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Ecclestone indictment raises question over F1 "bribe"

NEWS STORY
28/06/2014

The bribery case against Bernie Ecclestone is still motoring on in Germany not that the wider world would know about it. The media appears to have gradually become tried of the seemingly endless stream of bankers and bureaucrats who are giving evidence. As is often the case in these kind of trials, the big news recently broke away from the court room and it comes from the indictment against Ecclestone according to an article in American business magazine Forbes by Christian Sylt.

Surprisingly the indictment seems to call into question whether Ecclestone really did pay a bribe as he has been charged with doing. Prosecutors have accused Ecclestone and his Bambino family trust of paying a £26m ($44m) bribe to steer the sale of F1 in 2006 to the private equity firm CVC but close inspection of the 256-page indictment reveals what appears to be a key hurdle to their case.

Ecclestone admits paying Gerhard Gribkowsky, the former chief risk officer of German bank BayernLB which owned a 47.2% stake in F1's parent company SLEC. However, he denies that it was a bribe and says he paid Gribkowsky to stop him making unfounded allegations about his tax affairs.

The show-stopping revelation in the indictment is that Gribkowsky did not actually have the power to steer the sale of F1 to CVC which raises the question of what would have been the point in Ecclestone bribing him. The decision to sell was made by a majority of BayernLB board members and Ecclestone has not been charged with bribing them.

BayernLB was paid £478m ($814m) for its stake which valued F1 at £1.2bn ($2bn) and was double CVC's initial offer. The indictment reveals that Ecclestone knew Gribkowsky could not get the BayernLB board to accept the initial lower offer. "The Accused knew that BayernLB was not ready to sell its shares for offers of between £235m ($400m) and £294m ($500m), so the resulting sale price from an enterprise value of £600m ($1bn) ,as CVC brought into play, would not meet the expectations of the bank. The Accused knew that a sale at this price would fall through since he reckoned that even Dr Gribkowsky could not negotiate this price with BayernLB."

The indictment adds that Ecclestone was aware of this because "BayernLB did not agree to offers in the order of between £235m ($400m) and £294m ($500m) which were made between April and July 2005."

According to the indictment, Ecclestone encouraged CVC to pay more as he "reckoned from the start that BayernLB would not turn down an offer based on an enterprise value of £1.2bn ($2bn) for 100% of SLEC." This is exactly what happened as BayernLB snapped up the £478m offer for its stake and numerous executives from the bank have testified that they did not believe it was undervalued.

If the F1 stake could not have been sold at the lower price, because the BayernLB board would not have accepted it, then it directly follows that Gribkowsky did not have the power to steer the sale to CVC. If Gribkowsky did not have the power to steer the sale to CVC then how could Ecclestone have bribed him to do this? To guarantee that BayernLB sold its F1 stake to CVC Ecclestone would have had to bribe the board of the bank but there is no suggestion that this is what he did.

Given that the most Gribkowsky could do is try to convince the BayernLB board to agree to sell it seems that a charge of attempted bribery would better suit the prosecutors' evidence against Ecclestone. Of course he has not been charged with attempted bribery but with bribery itself though time will tell whether this sticks.

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READERS COMMENTS

 

1. Posted by blackdog, 30/06/2014 20:43

"Buy into it or not, it is fact. "

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2. Posted by Spindoctor, 30/06/2014 12:49

"Sorry blackdog but I can't really buy into the whole "Bernie as conquering hero" mythos.
F1 worked perfectly well as a sport for many years before Bernie became involved, and for many years afterwards until he managed to get control. He did indeed seem to bring in the big money, but sponsorship, for example, was well-established long before he stuck his oar in.

However all of that is pretty much irrelevant in this context. Mr E is accused of dodgy dealings by the German Prosecutors,. Even if he were the Formula One equivalent of Mother Teresa his guilt or innocence should be determined by the evidence, or lack of it, not his contribution (or lack of it) to the parlous state of F1.

There is another debate to be had about whether or not Bernie's activities have primarily benefitted the sport, or Mr B. Ecclestone, but that would most likely turn libellous, and is surely for another topic..... "

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3. Posted by blackdog, 30/06/2014 10:35

