A fraud claim by British financier Guy Hands against Citigroup Inc over his $6.4 billion buyout of legendary music company EMI in 2007 went to trial in New York on Monday (Oct. 18), the two sides apparently unable to settle their dispute out of court.

Hands and his onetime banker friend David Wormsley, one of Citigroup's leading European bankers whom buyout house Terra Firma Capital Partners accuses of misleading Hands, sat feet away from each other at their respective lawyers' tables in U.S. District Court.

Both men kept up a personal and business relationship after the deal, according to court papers. Then Terra Firma sued Citigroup in 2009 claiming the bank, which backed the acquisition with £2.6 billion ($1.6 billion ) in loans, had committed a fraud.

A nine-member jury will hear opening statements on Monday before presiding U.S. District Judge Jed Rakoff. Hands and Wormsley are both expected to testify. A month ago, Rakoff ruled that Terra Firma's claims for fraudulent misrepresentation and fraudulent concealment could proceed to trial.

The £4 billion ($6.4 billion) deal by Hands' Terra Firma buyout house for EMI came to epitomize the perils of loading companies with debt and the associated risks.

Settlement talks between Citigroup and Terra Firma broke down last Wednesday, The Wall Street Journal reported on Saturday (Oct. 16), citing two people familiar with the matter.

The case centers on telephone conversations between Hands and Wormsley on a weekend in May 2007. Hands says Wormsley told him that if he did not make a strong bid for the record company, rival Cerberus Capital Management LP would win with a higher offer.

Wormsley denies telling Hands of any Cerberus bid. As it turned out, there was never a bid from Cerberus or any other competitor of Terra Firma.

Both Terra Firma and Citigroup say they are confident of success at the trial, which is expected to last about three to four weeks.

Citigroup, which is struggling to distance itself from its near collapse during the financial crisis two years ago, reported a better-than-expected quarterly profit on Monday (Oct. 18).

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.