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Few battles in Formula One have gone on as long as the case against the sport's former chairman Gerhard Gribkowsky. The German was arrested in January 2011 after investigators discovered he received £27.5m in 2006 and 2007 whilst working for BayernLB, the bank which owned a 47.2% stake in F1.
The money had been paid into an account in Austria where it was taxed at a lower rate than it would be if it had been banked in Germany where Gribkowsky was resident. This led prosecutors to charge him with tax-evasion and, as he never told BayernLB that he received the money, he was also charged with breach of trust. However, it is the third and final charge against him which is most relevant to F1 as the prosecutors believe that the payment was connected to the 2006 sale of the sport by BayernLB to current owner, private equity firm CVC, so they also charged Gribkowsky with receiving a bribe. For the first time we may get his version of events today.
Gribkowsky has been on trial in Munich defending these three charges since October last year and he has not yet given his side of the story. There was a flurry of media interest in the case when it started and when F1's boss Bernie Ecclestone testified in November however it all went quiet soon after that. It is believed to be Germany's biggest post-war corruption case so it is no surprise that there have been more than a few twists and turns in the trial.
Earlier this year Gribkowsky's lawyers claimed that their client was suffering from the stress of the trial and his conditions in Munich's Stadelheim prison which happens to be the same one where Adolf Hitler was incarcerated. The trial resumed after a brief pause but there was yet another unexpected development recently when Gribkowsky's lawyers asked for the court to hear testimony from numerous new witnesses including Ecclestone's ex-wife Slavica, former Renault F1 team principal Flavio Briatore and Max Mosley, former president of F1's governing body the FIA. The judge rejected the request and the case continued.
As it has been a while since the proceedings began it is worth recapping on the detail of the charges against Gribkowsky. The charges of tax evasion and breach of trust are straightforward but the allegation of bribery is more complex.
According to the prosecutors, Gribkowsky's Austrian company received the £27.5m payment from two sources. Between July and September 2006 £13.3m of it came from a company in Mauritius called First Bridge which was ultimately owned by Bambino, the Ecclestone family trust. The remaining £14.2m was paid between October and December 2007 by Ecclestone himself to Briatore who transferred it to Gribkowsky's company via the British Virgin Islands-based business Lewington Invest.
Last year, Pitpass' business editor Christian Sylt exclusively revealed Ecclestone's explanation for both of these payments. First, in July, Ecclestone said that he paid the money to Gribkowsky because the German had threatened to make the false allegation to the UK's tax authority HMRC that the F1 boss was in control of Bambino despite the trust needing to be independent of him for tax purposes.
HMRC would have had to investigate Gribkowsky's allegation and this would have taken years to resolve regardless of whether there was any truth to it. As Pitpass has explained at length the formation of the trust saved around £1bn ($1.6bn) in tax being paid on the £2.4m ($3.9bn) Ecclestone made from F1. At the time that Gribkowsky made his threats the trust had not been fully set up and if HMRC had got cold feet about letting it go ahead Ecclestone would have had to pay the tax. He also revealed to Sylt that the money had been paid through offshore companies because Gribkowsky had said he didn't want it to look like it had come directly from him.
In November last year, Ecclestone also revealed to Sylt that Bambino paid its share of the money to Gribkowsky for two reasons. Firstly, it wanted to prevent Gribkowsky from claiming to HMRC that Ecclestone controlled the trust because this could have led to the tax authority preventing it from being set up. Secondly, Ecclestone said that Bambino paid the money because Gribkowsky was doing property consultancy for it.
Separate to these transactions, Ecclestone received a £25.9m ($41.4m) commission from BayernLB after its stake in F1 was sold to CVC. Ecclestone told Sylt he got this because he facilitated the sale to CVC and also gave BayernLB "an indemnity for an awful lot of money that all the accounts were in good order because the bank would not give them." At the time of the sale to CVC F1 was in a state of disarray with teams threatening to leave the sport but Ecclestone vouched for its health and this is why he got the payment from BayernLB. The German prosecutors see things differently.
The prosecutors claimed that in fact, Ecclestone paid Gribkowsky to convince him to sell to CVC because it would retain him as F1's boss. They added that the commission was paid to Ecclestone to cover the bribe he allegedly gave to Gribkowsky and therefore BayernLB suffered damages as a result since it should not have had to pay out the money.
For months last year the prosecutors also tried to argue that BayernLB lost out because CVC paid less than the going rate for its F1 shares. Pitpass explained at great length that this argument was fundamentally flawed but the prosecutors didn't give up. Even as the trial got under way the prosecutors adapted this argument to suggest that since Gribkowsky had been paid a bribe to sell to CVC this meant that he would not have favoured higher bidders.
During the trial it has come out repeatedly that, in fact, as Pitpass said, there were no higher bidders. Witnesses in the trial also confirmed that the £527m ($839m) paid to BayernLB for its F1 shares was an extremely good price since the teams were on the verge of pulling out of the sport. Sources close to the German legal process now say that the prosecutors finally accept that CVC did not underpay BayernLB. However, they have apparently not given up on the bribery charge.
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