"Guys. In the beginning, Bernie put a proposal to the teams and they accepted. He then went out and turned F1 into a global sport, pretty much single handed. He created the revenues and took his share. He did the deal for the commercial rights with the FIA and took his share. In doing so, he also created huge sponsor revenues for the teams because of the global tv coverage he negotiated. You get to do all that by being in control and by being clever. He always had a reputation for being hard, but fair and the teams now enjoy a massive share of the revenues he created. He is a master deal maker.
Forgive me, but I think he is entitled to spend his money how he wishes, so I'm not sure criticizing his daughter's wedding etc is any of your business. He lives in England and pays a lot of tax for that privilege.
Quite naturally, if you have the opportunity to do a spectacular deal, you get the best tax efficient advice you can. HM revenue isn't sitting next to you in the kitchen at 3 in the morning helping you figure out how to get your deals done, but they sure want to grab the lion's share when the money starts rolling in. I don't remember signing that particular agreement. So you do what you legally can. Preferably, off shore, just like everybody else.
Under Harold Wilson the Beatles were paying 98p in the pound. 98%, on revenues from songs that came out of their heads.
Me, I'd stay in bed and say, Here you are Harold, have 98% of that!
I don't much like all the silly new races, Azerbaijan etc etc, but he goes where the money is. These races come and go. Do the deal and take the money, say bye bye. Silverstone, Spa, Monza will always be there and Austria is back. It is just business.
Teams like Caterham, Hispania and Marussia should never have even started. If you can't do it properly, don't bother.
The new Kolles Forza Rossa team is likely to be a joke as well and funded, we are led to believe, by Romanian government ministers? Hello? Anybody there? Wake up Brussels. Investigate!!! I really don't understand what the FIA are playing at.
At least Haas has the background, the funding and reputation to be taken seriously.
Clearly, Bernie made a big mistake with this pay off business, as I wrote earlier.
Credit where it is due. He has done a spectacular job, but it's time to retire and hand over to someone else. Who?
Nobody ever mentions David Richards. A great businessman, solid reputation, motorsport background. Remember 2004 when he got Jenson back on track? He knows what he's doing.
At present, Grand prix motor racing is on a slippery slope and we need a new man running the show.
"

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4. Posted by TokyoAussie, 30/06/2014 5:09

"I, too, have no sympathy for Bernie. That he admits he made a payment is beside the point. He first denied making any payment, vigorously. He lied. Why? Then part of the payment, via a back door (Austria), came from the Trust, of which he supposedly has no control. If Bernie has no control, as he claims, what story did he spin to get the Trust to make a payment? Was it legal?

I have no trouble believing that Gribkowsky was likely leaning on Bernie for some cash because of alleged control of the Trust, and I also have no trouble believing that Bernie does exercise some control over the Trust. Otherwise, why would the Trust pay money to Gribkowsky, and via the back door? How would the Trust even know to do this? If Bernie can get the Trust to release huge chunks of money to individuals for undisclosed reasons (and real-estate "advice" doesn't really justify tens of millions), what more control does he need.

I suspect both Gribkowsky and Bernie have crossed the line into illegality, but proving what actually transpired is probably next to impossible. As for Bernie's claims about tax liabilities, tough cheddar. If tax was owed, then he should cough up. If so, he has cheated the citizens of the UK.

Personally, I think that the ridiculous extravagance of his daughter's wedding & house, while F1 teams go bust, is reason enough to pursue him for tax reasons. Unfortunately, that part is legal, but it stinks all the same."

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5. Posted by Jonno, 29/06/2014 23:49

"Am I supposed to have some sympathy for Bernie? Well, I don't. The man who runs F1 with smoke and mirrors, who plays every team off against the rest, who arranged for secret extra payments to Ferrari, who bought F1 on the cheap, who's happy to see team after team go the wall, who's made more money out of F1 than all the teams combined, who never puts a pound into publicity, who stops me from watching short race segments on the interweb, he doesn't need sympathy, he needs to get out of F1 - like last week."

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6. Posted by Tommy Tipper, 29/06/2014 11:03

"So if Gerhard Gribkowsky was convicted of accepting a bribe from Bernie (along with tax evasion and fiscal something or other) and Bernie now looks likely to escape that charge - where does that leave GG?. Wouldn't they then have to release him?."

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7. Posted by Hardliner, 29/06/2014 9:59

"There is some very well-informed and insightful analysis on this page. What happened to the cash trail - presumably there is one? If it wasn't a bribe, what was it - did Bernie bung it there to put Gribkowsky offside for some reason, thinking he would get it back one way or another? The HMRC angle has always seemed rather weak, he has legions of advisers protecting him, and legions of detractors who might take a pot shot at him, so a whistle blow to HMRC was always going to be on the cards anyway, he'll have planned for that. The HMRC thing appears to be Bernie being disingenuous, a tactic he often uses. I wonder if the real story will ever get into the public domain?"

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8. Posted by Spindoctor, 29/06/2014 8:27

"Who knows (Bernie & his coterie aside) what the truth of this whole sorry business really is. Much of the confusion derives from the conflation of two hugely complex matters: The control of the Ecclestone Family Trust, the sale of "Formula 1" to CVC.

