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Terra Firma v Citigroup: Did I lie? No

By | Published on Thursday 28 October 2010

So, the question at the very heart of Terra Firma’s lawsuit against Citigroup in relation to their purchase of EMI in 2007 was asked yesterday. Did Citigroup’s David ‘The Worm’ Wormsley tell Terra Firma’s Gary ‘The Guy’ Hands that a rival equity group, Cerberus Capital, was about to bid for EMI at 262p per share as the deadline for making an offer for the music company loomed? The Worm, needless to say, answered with a resolute “no”.

Gary, of course, says that The Worm told him exactly that on three separate occasions the weekend before Terra Firma bid 265p a share. Had he not, Gary claims, Terra Firma would have bid at a lower price, or maybe not at all, reducing the multi-million pound losses the London-based equity group have since made since taking over EMI.

It was Citigroup’s lawyer Ted Wells who asked the question. Terra Firma’s legal guy, David Boies, who had previously spent nearly two days questioning Wormsley by that point, had not thought to actually ask the question at the heart of this dispute, instead concentrating on trying to make the jury question just how honest a banker The Worm really is. 

But once Wells was in the hot seat, he got his man Wormsley to talk about his role in the EMI takeover. The Worm had already told Boies that he was pissed off when the music company brought in a rival City firm, Greenhill, to also advise on the sale. Boies used that fact to imply The Worm had tricked Terra Firma into buying EMI because, unless he found and financed a buyer, he would have been completely cut out of the EMI takeover deal. 

But Wells used Greenhill’s involvement to help Wormsley’s case. He said that once Greenhill was on board, The Worm was told by EMI to not discuss deal specifics and offer prices with any other potential buyers. Therefore, Wells concluded, The Worm wouldn’t and couldn’t have known was price Cerberus was going to offer, so couldn’t have shared that information with Gary even if he’d wanted to.

Of course, if Gary didn’t know that Wormsley didn’t have access to that information, and if The Worm was willing to lie (though obviously he wouldn’t, he’s a banker after all), then that doesn’t mean the Citigroup man couldn’t have told Terra Firma about Cerberus’ (made up) intents anyway. It’s also possible that The Worm had heard about Cerberus’ plans on the grapevine. But whatever.

Wells also returned to a line of questioning he previously undertook with Hands himself. If Terra Firma believed The Worm had lied to them, tricking them into buying EMI, why didn’t the company make this allegation as soon as they became aware the alleged lie had been told, rather than waiting until the day its attempts to persuade Citi to take a billion off what EMI owe the bank failed and they decided to go legal?

Had Hands ever told Wormsley that he believed he’d been lied to by Citigroup before he filed his lawsuit last December, Wells asked. Again the predictable answer from The Worm – “no”.

The case continues.