Citigroup Faces Second EMI Lawsuit

US banker Citigroup is facing a second lawsuit over the sale of EMI Group to UK private equity firm Terra Firma, this time from one of the British company’s investors.

Colorado-based Sungate Securities, which has £1.3 million ($2m) tied up in Terra Firma, claims Citigroup hid its conflict of interest when conducting the sale of the only remaining UK major music company.

The Sungate suit was filed in New York and says Citigroup represented EMI and encouraged Terra Firma to buy it, to the extent it lent it £2.6 billion of the £4.2 billion it paid for it.

Sungate says that in doing so Citigroup neglected its duties to the partners that put money into the UK private investment company.

The Colorado company’s action is similar to the one Terra Firma chief Guy Hands has already filed in a New York court, which says Citigroup tricked his company into buying EMI and hiked the price by failing to disclose the other bidders had already pulled out of the auction.

Hands has made it public that he thinks he paid too much for EMI, a deal done on the eve of the credit crunch, and now the cost of servicing the Citigroup loan has brought the London-based record company to its knees.

As Hands filed suit in New York he wants the case heard there, particularly as Citigroup is a US-based company. Citigroup says it should be heard in London because that’s where the action took place.

In New York March 4 US District Judge Jed Rakoff heard Citigroup’s request to move the EMI hearing to the UK, then admitted he needed time to think before making a ruling.

“This is not an obvious slam-dunk decision for either side,” he said. “I have no idea where I’m coming out on any of this yet.”

He’s expected to make his decision by the end of the month.