15/08/2006
FEATURE BY MARK GALLAGHER
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Shortly after 6am on the morning of 21st February this year a Swedish businessman, Stefan Eriksson, crashed his car on the Pacific Coast Highway in Malibu, California. The car was a red Ferrari Enzo and the police, headed by Sheriff Sgt Phil Brooks, initially estimated that it was doing 162 mph when it crested a rise, became airborne, slewed sideways along an embankment and hit a telegraph pole so hard that it split the car in two. Later, following a police reconstruction of the accident, the speed was revised. Upwards. To 194mph. It emerged in reports that Eriksson's passenger, one Trevor Karney, was videotaping their high speed journey at the time and that the digital speedometer on the Ferrari Enzo was reading 199mph.
Although Eriksson and Karney miraculously emerged unscathed, other than for a cut lip suffered by Eriksson, they stumbled out of the wreckage and into a media spotlight that illuminated one of the biggest corporate collapses in UK business history. One that touched upon the world of Formula One and showed that, whatever the desire for sponsorship, endorsements or licensing agreements needed to fulfil the sport's unending quest for cash, it's always important to know who you are doing business with. It's called doing 'due diligence', establishing the credentials of the company you are doing business with, but in the case of Eriksson's company no one could have had any idea of the extent of the scandal that has now broken.
It was just before I quit my post as head of marketing at Jordan Grand Prix in June 2003 that the team was contacted by a company named Tiger Telematics which traded on the US stock exchange and was set to launch a revolutionary next-generation games console called Gametrac, a gaming device with built-in GPS positioning to enable parents to locate their children and communicate via SMS text messaging. Subsequently a sponsorship deal was agreed commencing at that year's British Grand Prix, running for the remainder of the season and then throughout 2004. For Jordan, a team moving into decline, new sponsorship deals were extremely important.
In December that year I took a call from Mike Hall-Taylor, who had taken over the running of marketing at Jordan after I left, asking me to introduce the boss of Gametrac, a Swede named Carl Freer, to Jenson Button. Freer was interested in buying Jenson's house in St George's Hill, Surrey, and as I was working with Jenson's management at the time Mike suggested I could make the necessary introductions.
I spoke to Freer on a couple of occasions and texted him back and forth. He was confident, highly articulate, apparently very credible and serious about buying Jenson's house. He even mentioned that perhaps Gametrac could sponsor Jenson. Later it would emerge that it was the charisma of the multi-lingual Freer that lay at the heart of Gametrac's success in wooing financial backers.
Fast forward a few months and the Gametrac-Jordan deal was dead, Freer telling me that Jordan had changed the on-car branding without telling him, and my former Jordan colleagues explaining that Gametrac had simply not paid up. In the midst of this I was invited to meet Freer at Tiger Telematics' impressive offices in Farnborough. He was interested in sponsoring Jaguar Racing and, showing me the various plans they had for Gametrac, we discussed options commencing with that year's Monaco Grand Prix. Nothing happened.
Instead Gametrac, now rebranded as Gizmondo and developed into a far more complex gaming device with GPS, SMS, video and music applications, announced in July 2004 that it would be launching a racing video game for its new platform and that 'Chicane' was being endorsed by than none other than Britain's Jenson Button. The game was being developed by American company Handheld Games and, Button said, would be quite something. Not unnaturally I reckoned that my introduction of Freer to Button's management team the previous December had clearly lead to something pretty good for all concerned.
By then, however, I was also aware that Jordan Grand Prix was suing Gizmondo for breach of contract and in the months that followed watched with interest as, first, Jenson Button's endorsement of the Chicane game seemed to dissolve and then Handheld Games sued Gizmondo in a Seattle court. There seemed to be trouble wherever Gizmondo appeared.
Jordan suing a former sponsor was no novelty for, having worked with Eddie, I knew him to be litigious, sometimes unwisely such as in the well documented Vodafone case, although in this instance the issue seemed clear cut. Gizmondo had failed to pay for their sponsorship of the team and Jordan could not afford to let them walk away. Handled by Jordan's legal team at Fladgate Fielder, headed by Mark Buckley, the lawsuit was ultimately successful, Gizmondo making a $1.5 Million settlement and handing over shares which raised $380,000 to cover legal costs.
Jordan's success in securing a settlement, in spite of coming after Midland had taken over, turned out to be a most timely and fortunate legal pay-out for within months Gizmondo had collapsed, leaving shareholders aghast at how it could have been possible for Carl Freer and his management team to blow £180 Million of shareholders funds in around 18 months. Gizmondo is now the subject of investigations on both sides of the Atlantic as the authorities try to find out where all the cash has gone.
