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Ecclestone reveals secret of the 27.5m tax threat

NEWS STORY
24/03/2013

Bernie Ecclestone's explanation for the payment of 27.5m by him and his Bambino family trust to jailed banker Gerhard Gribkowsky has gone down as being one of the most surprising twists in Formula One history.

Gribkowsky is serving an eight and a half year prison sentence after a German court ruled last year that the 27.5m payment was a bribe. It concluded that in return for receiving the money Gribkowsky steered the sale of F1 to current owner, the private equity firm CVC which agreed to retain Ecclestone as F1's boss when it bought the sport in 2006. Ecclestone admits to making the payment but says he did it because Gribkowsky threatened to make false allegations about him to the UK's tax authority HM Revenue & Customs (HMRC) if the money was not paid.

In 2011 Pitpass' business editor Christian Sylt broke the news about the pressure which was put on Ecclestone as the F1 boss revealed that Gribkowsky threatened to tell the tax authority that he runs Bambino. It is an allegation which could have made Ecclestone liable for paying tax on the billions of pounds in the trust as it is offshore whilst he is a UK resident so is not legally allowed to run it. However, although Gribkowsky's allegation came to light, the evidence for it remained a secret. Until now.

Writing in the Sunday Telegraph Sylt reveals that Gribkowsky's threat centred on Paul Ricard, the race track near Marseille which hosted the French Grand Prix in the 1970s and 1980s. In 1999 it was bought by Excelis, a French company which was owned by the Amsterdam-based business Somerset International. In turn, the sole shareholder of Somerset International was SLEC, a company in Jersey which was owned by Bambino.

After Ricard was taken over it was given an extensive renovation to transform the circuit into a high-tech test track which was run by experienced race organiser Philippe Gurdjian. The circuit's website states that in May 1999, "Philippe Gurdjian ... took up the chairmanship and management of the circuit", and "with Bernie Ecclestone, he coordinated 1,200 workers... having, as their sole aim, the creation of a test track entirely devoted to performance, safety and development." Ecclestone claims that Gribkowsky used this knowledge against him.

During a recent meeting with Sylt Ecclestone said "I helped the people that own the circuit in Ricard, it belongs to the trust. I helped them and told them the sort of hospital they should build and even the sort of car run off areas they should build. Gribkowsky said, I ran the trust and this is one example."

In fact, Ecclestone's unique experience and position at the helm of F1 made him the best man for the job. Anyone else would almost certainly not have been as experienced as him and so Ricard could have lost out. Clearly it shouldn't have had to put itself in this position and so long as its decision to use Ecclestone was made on the same arms-length basis as with its other executives, it is hard to see what was wrong with this. Adding further weight is the fact that Ecclestone's work with Ricard was no exception. "Like most circuits in the world, they asked me for help," he says.

It paid off for Ricard. It is understood that it charges around 26,000 ($40,000) per day for track rental and it is worth it for the teams. Its multicoloured rumble strips are incredibly reliable at avoiding serious accidents, and the medical facilities are world class.

Nevertheless, if HMRC had received a tip off like this from an F1 insider such as Gribkowsky it would have had to investigate it. The onus would then have been on Ecclestone to prove that there was nothing improper or unusual about the work he had done for Ricard.

During Gribkowsky's trial Ecclestone testified as a witness and said that although there was no substance to the allegation he was concerned HMRC might take it seriously. He said that it "might cause them to assess me to owe a tax bill of many hundreds of millions, if not billions of pounds that I believe I did not owe." He added that it would have put "the burden of proof on me to prove that the authorities were wrong in their assessment, and therefore I acquiesced in his demand for these payments."

Ecclestone says he thinks Gribkowsky deserved to be imprisoned for this. "I tell you what Gribkowsky should have been locked up for. He shook me down and put me in a position that I believed perhaps he was going to do what he was saying he could do, even if he couldn't. So, for sure he should have been punished for that." The court found him guilty for a different reason but the end result is the same so it looks like justice has indeed been served.

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