Welcome to the new Independent website. We hope you enjoy it and we value your feedback. Please contact us here.

On the record: ‘friends’ who fell out in £4bn EMI feud meet again in court

EMI boss and Citigroup financier in Manhattan court over £4bn deal that went sour

After a bitter months-long feud that has pitted him in ruthless combat against an old City pal, the private equity financier Guy Hands finally faced in court yesterday the man who he says cultivated his trust and then betrayed him by duping him in a multi-billion-pound deal to take control of EMI.

Jurors in a Manhattan courtroom heard his claims that the American banking giant Citigroup, and the head of their UK investment arm, David Wormsley, spun an intricate web of lies and then engaged in a cover-up to persuade him to finalise his purchase of the storied record company.

Mr Hands and Mr Wormsley were once drinking buddies who went pheasant shooting together. But yesterday their relations were anything but friendly. As a packed courtroom heard lawyer David Boies make his case that Citibank and its employee were "playing two sides of the street", Mr Hands sat just feet away from Mr Wormsley, whose view from the second row was primarily of the plaintiff's suit collar.

The accusation in a trial which, barring a settlement, may take three weeks, refers to the days before 21 May 2007, when the private equity firm Terra Firma, founded by Mr Hands, agreed to a £4.2bn buy-out of the music company. The stakes for both parties, pecuniary and in terms of reputation, are towering.

Mr Wormsley is accused of failing to disclose in the last days of an auction for EMI, at the height of the credit bubble more than two years ago, that a second bidder for the company, US-based Cerberus, had in fact dropped out. "They knew that if the news got out, the price and value of EMI would collapse," Mr Boies said in his opening statement. He said that Citigroup faced three options, the third of which was to "affirmatively mislead Terra Firma", by claiming to Mr Hands that Cerberus was still bidding. He added: "And that's exactly what they did."

Citibank, which also financed the buy-out with a large loan, has categorically denied the charges, for which Terra Firma is seeking damages in the range of £7bn, a stunningly high number.

In a blue suit, Mr Hands followed the first rituals of the trial intently, scanning the jury box as the process of selecting each of the nine jurors moved forward. The panel that was chosen included a doorman and vet's assistant and by no means matched the City or Wall Street types with whom he may be familiar. Yet his fate was now largely in their hands. "You will have to decide who is telling the truth and who is not telling the truth," Judge Jed Rakoff said in jury instructions.

Ted Wells, the lead defence lawyer, said that his evidence would show that Mr Hands decided to sue the bank only last year after he realised that his purchase of EMI had not been a good deal for him. "After a while Mr Hands had a new story," Wells told jurors. "There was no fraud, no lies. Nobody tricked him."

Lawyers from both sides yesterday faced the challenge of explaining the workings of a multi-billion-pound take-over deal, involving some of the world's most sophisticated lawyers and financiers, to a jury with little knowledge of that world. In Britain, EMI is still home to names such as Coldplay and Robbie Williams, although the latter threatened to down his microphone in 2008 after complaining he was being overworked by the new owners. Joss Stone left the label in the same year citing the breakdown in her relationship with the company after Terra Firma's takeover. Howver, to the jury, all that may mean nothing; Mr Boies at one point paused to explain the repeated references to "pence", as in pence and pounds.

Mr Boies, one of America's highest-paid lawyers who represented Al Gore in the disputed ballot with George Bush in Florida in 2000, said that Citigroup deliberately took advantage of its dual positions as adviser to both EMI and Terra Firma simultaneously. Mr Wormsley's intent from the start, he said, was "to leverage his relationship with Guy Hands" so he could deliver the bid to his other client, EMI.

He presented to jurors a picture of Mr Wormsley working overtime to establish that trust with Mr Hands. An email from Mr Wormsley to Mr Hands projected on a screen in the courtroom showed him saying, "I am incapable of not trying to get the best possible outcome for you". All the while, Mr Boies said, Mr Wormsley was "secretly" keeping EMI in the picture about what Mr Hands was doing and thinking. Even after the purchase was complete, Citigroup maintained the fiction there had been a competing bid for EMI from Cerberus, Mr Boies said. "Why would they say there were two bids when there never was, unless they were covering up?" he asked jurors.

Mr Hands is expected to testify this morning.

Guy Hands vs 'The Worm'

* Guy Hands was born on 27 August 1959, the son of a Kent solicitor.

* He was diagnosed with severe dyslexia, but went on to study at Mansfield College, Oxford. He was appointed president of the university's Conservative Association, where he became friendly with William Hague.

* Hands made his fortune at investment banks Goldman Sachs and Nomura, and founded Terra Firma in 2002.

* David Wormsley was born in 1961.

* The Cambridge graduate – known as 'The Worm' – is married to a PR executive.

* He joined Bank of America straight from university, then went to Schroders in 1986. When the bank was bought by Citigroup, he moved across.

* Prior to falling out, Wormsley and Hands had worked together for 10 years.