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Three investment banks, including two giants and one smaller firm, are embroiled in a court battle that’s currently heating up.

From Bloomberg:

Citigroup Inc. and Nuveen LLC were accused of mishandling evidence that the municipal bond giant tried to strong-arm banks into blackballing its smaller rival Preston Hollow Capital.

Citigroup failed to turn over tapes of phone calls about alleged demands by Nuveen’s head of municipal investment, John Miller, that the bank cut off business with Preston Hollow, the smaller firm said in an April 27 court filing.

Preston Hollow is suing Nuveen in Delaware Superior Court for defamation over what it says was Nuveen’s intimidation campaign. Nuveen oversees more than $140 billion of municipal bonds and generates millions of dollars in revenue for Wall Street trading desks.

Meanwhile, in a separate court, Preston Hollow wants Delaware Chancery Court Judge Sam Glasscock III — who concluded last year that Nuveen’s campaign wrongfully interfered with Preston Hollow’s business — to sanction Citigroup for failing to hand over the tapes and penalize Nuveen for allegedly offering false testimony about Miller’s demands.

“The corruption of the judicial process perpetrated by Nuveen (with the active participation of Citi) threatens to undermine” the courts, according to the filing.

It’s the latest salvo in a three-year battle over Nuveen’s alleged attempt to use its market power as one of the biggest buyers of U.S. state and local government bonds to hammer the smaller firm, whose role in financing risky projects posed a competitive problem, Preston Hollow says.