Guy Hands drops £1.5 billion fraud claim against Citigroup

Lawyers for the private fund of financier Guy Hands, Terra Firma, told a London court that Hands' £1.5 billion lawsuit against Citigroup stood withdrawn. The development comes only four days into a case that was expected to last until mid-July.

''Terra Firma confirms it unreservedly withdraws its allegations of fraud,'' David Wolfson – standing in for lead Queen's Counsel (QC) Anthony Grabiner – told the court. Terra Firma would also pay the costs of the US bank, expected to run into millions of pounds.

Hands, who had been claiming at least £1.5 billion from Citi, faced questions by the bank's lawyers over the past two days. The questioning was expected to last into the next week. His recollection of the events in 2007, when Terra Firma took over EMI just ahead of the credit crunch was found to be inaccurate and at one point during his questioning Mark Howard QC, representing Citi, said: ''The problem is, Mr Hands, your story is shifting and it is impossible to reconcile these different versions.''

Citi, which was advising EMI, had lent Terra Firma £2.5 billion to fund the deal, in which Hands admitted to have personally lost €200 million (£156 million). One of his arguments was that he had been told by Citi banker David Wormsley of a rival bid for EMI and the price at which to table the offer. According to Terra Firma, Wormsley, Citigroup's London-based banker, had misrepresented facts by saying that Cerberus Capital Management was also an interested bidder in the auction, which made Terra Firma make a binding offer for EMI.

Terra Firma said that it would not have raised its bid to £2.4 billion, had it known that it was the only bidder left in the race to buy EMI. (See: Terra Firma sues Citigroup on EMI acquisition )

Terra Firma and co-investors lost their £1.75 billion investment in EMI when Citigroup took it over in 2011, following financial difficulties.

Hands, who had claimed that he was misled and "lied to" by Citigroup bankers during the 2007 takeover, lost a legal claim against Citigroup in New York in 2010 over the EMI takeover.

However, in 2013, he won the right to have a retrial on the grounds that the judge in the original case had given incorrect instructions to the jury. It was then decided by both sides to hear the case in London.

Hands' memory of the phone calls and meetings related to the 2007 takeover had been a key element in the case, which on Thursday was found to be wanting under grueling cross-examination.

"These claims were brought in good faith," Hands said in a statement. "However, it has become evident that our documentation of the fast-moving and complex events, and memories of these events after nine years, are no longer sufficient to meet the high demands of proof required for a fraud claim in court."Terra Firma will pay Citigroup's costs in the case.

Citigroup said in a statement: "We have always maintained that the allegations made by Terra Firma were entirely baseless and that Citi, specifically [Citi bankers] David Wormsley, Michael Klein and Chad Leat, acted at all times with absolute honesty and professional integrity throughout the EMI transaction. We are very pleased that Terra Firma has unreservedly withdrawn the allegations, agreed to the dismissal of the proceedings and will pay Citi's costs in relation to the matter."