Having worked in Private Equity Investment\Venture Capital I know about the extensive "Due Diligence" investigations undertaken in order to maximise profit\returns and minimise tax\liabilities, this is further complicated by fees to directors, Carried Interest etc.etc. I'm pretty doubtful that anything will actually be proven that might negatively affect CVC no-matter what any of us may believe about various possibly shady goings-on.

Similarly Bernie will have "invested" may millions in ensuring that his "Family Trust" is pretty much bullet proof from a legal\tax perspective, which makes it very surprising that he should have been bounced into paying the blackmail. This is even harder to understand given Bernie's reputation as a tough and intelligent deal-maker.

Whatever actually happened, these are two completely separate matters, and the only person who is benefitting from the confusion is Mr Ecclestone, who is happy to stir the pot of confusion at every opportunity.

Underlying all of this is the simple truth that in the world of high finance, where deals are done in multiple millions and billions, the rules that constrain most of us simply don't apply. Which brings me neatly back to my opening sentence...."

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9. Posted by blackdog, 28/06/2014 15:36

"I do agree. The whole thing is rubbish, and being pursued by the German prosecutors who are nothing but a bunch of jumped up pantry boys.
My real surprise is that Bernie ever got himself into this mess in the first place.
To my way of thinking, from a pure business sense, it would have been far better for the banks to remain as shareholders.
When all is said and done, CVC have done very nicely indeed through their investment. Banks usually like making money, and this would have provided very solid results for them.
Looking at the price CVC eventually paid, and given that Bernie wanted rid of the banks, he could very easily have afforded to buy them out, and then found a suitable investor in his own good time. If, for whatever reason, he did not want to appear as the buyer himself, then it could have been done through a private investment company. I believe I suggested this at the time but the idea fell on deaf ears. You can lead a horse to water, but you can't make the bloody thing drink.
It is, however, safe to say that had my suggestion been adopted, non of this shit would be happening now.
Next. Why did Bernie need to pay anything to Grib, if the allegations that he controlled the trust, were indeed, false?
Surely, since the allegations were false, it never made any sense to pay off Grib and certainly not merely in order to avoid an investigation by the UK tax authorities.
You just say "Prove it!", then sit back and relax while HMCE run around in circles. End of...
Logic, (which sadly, has never served me well, largely because people frequently seem to do the exact opposite of that which logic dictates), would seem to indicate that if you paid someone to shut up, then you did have something to hide.
It would seem that our hero was very badly advised in paying anything at all, and please, if you do ever find yourself having to pay someone, do it in such way that nobody finds out. Come on guys. What was this? Amateur night?
If I had been Bernie, upon being confronted by the blackmail threat, I would have immediately made a formal complaint to the board of the bank and probably the police as well, stating that Grib was attempting to blackmail me. I would have insisted that he be removed and that someone else be appointed in his place. Blackmail, or attempted blackmail, being a very serious offence indeed, I imagine that Grib's feet would not have touched the ground as he was whisked off to Germany's version of Sing Sing.
Bernie has proved to be the ultimate Mr Clever Clogs from the moment he served tea to the team bosses in a Heathrow hotel and persuaded them to let him handle the business side of F1, all those years ago. He has done a fantastic job and turned a tidy sum along the way. It seems such a pity that his fall from grace should come at the hands of some second rate, crooked German banker.
"

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10. Posted by f1khun, 28/06/2014 12:00

"It is a farce, there are no sensible words I can imagine regarding the prosecutors case.

Every decision that Ecclestone made was, as far as I have read - and I have read basically all what Mr. Sylt has written on the topic - was to sell F1 to CVC, and he has worked hard to assure that the former shareholders (among others BLB) were happy to accept the deal. CVC asked Bernie to assist in more borrowing capacity to get it done, so he did. It all makes pure common business sense.

Why would Bernie have bribed Gribkowski if BLB was VERY happy indeed to sell to CVC? CVC was enabled by Bernie to purchase the shares, and surely he knew they wanted him to stay on as F1 Boss, an of course Bernie wanted this and he proved his worth. Deal making is an art and Bernie knows how making deals work.

There was no need for a bribe and the only testimony that there WAS a bribe comes from a convicted felon, who had a motive (self interest, shorter sentencing) to confess to being bribed. And it was the prosecutors office that made him the deal.

To me, the prosecutors are hunting for their own right which they created from a wrong. And we all know, two wrongs do not make one right, wrong is and remains wrong.

I suggest and expect that Bernie will counter-sue the state of Germany and Gribkowski once these charades are done with. This is a typical case of people in the spotlight that have a high wealth being targeted because a win pays out. Instead of this, the money spent on the court proceedings could have a better use ANYWHERE then for this case.

Its all rubbish if you ask me. And yes, it angers me.

"

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