Last month it came to light that Bernie Ecclestone had been charged in the long-running bribery investigation over the sale of Formula One in 2006 to present owner, the private equity firm CVC. No sooner had the news come out than the internet was awash with reports of Ecclestone's demise. As Pitpass has pointed out, although Ecclestone has been charged with paying a bribe, the reports of his demise were more than a little premature.
The reason the media was jumping the gun is that the case has been brought against Ecclestone in Germany where if someone is charged with a crime it does not automatically mean they are going to court as it does in the UK. Instead, a judge will decide whether the case should go to trial and Ecclestone's lawyers have until around September to file a rebuttal of the charges against him. They are outlined in detail in a 256-page indictment which has not been seen by any UK media outlet until now.
Writing in the Daily Telegraph, Pitpass' business editor Christian Sylt reveals the key claims against Ecclestone and the questions that they raise. Sylt will not say how he got hold of the indictment save for the fact that it came from outside the UK. The claims in it shed new light on a case which has already been gone over time and time again in minute detail.
Before we get into the two big new allegations, let's have a quick recap on the background. At the heart of the case is £28.2m ($44m) which was paid to German banker Gerhard Gribkowsky by Ecclestone and his offshore Bambino family trust in 2006 and 2007. Gribkowsky was chief risk officer of German bank BayernLB which owned a 47.2% stake in F1. Prosecutors believe that the payment to Gribkowsky was a bribe so that he would agree to sell the stake to CVC. The private equity firm was allegedly Ecclestone's preferred buyer as it had made it clear that it would retain him as the boss of F1.
In June last year Gribkowsky was sentenced to eight and a half years in prison for receiving a bribe which spurred the prosecutors to come after Ecclestone.
He denies bribing Gribkowsky and instead, he revealed to Sylt in July 2011 that the money was paid after the banker threatened him. In specific, Ecclestone says that Gribkowsky threatened to tell the UK's tax authority H.M. Revenue & Customs (HMRC) that he was in control of the Bambino trust. It may not sound like a severe threat but it had particular significance to Ecclestone.
The most valuable assets in F1 are the rights to broadcast the sport and host races. They generate £975m ($1.5bn) in annual revenue and on 19 December 1995 F1's governing body the FIA agreed to transfer them to F.O.C.A. Administration which was 100% owned by Ecclestone. On 6 February the following year Ecclestone transferred all the shares in F.O.C.A. Administration to his then-wife Slavica who put them in the Liechtenstein-based SLEC Trust and Bambino Trust. In 1998 they moved the shares into the Bambino Trust's subsidiary in Jersey, Bambino Holdings, which became the ultimate 100% owner of F1.
Over the following 15 years Bambino has raised at least £2.7bn ($4.2bn) from dividends, selling shares in F1 and loans secured on the sport's future revenues. Since Bambino Holdings and the trusts are based offshore, no UK tax has been paid on the money which flowed into them. In contrast, Ecclestone is a UK citizen who resides in London and is domiciled there. Accordingly, he would be liable to pay tax on the money in the trust if he was found to be in control of it which he strongly denies.
Ecclestone says that although Gribkowsky's claim that he controlled the trust was false, it would have caused him a huge amount of trouble if it had been reported to HMRC. This is because at the time that Gribkowsky made the threat, HMRC was carrying out investigations into the tax affairs of Ecclestone and his wife.
One of the issues being investigated was whether the trust structures, including Bambino Holdings, were genuinely independent of Ecclestone. An adverse finding would have resulted in Ecclestone being forced to pay so much tax that he says it would have bankrupted him.
As he said when he appeared as a witness during Gribkowsky's trial "the tax risk would have exceeded £2bn." It shows how much was at stake and if Gribkowsky had followed through with his threat the onus would have been on Ecclestone to prove that he did not control the trust. He says he paid Gribkowsky because his false allegations would have triggered a lengthy and costly investigation which brings us to the first key claim in the indictment.