Terra Firma Capital Partners Ltd. and Citigroup Inc. made closing arguments in their $2.2 billion fraud trial over the auction of EMI Group Ltd., a case the judge called “a catfight between two rich companies.”
Terra Firma’s lead lawyer, David Boies, argued today that Citigroup’s David Wormsley lied to Terra Firma Chairman Guy Hands in a series of phone calls the weekend before the May 2007 auction.
Wormsley told Hands that Cerberus Capital Management LP planned to submit a bid for EMI, Boies said. In reality, Cerberus had decided to withdraw from the auction, leaving Terra Firma without competition. As a result, Terra Firma claims, it was tricked into overpaying for the 113-year-old music company.
“If they hadn’t believed Cerberus was bidding, if they didn’t believe there was an active auction, why would they have gone ahead and submitted a bid?” Boies asked jurors during his closing argument in federal court in Manhattan.
Boies showed jurors excerpts from the testimony and documents they have seen in the 2 1/2-week trial. He said that Wormsley, a former friend and business associate of Hands, told a series of lies that caused Hands to bid in the deal, which lost money for all involved.
Wormsley lied when he told Hands that Cerberus planned to bid 2.62 pounds ($4.22) a share for EMI on the morning of Monday, May 21, 2007, Boies told jurors. Wormsley also warned Hands not to “play games” on the price, advising that he would have to pay 2.65 pounds a share to win the auction, Boies said. In addition, Wormsley said the auction was moved up two days by EMI and another, non-existent, bidder, according to Boies.
If Hands had known Terra Firma had no competition in the bidding, it would have withheld its offer and negotiated directly with EMI for a lower price and more time to study the company, Boies claimed. In the weeks after the auction, Boies said, Citigroup covered up its fraud by pretending that Cerberus had submitted a bid.
“David Wormsley never lied to Guy Hands,” Ted Wells, the lead lawyer for New York-based Citigroup, said in his closing argument. “He never told Guy Hands that Cerberus was going to bid 262. He never said it.”
Wells said that, out of all the documents introduced in the trial, none of them recorded what Hands claims Wormsley told him about the Cerberus bid.
“There is not one e-mail, there’s not a text, there’s not a file memo, there’s not one single piece of paper that records that David Wormsley said that Cerberus was going to bid 262,” Wells argued.
In contrast, Wells told jurors, they were shown a document that records the appetizers each man ordered when they attended the opera together.
“It’s a wonder they didn’t write down when they went to the bathroom,” Wells said.
Wells accused Hands of filing the lawsuit to shift the blame for the failed acquisition to Citigroup, which has written down $2 billion on the deal.
“He was like the guy who says, ‘I can turn tin into gold,’” Wells told the jurors. “‘I got the magic sauce.’ But the magic sauce didn’t work this time.”
In rulings during the past week, U.S. District Judge Jed Rakoff narrowed the range of damages the jurors may consider, to $2.2 billion from $8.3 billion. Rakoff said that punitive damages aren’t appropriate in the case, which he called “a catfight between two rich companies.”
Separately, Rakoff ejected a juror yesterday who had a link to the Michael Moore film “Capitalism: A Love Story,” leaving eight jurors to consider the case. Rakoff dismissed the juror after determining she lied about an unrelated conversation on a courthouse elevator during a break.
The case is Terra Firma Investments (GP) 2 Ltd. v. Citigroup, 09-cv-10459, U.S. District Court, Southern District of New York (Manhattan).