The American legal system is built upon the ability of two sets of highly trained and highly compensated lawyers looking at the same set of evidence and spinning entirely opposing and irreconcilable stories from it. And so when a bank, about to be hit by a lawsuit for allegedly helping a client shield collateral from some hedge fund lenders, unexpectedly repays those lenders, to the penny—inclusive of many more pennies, indeed, than the creditor client has to its name—and three years early with its own money, to boot, the obvious conclusion available is that said bank fucked up big time. And this is the conclusion upon which Citigroup, the big-time fucker upper in this case, has weaved its legal story: No sophisticated investor, such as these hedge funds, could possibly believe that as financially-troubled a company as Revlon, the creditor in this tale, would have paid nearly $900 million it did not have early, and on a completely random date, at that, without first receiving a sternly-worded court order to do so, or, you know, giving the creditors about the receive this generous windfall something of a head’s up. Surprises are apparently not the way banks prefer to do these kinds of things.

Seems a pretty open-and-shut case, but HPS Investment Partners and Brigade Capital Management can hire fancy lawyers, too. And, when you think about it, isn’t Citi’s story a bit odd? I mean, sure, the bank still doesn’t really know what happened, but it quickly cried “mistake,” which allowed it to preserve its legal options vis-à-vis getting the money back. But the key theory here—a fat-finger error—does seem a bit fishy (it certainly did to the judge overseeing things): After all, fat fingers tend to add a zero or two or 10 to the end of a legitimate transaction. But the transfers made to HPS, Brigade and others weren’t simply coupon payments a few orders of magnitude too big, but the precise amount of principal and accrued interest owed, and didn’t come on the usual payment day, anyway. Furthermore, it’s not the job of sophisticated investors to spend time or energy investigating things done by allegedly sophisticated counterparties.

And this is why the American legal system allows for some rather invasive discovery. And boy oh boy must Citi’s lawyers have gotten excited when they saw these messages.

“How was work today honey?” the unnamed employee wrote. “It was ok, except I accidentally sent [$900 million] out to people who weren’t supposed to have it.”

The employee also wrote that he felt bad for whoever at the bank had “fat fingered” the payment….

Lenders used words like “unbelievable,” “erroneous,” “accidental” and “overpayment” when discussing the matter. An employee at lender Medalist Partners Corporate Finance LLC said Citi was getting “a taste of their own medicine,” court papers said.

Seems pretty damning, eh? Clear evidence that the hedge funds knew this was a fuck-up and not something intentional? Well, they say, not exactly, as it seems Citi’s as bad at checking timestamps as it is at not paying out nearly $1 billion by alleged accident.

A person familiar with the matter said the messages from HPS and cited by Citi were written only after the bank requested the payment be returned…. “Witnesses have testified that, in their decades of experience on Wall Street, they had not seen a similar error where a bank had paid lenders the exact amount of principal and accrued interest under a loan in error,” the lenders said in a court filing.

Plus, they add, whenever Revlon hits the skids, owner Ron Perelman is always there to bail it out (and, indeed, just did). So even if they knew Revlon didn’t have $900 million, Ron Perelman certainly does, and maybe that’s where the money came from, is what they might have been thinking to preserve their legal options vis-à-vis keeping the money.

At New Generation Advisors LLC, an employee involved in the matter wrote in an internal message that “mistakes like this can be hard to undo” and that he “thankfully” had prevented the investor’s share of the money from being returned to Citi, according to court papers.

“Someone’s losing their job over this,” another employee wrote back.

And he was right: Someone did.

‘Someone’s Losing Their Job’: Revlon Lenders Were Surprised at Citi’s $900 Million Mistake [WSJ]

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