In a surprising turn of events, the written indictment (basically a statement of claims) in the German court case against Formula One's former chairman Gerhard Gribkowsky seems to knock on the head a lawsuit in London filed against the sport's boss Bernie Ecclestone.
Gribkowsky was the chief risk officer of German bank BayernLB and was responsible for selling its 47.2% stake in F1's parent company SLEC. BayernLB received £527.7m ($814m) for selling its F1 shares to current owner, private equity firm CVC, in 2006 and over the next two years Gribkowsky was paid a total of £28m ($44m) by Ecclestone and his offshore family trust Bambino.
The money was paid into an account in Austria which was taxed at a lower rate than in Germany where Gribkowsky was resident. Since Gribkowsky did not declare the payment to either the German authorities or to BayernLB he has been charged with tax evasion and breach of trust. As Pitpass' business editor Christian Sylt revealed earlier in the week , the prosecutors bizarrely believe that Ecclestone paid Gribkowsky the money to favour a sale to CVC so they have also charged Gribkowsky with receiving a bribe.
Ecclestone denies paying any bribe in connection with the sale of F1 and neither he nor CVC has been charged with anything. Ecclestone says he paid Gribkowsky because the banker threatened that he would otherwise make false allegations about his financial affairs to the UK's tax authority.
Although the prosecutors believe that Gribkowsky received £28m for selling to CVC there does not seem to be any suggestion that he should not have sold to them. Quite the opposite in fact.
The indictment confirms that BayernLB received several "offers, or rather expressions of interest" in its F1 shares but, except for the one from CVC "none of these offers were regarded as being suitable, especially for reasons of price." It even goes into specifics by saying that "the investment business Bluewater LP expressed...interest in purchasing all of the shares...though for a lower price than CVC."
It echoes recent comments from BayernLB's chief financial officer Stephan Winkelmeier, who said that an internal investigation by the bank's management and supervisory board, as well as external checks by auditors, "have shown that the sale was carried out properly, in accordance with the bank's regulations and with a price that was in line with expectations."
The official confirmation in the indictment that CVC made the highest offer for BayernLB's F1 shares could put the brakes on a lawsuit which was recently filed against Ecclestone in London by another former part-owner of the sport. The lawsuit comes from German media firm Constantin Medien which claims it lost over £650m ($100m) as a result of F1 being undervalued when it was sold to CVC.
In 2003 Constantin sold its 16.7% stake in F1 to BayernLB and two other banks - JP Morgan and Lehman Brothers. This gave them a total of 75% of F1 as they already owned 58.3% of it which they took over in 2002 from media company Kirch when it defaulted on a £1bn ($1.6bn) loan the banks had given it to buy the stake.
Constantin's stake had a balance sheet value of €204m but it was sold to the banks for just €8.5m. Constantin agreed to sell it at a loss on the condition that when the banks sold the combined 75% it would share in any surplus remaining after the £1bn had been repaid to them. Its gamble didn't pay off because the 75% was sold for a total of £778m ($1.2bn).
In January prosecutors accused Gribkowsky of selling F1 to CVC without a valuation and getting £28m in return. Since they failed to mention at the time that CVC's offer was the highest this led to widespread reports that Gribkowsky received a bribe for undervaluing F1. When the prosecutors formally accused Ecclestone of paying the bribe in July it triggered the lawsuit from Constantin. The comments in the indictment may well put an end to it but it seemed to be doomed regardless.
Jonathan Walters, sports law expert for city firm Charles Russell, says "from what we know about the circumstances of the sale of Constantin's shares and the subsequent acquisition by CVC, there is nothing to suggest that anything untoward took place." He adds that Constantin itself seems to be partly to blame for its loss.
"It remains simple power politics that those with the biggest stake can, and often will, force through a deal that favours them. It also appears that Constantin contributed to its own problems by negotiating a bad deal. Accepting a very small payment in the original sale to the banks in expectation of a bigger return on the next sale backfired and demonstrates the risk of selling shareholders agreeing to deferred payments without an adequate element of control over that payment."
Walters has hands-on experience with F1 since, before joining Charles Russell, he was lawyer for the Brawn team which is now owned by Mercedes. Constantin's representative, Keith Oliver of Peters & Peters, declined to comment. Time will tell whether his client bothers pressing on with its claim in light of the recent developments.