the GP board, what Wormsley allegedly told him about the auction process for EMI.
Earlier in afternoon proceedings, Hands had told the court that “it wasn’t information they needed to know”.
When Howard suggested that information he alleges came from Wormsley was “fundamental” to Hand’s decision to bid for EMI, Hands told the court he agreed.
“If he hadn’t spoken to me at the time, I would have pulled out [of the auction],” Hands said.
Terra Firma bought EMI in 2007 and subsequently lost £1.5 billion when Citi took control of the company in 2011. The London proceedings are Terra Firma’s second attempt to sue Citi following the transfer of the case from New York.
The trial continues.