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F1 board shuffle not quite what it seems

NEWS STORY
11/09/2011

An article, with a very similar title to this one, recently appeared on a Formula One blog. It was about news in the Telegraph written by Pitpass' business editor Christian Sylt which revealed that CVC co-founder Donald Mackenzie has been appointed as chairman of F1's holding company Delta Topco. The blog article wrongly claimed that Mackenzie was already Delta Topco's acting chairman so it concluded that the news about his appointment was less significant than it seemed. Once the error was pointed out, the blog author duly acknowledged it. All square there then. However, today, in a different publication, there is an article containing yet another error about a change of F1 directors. And this time it does indeed appear to be less significant than it seems.

The article in question appears in the Sunday Times. It is written by the paper's senior business correspondent Karl West who has rarely covered the business of F1 before in contrast to his editor Dominic O'Connell who has a little bit more experience in writing about it. West's report is about the resignation on 2 September of 62 year-old lawyer Stephen Mullens from the board of several companies in the F1 Group, including Formula One World Championship, the sport's direct rightsholder.

Mullens has known F1's boss Bernie Ecclestone since the mid 1990s when the two were introduced by Luc Argand, a Swiss-based lawyer for the firm dePfyffer. Argand drew up the management contract between Ecclestone and late driver Jochen Rindt in 1970 and it was through knowing the F1 boss that he went on to represent his family trust, Bambino, on the board of the sport's key companies. When Bambino needed someone in England to look after its affairs, Argand introduced Mullens to Ecclestone. Mullens eventually took over from Argand on the board of F1's companies to represent Bambino's 8.5% stake in the sport. He remained in that position right up until his recent resignation on 2 September.

Based on this evidence it may sound like a significant development that Mullens has resigned from the boards of the F1 companies but that would be overlooking a small but important point. What the Sunday Times fails to mention is that Mullens has been replaced with Frédérique Flournoy, who is also a lawyer for dePfyffer. In short, all that has happened is that Bambino has switched one representative for another and, contrary to West's report, Bambino is most certainly not Ecclestone's holding company.

F1's owners have switched their representatives countless times before so this latest development is nothing new. Indeed, the real story is just who is Frédérique Flournoy? According to her entry on the dePfyffer website she "specialises in the field of animal protection. Provides legal advice and services to organisations with charitable status," so one wonders why she was selected to represent Bambino.

The Sunday Times says that Mullens' departure "comes amid a legal battle over the 2005 sale of F1 to CVC" though the article does not directly connect the two events. As the article goes on to say, there are two legal cases. The first one surrounds the claim that Ecclestone paid a bribe to Gerhard Gribkowsky, former risk manager for German bank BayernLB, in connection with the sale of its F1 shares to CVC. The second legal case claims that Ecclestone undervalued F1 when it was sold to CVC. The article adds that "it is understood CVC has been under pressure from investors to take action in response to the furore."

However, both of the allegations at the heart of the two legal cases were dealt a deadly blow by recent comments from BayernLB's chief financial officer Stephan Winkelmeier. He confirmed that "the sale of the Formula 1 stake has of course been checked by both the management board and the supervisory board of the bank, through an internal revision as well as an external revision by auditors. So far those checks have not revealed any problems and have shown that the sale was carried out properly, in accordance with the bank's regulations."

Clearly, if BayernLB, which formerly owned the F1 shares, believes that the sale was carried out "properly, in accordance with the bank's regulations," a bribe cannot have been paid in connection with it. Likewise, Winkelmeier adds that the sale was at "a price that was in line with expectations," so clearly F1 was not undervalued when it was sold to CVC. The quotes from Winkelmeier don't just put to rest the two allegations in the legal cases, they also deal with the reported pressure from CVC's investors since there is no substance to the furore for the firm to take action over. As Pitpass has already reported if the bribery charge against Gribkowsky is eventually dropped some publications will have to tuck into a healthy portion of humble pie.

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