The British financier whose private equity firm bought EMI in 2007 told a jury Wednesday that he paid too much for the music company based solely on his conversations with a Citigroup executive who misled him.
Citigroup lawyer Theodore Wells asked Terra Firma founder Guy Hands at the conclusion of his second day of testimony if he had any documents where he put in writing that his bid in May 2007 was based solely on his conversations with a longtime friend, Citigroup executive David Wormsley.
"No, I'm not aware of any," Hands responded.
It was the final line of questioning by Wells as he tries to defend Citigroup and Wormsley against a lawsuit which claims the bank fooled Terra Firma into believing it was one of at least two companies bidding for EMI when there were actually no other bidders.
Wells earlier had elicited from Hands an acknowledgment that his firm properly researched the purchase before it was made.
Wells argued in his opening statement to the jury Monday that Terra Firma had promised its investors that the EMI deal was a good one and felt obligated to sue Citigroup only after the investment turned bad and it needed to explain why. Terra Firma lawyer David Boies told jurors documents and e-mails would prove the firm was tricked by Citigroup.
On Tuesday, Hands said he was "very reluctant" to bring the lawsuit claiming Terra Firma was cheated when it paid $4.9 billion for EMI. He estimated that the company was worth 20 to 25 percent less than the purchase price if there were no other bidders.
"If you accuse someone of fraud, it's really game over in terms of conversations, and we were relying on Citi, as banker to the company, and it's like, you know, putting a stick in a dragon," he told the jury in U.S. District Court in Manhattan.
"From a business point of view, the reality is, our business relies on banks. Suing your banker is something you would only do as a very, very last resort," the 51-year-old Hands said.
He said he brought the lawsuit anyway out of a duty to investors, including pension funds.
Suing, though, required him to turn against his longtime friend, Wormsley.
"I came to the conclusion we had no alternative," he said. "David Wormsley is someone who's a friend, someone who we'd worked with very successfully over a very, very large number of years, and to, you know, sue someone who is a friend and you've worked with successfully is a difficult, difficult thing."
The trial was expected to last three weeks.