The bribery trial of Bernie Ecclestone got underway on Thursday and although it yielded no major news, the scale of the challenge facing the Formula One boss has come to light. In a startling development, prosecutors have revealed that they believe Ecclestone was blackmailed by former banker Gerhard Gribkowsky according to an article in Forbes magazine by Christian Sylt.
The revelation is surprising because it reflects Ecclestone's defence to charges from the same prosecutors that he bribed Gribkowsky. If Ecclestone loses he could face up to ten years in prison so the latest news may initially sound like it plays right into his hands. However, it remains to be seen how significant a matter the prosecutors believe it to be. Although they believe that Gribkowsky has committed blackmail, which is of course a criminal offence, it does not appear that he has been charged for this.
First let's have a quick recap. Ecclestone has been charged with paying part of a £26.2m bribe to Gribkowsky to steer the sale of a 47.2% stake in F1 to the sport's current controlling shareholder, the private equity firm CVC.
CVC bought F1 in 2006 from Bambino, Ecclestone's family's trust, which owned 25% with the remaining 75% held by a consortium of three banks. They were JP Morgan, Lehman Brothers and state-owned German lender BayernLB which had the 47.2% stake in F1 making it the single-biggest shareholder.
Gribkowsky was the chief risk officer of BayernLB and was in charge of the sale of its F1 shares. Over the two years following the sale Bambino and Ecclestone paid Gribkowsky £26m which he did not declare to BayernLB. German prosecutors believe that it was a bribe for selling F1 to CVC as it had agreed to retain Ecclestone as the sport's boss.
In June 2012 the regional court in Munich ruled that the payment was a bribe and sentenced Gribkowsky to eight and a half years in prison for receiving it. This spurred the prosecutors to come after Ecclestone and they claim that he had good reason to bribe Gribkowsky.
When the banks were shareholders in F1 they had, at times, a turbulent relationship with Bambino and Ecclestone. In 2004 the banks sued Bambino in London's High Court and claimed that although it was a minority shareholder, it had hijacked the board of several key F1 companies. The first was Formula One Holdings (FOH) and the banks won the lawsuit over control of it. In 2005 they filed a related lawsuit against Ecclestone personally over control of Formula One Administration (FOA) which he settled soon afterwards.
The legal action from the banks was the last straw for Ecclestone according to the indictment against him in Germany. "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 H.M. Revenue & Customs (HMRC) that he controlled Bambino if the £26m was not paid.
The reason that this is a threat is that Bambino is based in in the tax haven of Liechtenstein whereas Ecclestone is a UK taxpayer so is not allowed to control the trust. If he was found to be in control of it he would have to pay tax on the £2.4bn in its accounts which it has raised from selling stakes in F1.
Ecclestone strongly denies that he has ever controlled Bambino and in 2011 he revealed to Pitpass that Gribkowsky's threat of informing HMRC came in the "very early days when they were dealing with the trust before it was set up." HMRC was looking into the proposed structure for Bambino at the time and Ecclestone says he paid Gribkowsky because if the unfounded allegations had been reported the tax authority would have extended its investigation thereby incurring huge costs for him.
Surprisingly, although the German prosecutors do not believe that Ecclestone paid the money because he was being blackmailed about his connection to Bambino, they do believe that Gribkowsky blackmailed him about this on a previous occasion. It is fascinating that the prosecutors not only believe Gribkowsky was capable of blackmailing Ecclestone but this is something he had actually done.