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Judge says Ecclestone bribe allegation lacks plausibility

NEWS STORY
12/12/2013

For the past six weeks Formula One has been gripped by action of a different kind to that which fans are used to. The scene of the action was not a track but London's High Court where Bernie Ecclestone has been on trial accused of paying a £26.9m ($44m) bribe to undervalue the sport when it was sold in 2006 to current owner CVC. The trial comes to a close on Friday but that isn't the end of it as we won't get a verdict until early next year. However, in an extraordinary development, the judge himself has given us an insight into the direction of his thought and Pitpass' business editor Christian Sylt has written it up in an article for today's Guardian.

This week the court has heard what are known as closing arguments in the case from barristers representing both sides. Court-room movies usually present closing arguments as long monologues without interruption but Hollywood's version of events is somewhat removed from reality, certainly in England. Over the past few days the judge, Mr Justice Newey (no relation!), has repeatedly challenged Philip Marshall, QC for Constantin Medien, the German media rights firm which has brought the case against Ecclestone. The challenges from the judge came during Marshall's closing speech which seems surprising enough but it is what Mr Newey said that made it astonishing.

To recap, Constantin's lawsuit specifically concerns the sale of a 47.2% stake in F1 by German bank BayernLB to CVC in 2006. BayernLB was one of three banks which, prior to the sale, owned F1 with Ecclestone's Bambino family trust.

Constantin claims that Ecclestone and Bambino paid a £26.9m bribe to BayernLB's chief risk officer Gerhard Gribkowsky so that he would agree to sell the bank's 47.2%stake to CVC. Bambino owned 25% of F1 so the sale was a significant transaction as it gave CVC a majority of the shares in the sport. Last year a German court sentenced Gribkowsky to eight-and-a-half years in prison for receiving the alleged bribe and in May Ecclestone was charged with paying it.

Constantin's lawsuit alleges that CVC was Ecclestone's preferred bidder as it had agreed to retain him as F1's boss in contrast to the three banks which had considered firing him. CVC paid a total of £1.2bn ($2bn) for F1 with BayernLB getting £467m ($765m). Constantin says it lost out because it had an agreement with BayernLB which entitled it to 10% of the proceeds if the bank's stake had been sold for more than £670m ($1.1bn).

Constantin claims that other bidders would have paid more if a bribe had not been paid to sell to CVC. However, in court this week Mr Newey cast doubt on that theory. He told a stunned court that "I have to say I find the idea of a bribe being paid to get rid of the banks more plausible than the idea of a bribe being paid to undertake an arrangement under which shares were sold at an undervalue."

It could be a big blow for Constantin as it needs Mr Newey to rule that the stake was undervalued in order to win its £85.8m ($140.4m) damages claim against Ecclestone, Gribkowsky, Bambino and its former legal adviser.

The judge's comments don't just have significance to Constantin. On Wednesday it came to light that BayernLB is planning to sue Ecclestone in London for £244.4m ($400m) in damages because he allegedly bribed Gribkowsky to sell its F1 stake for less than it was worth. The judge has already admitted that he thinks this is less plausible than other explanations for the £26.9m payment and if he rules that it was not a bribe paid to undervalue F1 then it is hard to see how BayernLB's case could get off the ground.

Perhaps tellingly, a BayernLB spokesperson is quoted as saying that the bank "is working at high speed on civil charges against Mr Ecclestone and expects to file suit against him in the High Court in London in January 2014." This just happens to be when the verdict is due in the Constantin case so if the judge rules that the payment was not a bribe paid to undervalue F1 then BayernLB can quietly drop its plans to sue. Constantin does not have that luxury and will soon know its fate in the trial.

The stakes are particularly high for Constantin as it only has £4.3m (€5m) of cash in the bank and in the year to 31 December 2012 it made a £4.2m (€5m) net loss on revenue of £438.4m (€520.5m). Last month the company warned that its revenue in 2013 will be lower than expected and it will make another loss due to poor performance in the third quarter.

The costs in the F1 case alone are understood to be substantial and include fees to Constantin's lawyers, Peters and Peters, which is led by its head of Commercial Litigation/Commercial Fraud Keith Oliver. According to testimony from Constantin's supervisory board member Dieter Hahn, the lawsuit is being funded by the company and its single-biggest shareholder KF15, in which he has a 42.5% stake. The remainder of the shares are owned by the family of the late Leo Kirch the German media mogul whose company owned a majority stake in F1.

Giving further detail about the direction of his thought process, Mr Newey said "a key question, were I to decide there has been a bribe, would be whether Mr Ecclestone thought that the shares were being sold at an undervalue or possibly might have been sold at an undervalue... A lot depends on exactly how Mr Ecclestone gets to his figure of 2 billion."