The Gizmondo console had finally been launched in March last year after interminable delays and false starts, guests at the Park Lane hotel in London being wowed by celebrity guests including Danni Minogue, Sting and Busta Rhymes. According to The Sunday Times rumours went around that half a million consoles had already been sold. Another newspaper said Gizmondo was going to be Britain's answer to Nintendo.
A swanky Gizmondo shop on London's Regent Street, not far from the superb Apple Shop, served to further illustrate their confidence and success. I later learned that someone I know had arranged cars for Carl Freer and fellow director Stefan Eriksson - Mercedes McLaren SLRs no less. Another friend of a friend of mine in Ireland admitted that he had ploughed a couple of hundred grand into Gizmondo - it really did look like the next great product.
Six months later and the business started to come off the tracks. The company was haemorrhaging cash, creditors were suing. Jordan was one of the lucky ones to get paid. Last September a Swedish newspaper revealed that Eriksson and another Gizmondo director Frederik Uf had been members of the 'Uppsala Mafia' named after a town north of Stockholm. Eriksson, the story said, was a former convicted fraudster and went by the nickname of 'Fat Steffe'. A third member of their alleged mob was said to be John 'The Torpedo' Enander, now head of security for Gizmondo, previously convicted of crimes including assault and blackmail.
For those at Jordan and within the Jenson Button management who had dealt with Gizmondo, these revelations will have come as a shock. Carl Freer and Stefan Eriksson had been Formula One Paddock Club and VIP Paddock guests at the 2004 British Grand Prix, while Eriksson and Uf attended that same year's German Grand Prix, rubbing shoulders with the great and good of Formula One.
According to press reports Eriksson, Uf and Enander quickly quit Gizmondo after being 'outed', followed by Freer, and within months the company, now without leadership, collapsed. They took off for California, where they had set up in order to develop Gizmondo USA.
Which takes us neatly up to the early part of this year. Eriksson, having shipped the leased Ferrari Enzos and Mercedes McLaren SLR to California, had his little accident, attracting the kind of attention that the former director of a collapsed business can hardly want.
Eriksson's first reaction after the accident was to claim that he was in fact the passenger in the car and that the driver, a man named Dietrich, had run off. Meanwhile Trevor Karney used the cellphone in a witnesses car to make a call, the witness later discovering a gun magazine stuffed down the side of his seat. Police were also allegedly told by Eriksson that he was a member of Homeland Security, America's anti-terrorism body, and he said they were racing a Mercedes McLaren SLR at the time of the accident.
The police, however, said they quickly established that there was no Dietrich, that Karney had been the passenger and that Eriksson's bloody lip accounted for the blood on the driver's airbag. What was more, Eriksson was drunk. Further investigations showed that the car, along with a second black Ferrari Enzo with a Manchester registration plate and a Mercedes McLaren SLR, had been brought into the USA illegally and without the knowledge of the Bank of Scotland, Lombard and Yorkshire Bank who had leased them to Gizmondo.
Eriksson was subsequently arrested in April and charged with embezzlement, grand theft auto, drunk driving and firearms offences. A police raid on a 110ft yacht moored at Marina del Rey, given as a home address by Karney, showed that it belonged to Carl Freer and the police uncovered 16 guns, including 12 rifles and four hand guns. Police later arrested Freer on suspicion of having bought one of the firearms, a Magnum revolver, whilst posing as a policeman. They also raided his Bel-Air house, which is for sale for $5.9 Million.
Sponsors come and go in Formula One. The really large ones, the major corporates, often bring a sanitised image with them and, in my last Pitpass column, I was critical of the blanket of corporateness which these sponsors and the car manufacturers have laid across the sport. The upside, and it's a major one, is that these major companies funding Formula One are proper businesses, highly profitable, entirely accountable to both their shareholders and the authorities. Proper people, in other words, who make our sport happen.
The downside of the quest for sponsorship is that sometimes, fortunately not often, the headlong rush to find the next dollar can lead you into the arms of the less savoury side of international business. In the case of Gizmondo, what looked like nice little earners for both Jordan and Jenson Button turned out to be just what those of us engaged in raising funds often fear. Too good to be true. No one can blame either the team or the driver's management for getting into bed with Gizmondo, a company which carried a veneer of credibility, had financial clout and was wowing the investment community out of three hundred million dollars. But it's a cautionary tale, and one everyone in F1 should keep in mind the next time a deal comes out of the blue.
Picture: Hans Laetz
Mark Gallagher
mark@pitpass.com
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To check out previous features from Mark, click here