Buyout firm: Citigroup cheated in EMI auction

AP News
Posted: Oct 18, 2010 4:55 PM
Buyout firm: Citigroup cheated in EMI auction

A British private equity firm was duped into paying billions of dollars for the struggling music company EMI in 2007 by Citigroup, which was advising both companies in the deal, a lawyer told a jury at the start of a civil trial Monday.

Attorney David Boies said Citigroup falsely claimed to Terra Firma Capital Partners that there were other bidders for the record company and that Terra Firma needed to raise its bid when an auction had actually been busted because there were no other offers for EMI. Terra Firma paid $4.9 billion for EMI.

"They knew that they'd lied and made Terra Firma make this bid on the fictional claim that there were multiple bids," Boies said. The lawyer said Citibank took advantage of its close relationship with its biggest customer _ Terra Firma _ to keep EMI as a client when the company was threatening to let another banking institution handle the deal.

In addition to brokering the sale, the bank advised both EMI and Terra Firma as it provided financing for the transaction.

Boies urged jurors to closely reviews e-mails and documents in the case, and he put several of them onto a large screen in front of the jury. He said they would show Citigroup deceived Terra Firma repeatedly by hiding that it knew the only other bidder _ investment firm Cerberus Capital Management _ had dropped out.

Citigroup lawyer Theodore Wells countered that Terra Firma has its facts wrong and was unwilling to take the blame for having promised investors that buying EMI was a great investment.

"It turned out to be a bad deal and people lost a lot of money," Wells told the jury in U.S. District Court in Manhattan. "There was no fraud. There were no lies."

Wells said one of the biggest losers in the purchase was Citibank, for having provided $2.5 billion for the deal to go through.

"We didn't go out and lie to anybody so we could loan them $2.5 billion," Wells said.

Terra Firma sued Citigroup last year, seeking a return of any money Citigroup was paid for the deal among other unspecified damages, including lawyer fees.

The trial, expected to last up to three weeks, features two heavyweights in legal circles. Boies argued the case for Democrats before the U.S. Supreme Court in the 2000 tied presidential election. He lost. Wells represented former White House aide I. Lewis "Scooter" Libby when he was convicted on charges he lied to investigators about his conversations with reporters regarding CIA operative Valerie Plame.