He added "we will assume for the purposes of this that he thought that it was a fair price and he was not subjectively aware that it might be an undervalue. Now, were that the position, you are dead in English law, aren't you?" In response, Marshall said "there wouldn't be an intention to injure in those circumstances so there would be a difficulty under the English law of conspiracy, certainly."

Let's take stock of that for a moment. In summary, if Ecclestone did not think that F1 was undervalued by CVC paying £1.2bn ($2bn) for it then Constantin agrees it would have "difficulty under the English law of conspiracy." That's quite a serious conclusion for Marshall to come to.

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READERS COMMENTS

 

1. Posted by Spindoctor, 13/12/2013 17:30

"What I can't figure is this.
In the first instance Mr Ecclestone has claimed he paid a "blackmail" to prevent having the UK Tax people sniff around Bambino.
Now he has bruited it about, surely alerting the aforementioned Tax authorities to his alleged Bambino wheeler-dealing.

I'm confused. If the allegations are untrue then surely he needn't have paid the "blackmail" in the first place. "

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2. Posted by eeyore, 13/12/2013 11:00

"Chris, you don't think the prospect of facing allegations of making corrupt payments (a bribe) and dismissal as CEO of FOM will be worrying Ecclestone?

This Constatin case is a civil matter - even if Constatin wins, it's just money. The more debate there is about the motivation for this £10Million payment, the less secure will be his position as CEO. It doesn't even need a conviction before any reputable company would suspend a senior executive facing such allegations.

The quote from Mr Justice Newey in the article states: 'I have to say I find the idea of a bribe being paid to get rid of the banks more plausible than the idea of a bribe being paid to undertake an arrangement under which shares were sold at an undervalue.' Whilst the judge may dismiss Constatin's case, we're still left with the possibility that Ecclestone paid a bribe, for which the judge can think of a more plausible motivation than that put forward by Constatin's barrister. Having raised the issue of the payment of a bribe in open court, the judge would have to make it clear in his final judgment that he gives no credence to these allegations of bribery; anything less would just increase the pressure on Ecclestone.

And now we have the politicians wading in! The BBC has quoted the Shadow Attorney General Emily Thornberry as saying:
"All I can say is that from what we've seen in the German courts and the British civil courts, there are questions to be answered. There should be proper investigation by both the Serious Fraud Office and by HMRC about Bernie Ecclestone and as far as I can see that isn't happening."
(http://www.bbc.co.uk/news/uk-25307307)"

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3. Posted by Chris, 12/12/2013 18:57

"I'm not sure why this would be worrying Ecclestone since all of the claims against him (in America, Germany and the UK) are based on a bribe being paid to undervalue the shares. If alternative explanations for the payment have more plausibility than it being a bribe to undervalue the shares then clearly that theory lacks plausibility (hence the title). If the judge rules that the payment wasn't a bribe to undervalue the shares, then Ecclestone will win the case. If the judge thinks the money was paid for a completely different reason to that provided by Ecclestone or Constantin, then it's unlikely that we're going to hear what that is in the UK case. "

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4. Posted by eeyore, 12/12/2013 16:00

"This article is titled:
'Judge says Ecclestone bribe allegation lacks plausibility'

Did Mr Justice Newey really say that? I see a quote that he finds one of Ecclestone's possible motivations for paying a bribe (allegedly) more plausible than another.

What will be worrying Ecclestone is that the Judge's comment implies that he thinks the payment of a bribe *is* plausible, just not for the reason that Constantin's barrister is putting forward, otherwise he'd have said 'I think your argument that Ecclestone paid a bribe to sell to shares undervalued more implausible than that it was paid to get rid of the banks'.

In his final judgment, anything other than a rejection of the allegation of bribery will further undermine Ecclestone's position, even if he does dismiss Constantin's case.


PS: If a judge is leaning to one side towards the end of a case, he will often subject the advocate of the side which he favours to more vigorous questioning, if only to test his own conclusions.

"

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5. Posted by ScottC, 12/12/2013 12:38

"My interest in this whole saga is flagging. If however they agreed to doubling of the sentence or fine at the end of the trial I'm sure I could be persuaded to stay ..."

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6. Posted by f1khun, 12/12/2013 11:02

"I am happy to read the above. The German courts conclusion that this was a bribe, as testified by Gribkowski, is simply a prosecutor trying to get his way by promising something to the defendant - in this case a reduced sentence. It's a bad representation for the German legal system.
To Bernie - well done, Sir!"

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