News analysis: Hands and Wormsley at the door

The jury deciding Terra Firma’s trial against Citi began deliberations late Wednesday. The day included an uncomfortable encounter between David Wormsley (pictured) and Guy Hands.

There was an awkward moment at Terra Firma’s Downtown New York trial against Citi Wednesday, as attorneys for both sides wrapped up their final arguments and the jury moved into deliberations.

After Judge Jed Rakoff announced a quick break in the proceedings, Terra Firma chief Guy Hands walked briskly to the door of the courtroom. When he reached the door, he came face to face with David Wormsley, the man he claims was once his friend, advisor, but who he now accuses of being a liar.

Usually both men are surrounded by attorneys and publicity handlers at all times, but at this unscripted moment both men were alone.

David
Wormsley

Hands didn’t break stride as he politely held out his hand indicating Wormsley should walk first through the door.

Wormsley seemed more affected. He began nodding his head awkwardly and seemed about to say something, but dropped his head and cast his eyes around the floor. He looked nervous and unsure of how to respond.

Wormsley then lifted his own hand letting Hands know he should go first, to which Hands obliged and walked through the door.

The moment lasted mere seconds, and no words were exchanged, but the body language spoke volumes. Guy Hands, a man who Citi attorney Theodore Wells described as the ruler of an empire, appeared not flustered by the inconvenient meeting. Wormsley, on the other hand, who Wells describes as a family man, a guy who goes to work every day, seemed to wilt in the presence of his nemesis.

Now that the trial is entering its final phase, the jurors’ job comes down to one claim called “fraudulent misrepresentation”. They must unanimously agree on four points.

Hands was the guy who said, 'I can turn tin into gold. I got the magic sauce'. But the magic sauce didn't work this time. When he bought EMI, he made a mistake, and he lost a lot of money

Theodore Wells

They must agree that Wormsley lied to Hands, telling him Cerberus Capital Management was still in an auction for troubled music publisher EMI in 2007, and was bidding £2.62 per share, when in fact the firm had already dropped out of bidding.

They must also agree Wormsley knew his statements to be untrue; that he lied with the intention that Terra Firma would rely on false information; and finally that the lies were a “substantial factor” in causing the firm to bid when it did, on 21 May 2007, at the price of £2.65 per share.

If the jury can’t reach a consensus on any one of those points, it cannot find Citi liable, and the case – this case at least – is over. Hands could then choose to appeal the decision.

If the jury does find Citi liable, then it is charged with determining how much Citi owes Terra Firma in damages, up to a maximum of £1.5 billion.

Jurors have piles of documents to pore over, hours of testimony to review, but ultimately their decision will come down to this – do they believe Wormsley deliberately lied to snooker his friend into doing the EMI deal?

Terra Firma attorney David Boies tried to make the case Wednesday that jurors shouldn’t just rely on Hands’ word, but also pay attention to the testimony of several witnesses – including the firm’s president Tim Pryce and former Terra Firma dealmaker Riaz Punja – who testified they heard second hand that Wormsley told Hands about Cerberus still being in the auction.

“Witness after witness after witness after witness that confirms what Mr. Hands said,” Boies said. “And it's not just the witnesses, it's the documents – the draft minutes, the handwritten notes.”

Citi did serve as Terra Firma's advisor on the EMI deal, despite the bank's denial of an advisory role, Boiessaid. “They knew they were our advisor, they knew we were trusting them. They gave us this advice. They intended we would act on that advice. And we did.”

Citi attorney Wells countered with the argument he has been making all along – that the firm has absolutely

[Citi] knew they were our advisor, they knew we were trusting them. They gave us this advice. They intended we would act on that advice. And we did.

David Boies

no documented proof of the alleged Wormsley lie. He argued the absence of any documentation is especially damning in a company that writes everything down, including what Hands had for dinner one night.

“We've seen hundreds and hundreds of emails. There's a craziness to this, because the one email, the one file memo, the one document you don't see is what the case is about,” Wells said. “We've seen so many emails. You could go [to one email] and you could find out that on June 24, Mr. Wormsley and Mr. Hands went to the opera, and you can find out what they had as appetizers for dinner. Mr. Hands had smoked salmon. Mr. Wormsley had pea and cucumber soup. These people wrote everything down.”

Hands' charge against Wormsley is simply a case of a formerly successful financier trying to reclaim a little of his greatness, Wells argued. He was a contrarian who targeted turnaround situations, investments no one else wanted to look at, but this time it failed, Wells said.

Hands was “the guy who said, 'I can turn tin into gold. I got the magic sauce. But the magic sauce didn't work this time,” Wells said. “When he bought EMI, he made a mistake, and he lost a lot of money”.