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Gribkowsky trial in the balance

NEWS STORY
27/02/2012

The run-up to the start of the season has been one of the quietest in recent history on a business front. Whereas 2011 saw new F1 sponsorships from Group Lotus and Infiniti, which alone invested around £38m, this year there has not been one new deal signed by a team with a value of over £10m. It seems that most teams have had to fight just to keep sponsors let alone sign new ones. Indeed, the only sponsorship of any real note was announced last week by F1's deal-maker extraordinaire Bernie Ecclestone who signed Tata Communications to become the sport's official connectivity partner.

Aside from this, there is of course still rumour after rumour swirling around about a sale of F1, most recently the report at the end of last year by business editor Chris Sylt revealing that one of the sport's former shareholders, investment firm Hellman & Friedman, is interested in becoming an owner again. Although a direct quote from Ecclestone in Sylt's report revealed that Hellman & Friedman is interested in buying into F1 that doesn't mean to say that private equity firm CVC, the sport's majority owner, wants to sell to them.

With so few commercial developments taking place Sylt has been using the opportunity to compile the latest edition of F1's industry guide Formula Money whilst travelling through North America where he has been commissioned to work for the past few months. Somewhat ironically, interest in F1 is hotting up in that part of the world. As many countries in F1's traditional European heartland struggle to maintain one race, the United States is getting two. It puts the tally at three races in North America from next year.

In contrast, Spain, the only other country with two Grands Prix, has admitted that it is fighting to get the funds to retain its races. This is of course despite the fact that the country produced a double world champion in the past decade and has seen tremendous economic impact generated by F1. There are even problems in Germany, which once also hosted two races and is the home of F1's current champion Sebastian Vettel. The future of the German Grand Prix at the Nurburgring was thrown into doubt earlier this month when the local government terminated the race promoter's 30 year lease on the circuit. The explanation for this was given by Roger Lewentz, minister for the Interior, Sport & Infrastructure who said that "we want to continue with Formula One at the Nurburgring, but at a reasonable cost to the government."

Even the trial against F1's former chairman Gerhard Gribkowsky has gone quiet in recent months. Gribkowsky went on trial in Munich in October last year for allegedly receiving a £27.5m bribe from Ecclestone and his family trust for agreeing to sell a majority stake in F1, held by publicly-owned bank BayernLB, to CVC in 2006. There was a huge flurry of media interest when the trial began and when Ecclestone took to the stand as a witness in November. However, there is good reason why things have been quiet on the case recently.

In July last year Ecclestone exclusively admitted to Sylt that he paid Gribkowsky after he threatened to tell the UK's tax authority, Her Majesty's Revenue and Customs (HMRC), that the F1 boss controlled his independent family trust. If true, the consequence of this would be that Ecclestone has to pay tax on the £3bn trust since he is a UK resident but no tax has been paid on the trust as it is based offshore in Liechtenstein.

Sections of the media saw this as being tantamount to an admission of guilt from Ecclestone but as Pitpass pointed out when Ecclestone's revelation came to light, in fact, his explanation shows that the £27.5m payment was certainly not a bribe connected to the sale of F1 as the prosecutors claimed. According to the German media, it seems the powers that be have finally caught on to this and Pitpass can reveal this for the first time in English.

A report in the Spiegel, a weekly German news magazine with a circulation of more than a million, claims that Gribkowsky's lawyers are in the process of doing a deal with the prosecutors to strike out the charge of bribery and breach of trust. This would leave Gribkowsky with a charge of tax evasion since the £27.5m was paid into an account in Austria where it was taxed at a lower rate than in Germany where he lived.

According to Spiegel, the reason for this deal is that none of the witnesses in the trial have been able to support the allegation that Gribkowsky received the money to agree to sell BayernLB's stake to CVC. Several witnesses have questioned Ecclestone's version of events but indeed the prosecutors' claim seems to lack support.

Sylt says that it would not surprise him one bit if the bribery charge is struck out and Pitpass has reported extensively on how the witnesses in court in fact testified that the sale to CVC brought tremendous benefit to BayernLB. If the case concluded that in fact Gribkowsky did not receive a bribe then some may accuse the case of wasting public money which would be particularly ironic given that this is effectively what Gribkowsky has been accused of.

The Spiegel article quotes a source inside the prosecutors saying that they had "exchanged mutual positions" with Gribkowsky's lawyers however it adds that more details could not be given "in order not to affect future negotiations."

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