As we’ve discussed, the ongoing battle between Citigroup and a group of hedge funds over the former’s alleged whoopsie in paying the latter a half-billion dollars it didn’t mean to has, at times, seemed like a contest over who could play dumb and disingenuous most convincingly. Even given the high bar both sides have set in the matter, the trial’s last day had something special.

In effect, Citi has argued that no right-thinking person would believe that the sudden appearance of every penny they were owed by a deeply distressed debtor in their accounts could have been anything other than a monumental mistake. The lenders have countered that it beggars belief that a sophisticated operation like Citi’s could possibly have made so monumental a mistake so precise. After all, it’s not like whatever screen whichever unfortunate person allegedly made the mistake on has a button that says, “Pay Back Everything With Our Money With No Internal Checks Of Any Kind,” however bad Citi’s internal systems might be, and if it does, well, it deserves whatever it doesn’t get back.

The problem Citi has is a judge who seems persuaded by the “no fat finger gets things exactly right to the last decimal place” argument, and therefore must somehow affirmatively demonstrate that the hedge funds knew in their bones that the bank had no intention of making that payment before it sent its rather self-serving e-mail proclaiming it all a terrible mistake. This it has rather hilariously failed to do in spite of all of the e-mails and other internal communications its lawyers have pored over, albeit apparently without reading the time stamps. Hence an exasperated U.S. District Judge Jesse Furman was forced to put the issue quite plainly:

“Can you point me to anything in evidence before 2:28 p.m. on Aug. 12 that anyone on the recipient’s side thought there was a mistake,” Judge Furman asked Citi’s lawyers, referring to the time and date Citi sent recall notices to lenders asking them to return the funds.

Incredibly, Citi had a credible answer.

Christopher Houpt, a lawyer for Citi, pointed to an email from Allstate Investment Management Co. portfolio manager Catherine McCoy to colleagues in the firm’s operations department in which she wrote: “So strange—could this be a mistake?”

At last, the smoking gun! And the response to it was so amazingly of a piece with everything else in this insane story that it is very close to literally unbelievable.

In court papers, however, Ms. McCoy maintained that in the email her reference to a mistake was to possible internal errors in recording the payment, rather than an error by Citi.

Whether it’s unbelievable to Judge Furman, and whether it matters at all, remains to be seen, as he’s considering his verdict, and undoubtedly enjoying a few good laughs at everyone’s expense in the process.

Trial Over Mistaken Citigroup Payment Focuses on Revlon Lenders’ Knowledge [WSJ]

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