Guy Hands bid for storied music company EMI in 2007 based on false statements from a Citigroup banker that there was a rival offer he had to beat, the British financier told a jury on Tuesday.

Hands, who founded Terra Firma Capital Partners, took the witness stand on the second day of a trial in U.S. District Court in Manhattan to decide his private equity group's fraud claim against Citigroup Inc, which provided 2.6 billion pounds in loans for the EMI acquisition.

In the ensuing credit crisis, the 4 billion pound ($6.4 billion) soured deal came to epitomize the perils of loading companies with debt and the associated risks in the leveraged buyout bubble.

The trial centers around three telephone conversations between Hands and David Wormsley, his onetime Citigroup banker friend, over the weekend of May 19-20, 2007, as a May 21 deadline to bid for EMI approached.

Terra Firma accuses Citigroup and Wormsley of tricking Hands, who had long coveted EMI, into thinking that rival private equity firm Cerberus Capital Management was also bidding for the company.

Terra Firma paid 265 pence per share for EMI in the belief Cerberus would offer 262 pence per share, but the rival bid did not exist, the nine-member jury heard.

"He told me that Cerberus was there at 262 and that it was very important we had to get in," Hands, 51, wearing a gray business suit and pale blue shirt, said of one of the conversations. "He told me not to play any games with the price."

In response to questioning by his lawyer, David Boies, the Terra Firma head told the court that "his (Wormsley's) confirmation was incredibly important" in deciding to bid for EMI.

Citigroup denies Terra Firma's allegations that Wormsley or the bank lied to Hands or tricked him. The bank argues that Terra Firma sued after realizing the deal had gone badly.

Hands' testimony was continuing on Tuesday, and Wormsley, one of Citigroup's top European bankers, was expected to tell his side of the story later in the trial.

The trial is expected to last up to three weeks.

The case is Terra Firma et al v Citigroup et al, U.S. District Court for the Southern District of New York, No. 10-10459.