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Ecclestone indictment challenges London High Court ruling

NEWS STORY
22/04/2014

Formula One boss Bernie Ecclestone's chances of triumph in his bribery trial, which begins on Thursday, have been given a boost from the most unlikely of sources according to an article in the Guardian written by Christian Sylt.

German prosecutors have charged Ecclestone with paying part of a £26.2m ($44m) bribe to former banker Gerhard Gribkowsky to steer the sale of F1 to the private equity firm CVC in 2006 as it had agreed to retain him as boss of the sport. Gribkowsky was chief risk officer of German bank BayernLB which owed a 47.2% stake in F1's parent company SLEC and received £484.7m ($814m) for selling it to CVC.

Last year Ecclestone was sued in London's High Court for undervaluing F1 because other bidders could have come forward and offered more than CVC. Ecclestone won the case because the judge, Mr Justice Newey, said he did not want to undervalue the shares and did not believe they were sold below market value. However, Mr Newey also said he believed that Ecclestone paid a bribe "to be rid of the banks" which previously owned the majority of F1. It may seem like it bodes badly for Ecclestone's trial in Germany but that's not where the story ends.

In his judgement Mr Newey said that when CVC bought F1 BayernLB "had the chance to reinvest, but chose not to take it, and the evidence indicates that this was a decision taken against Dr Gribkowsky's wishes rather than because of them." At another point in the ruling Mr Newey added that BayernLB's decision not to reinvest in F1 "ran contrary to Dr Gribkowsky's preference." This seems at odds with the claim at the heart of the indictment against Ecclestone which says that he bribed Gribkowsky so that he could "dispense with BayernLB as a Formula One shareholder."

It is the first time that the indictment has been quoted in detail and the details in it are stunning. It adds that "from the very beginning, the interests held by the majority shareholders in Formula One, i.e. BayernLB and the other Formula One banks JP Morgan and Lehman, constituted a disturbing factor for the Accused."

The banks had at times a particularly turbulent relationship with F1's minority shareholder, Ecclestone's Bambino family trust, and in 2004 they sued it in London's High Court. They claimed that although Bambino was a minority shareholder in F1 it had hijacked the boards of several key companies in the sport. The banks won the case and in 2005 they filed a related lawsuit against Ecclestone personally which he settled soon afterwards. The German prosecutors claim that the banks rattled him so much that he began to look for a way to get rid of them.

"All this considerably displeased the Accused, as until then he had acted as the de facto undisputed ruler of Formula One and CEO of the Formula One operating companies. He wished to prevent as far as possible any interference or even involvement in operating processes and structures on the part of the banks in their capacity as majority shareholders, since for him, this would have meant losing his de facto absolute position of control and power in Formula One."

The indictment describes Ecclestone as being so paranoid about threats to his position that he would not even tell the banks how F1 operated.

"His prominent status and powerful position resulted from the fact that the Accused was familiar with the structural details of Formula One and its operating companies, had negotiated, knew and guarded important contracts with partners of the Formula One operating companies, on the basis of which Formula One generated its revenue and disclosure of which, even to SLEC shareholders, he made every effort to avoid, as well as his contacts to close allies in the Formula One scene who played a key role in the marketing sector. All the main operational structures and processes were tailored to suit his individual needs and were in fact controlled by him alone."

The legal action from the banks was the last straw for Ecclestone according to the indictment. "In view of these circumstances, the Accused decided to win over the since convicted Dr. Gribkowsky by offering him the prospect of personal gain in order to end Dr. Gribkowsky's confrontational course and dispense with BayernLB as a Formula One shareholder as quickly as possible."

Ecclestone denies paying a bribe and says that Gribkowsky threatened to tell the Inland Revenue that he controlled Bambino if the £26.2m was not paid. As Ecclestone is a UK resident he would be liable to pay tax on the estimated £2.4bn of cash in Bambino's accounts if he was found to be in control of it which he strongly denies. He says he paid Gribkowsky because his unfounded allegations would have triggered a lengthy and costly investigation.

In contrast, the picture of Ecclestone painted by the indictment is that of a dictator who was so paranoid of losing power that he paid a huge bribe to stay in his job. It is a world away from the hard-nosed nonchalance that Ecclestone is famous for and his career now depends on proving this.

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READERS COMMENTS

 

1. Posted by Ro, 23/04/2014 9:39

"Totally agree with you Hardliner, There's not one successful business man in the world who hasn't bent the rules as some stage, but then some do it as a pastime. I just wish there was more reporting on the racing and not on some crook that's been found out, that's what's a waste of money !"

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2. Posted by Hardliner, 22/04/2014 22:48

"Who are you kidding Ro? The only 'Not guilty' bit about Ecclestone is that he hasn't yet been found guilty, simple as that. He tried for global domination, got very close to it, but there was always going to be a weak spot and we've found it. So why is this good news? Simple again. Bernie has outlived his usefulness to F1, he's milking the cow too hard, it will die soon, we need him out of the way"

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3. Posted by Ro, 22/04/2014 17:43

"What a total waste of money, let sleeping dogs lay and let us get on with what could be a great season."

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