F1 launches investigation into payments to jailed banker

15/02/2011

According to Sky News an investigation has been launched into Delta Topco, the company which ultimately owns the commercial rights to F1, over payments received by jailed German banker Gerhard Gribkowsky.

The investigation is being handled by the accountancy firm Ernst & Young and lawyers Freshfields. The decision to investigate has reportedly been taken by Delta Topco's board and its majority owner CVC.

Gribkowsky was arrested on 5 January for allegedly receiving $50m in return for undervaluing shares in Delta Topco subsidiary SLEC which were sold by German bank BayernLB to CVC in 2006. Since then no one has been arrested for giving the alleged bribe and the German media has been rife with rumours of who paid it. It seems that F1 itself now wants to clear up this question and it has appointed Ernst & Young, which audits the accounts of the sport's direct rights holder Formula One Administration (FOA) and Freshfields which has worked with FOA on corporate, tax, anti-trust and financing matters.

The very fact that the law firm which represents F1 and its auditors are carrying out the investigation suggests that it has not been demanded by an external authority. If a third party had demanded the investigation then it would presumably have insisted that it is carried out by firms which F1 is not already a client of. Accordingly, it seems most likely that CVC and Delta Topco want to voluntarily demonstrate the truth of their denials that they had anything to do with payments to Gribkowsky in exchange for undervaluing the shares.

When CVC bought SLEC Gribkowsky became a director of Delta Topco but this position became untenable when he was thrown in prison last month as he clearly couldn't attend board meetings. Although it really didn't need stating, Sky News reports that he has been replaced on Delta Topco's board with CVC co-founder Hardy McLain taking over from him. Sky also refers to Pitpass' coverage of Gribkowsky but it claims it isn't sure whether he is still in prison. One wonders where else Sky News thinks he is because the last time Pitpass checked, Gribkowsky hadn't dug his way out of Munich's Stadelheim jail.

Apparently Freshfields and Ernst & Young have been ordered to report its findings within weeks - just as well really given that the F1 season is due to start in less than a month. In its coverage Sky News repeatedly states that F1 faces being thrown into turmoil over this yet it never explains why this is the case.

There is no doubt that this investigation in England, along with the one in Germany, casts a very dark shadow over the sport's credibility at a time when many teams are embarking on ambitious financial plans. And that is just the tip of it.

Rest assured that Pitpass' business editor Chris Sylt will provide readers with the full consequences as this situation develops.