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Mosley gives boost to Ecclestone's bribery defence

NEWS STORY
23/09/2013

For almost three years Pitpass has been saying that there is no substance behind the bribery charges against Bernie Ecclestone. It looks like we now have proof.

Prosecutors in Germany claim that Ecclestone - seen here in the Singapore paddock - and his offshore Bambino family trust paid 27.5m ($44m) to German banker Gerhard Gribkowsky so that he would sell F1 in 2006 to current owner the investment firm CVC. Gribkowsky was in charge of the sale of a 47.2% stake in F1 owned by German bank BayernLB and prosecutors believe that CVC was Ecclestone's preferred buyer as it had agreed to retain him as chief executive of the sport.

In July 2011 Ecclestone revealed to Pitpass' business editor Christian Sylt that he did indeed pay his share of the money, which came to 13.9m ($22.3m), but it wasn't a bribe. Ecclestone said that Gribkowsky had threatened to tell the UK's tax authorities that he controlled Bambino if the money was not paid. As Ecclestone is a UK resident he would be liable to pay tax on the estimated 2.5bn ($4bn) in the trust if he was found to be in control of it which he strongly denies. He says he paid Gribkowsky because his false allegations would have triggered a lengthy and costly investigation.

Crucially, Ecclestone stressed that the payment was not made in connection with the sale of F1. It is a crucial point but a fine one which is easily misunderstood by those not familiar with the business of F1 as demonstrated by a recent article in the Financial Times. It stated that "the F1 chief said he had given the former banker $23m in connection with the sale by BayernLB, the Bavarian bank, of its F1 stake to CVC but he had done so because he was being "shaken down" by the former banker."

Earlier this year Ecclestone even revealed the details of the threat Gribkowsky allegedly made. Ecclestone said it centred on Paul Ricard, the French circuit which is owned by Bambino and was renovated under his supervision – a process which could come across as him being in control of the trust's funds even though he says that was not the case.

Gribkowsky was found guilty last year of receiving the alleged bribe and when he was on trial in November 2011 Ecclestone appeared as a witness confirming the details that Sylt had reported. He explained why the money was paid, which was at the heart of the matter at hand, and he responded to questions from the judge about this. However, Ecclestone didn't discuss the reasons why the payment could not have been a bribe. There was no reason to do this because Ecclestone was not the one on trial.

However, things changed on 10 May this year when the German prosecutors charged Ecclestone with paying the alleged bribe. As Pitpass has explained, a judge will now decide whether to bring the case to trial and key to this decision is evidence from Ecclestone's lawyer about why the payment could not have been a bribe. The evidence was delivered to the court earlier this month and we discovered on Friday that the prosecutors have decided to delay until next year a decision on whether to bring Ecclestone to trial. What evidence in Ecclestone's defence could have possibly brought them to this conclusion?

An insight into Ecclestone's defence comes from an article written by Sylt in the Sunday Telegraph. It is based on an interview with Max Mosley, former president of the FIA. He reveals that Ecclestone's position as Formula One's boss was protected and the consequence of this is seismic. In a nutshell it shows that it is nonsense to conclude that Ecclestone paid a bribe to ensure that he stayed in his job.

Mosley concurs and says that Ecclestone would not have needed to pay a bribe to ensure that he stayed in his job because he knew that if F1 had been sold to an owner which wanted to remove him, the deal would have been blocked by the FIA.

F1's commercial rights are granted to it by the FIA and the contracts give the governing body a veto over a change of control of the sport's operating company Formula One Management (FOM) and a change of its chief executive. This is revealed on page 26 of the prospectus for the stalled flotation of F1 on the Singapore stock exchange. Pitpass can reveal (right) the relevant section which states that "our rights... can be terminated by the FIA if we... undergo an unpermitted change of control."

The FIA's veto was originally inserted into a contract known as the 'Formula One Agreement' between the FIA and Ecclestone's private company F.O.C.A. Administration which has since changed its name to Formula One Management (FOM). The agreement was dated 19 December 1995, took full effect on 1 January 1997 and was effective until 2010. Under this agreement the FIA granted to FOM all of the commercial rights to F1 including the right to allow television stations to broadcast the sport and to allow countries to host races.

This agreement was replaced by a longer contract with the FIA which was signed in April 2001 and grants FOM's ultimate parent company the commercial rights to the sport for 100 years from 1 January 2011 until 31 December 2110. The contracts governing this are known as the 100-Year Agreements with the overarching one being the Umbrella Agreement.

The 100 year commercial rights deal resulted the creation on 28 February 2001 of a UK company called Formula One Asset Management which directly holds the FIA's right to veto as confirmed in its accounts. The latest set are for 2011 and the relevant section, which can be viewed (left), states that "the 'B' Ordinary shares confer no right to income and no right to vote at a general meeting of the company. However, they do confer rights of veto over certain operating and financial policies."

At the time that BayernLB was selling its stake in F1 Mosley was president of the FIA and chairman of its World Motor Sport Council (WMSC) which had the power to exercise the veto. Mosley had the casting vote on the WMSC which Ecclestone himself also sat on along with 24 other motorsport managers.

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READERS COMMENTS

 

1. Posted by Hardliner, 25/09/2013 13:30

"Great article, thanks. What betting the charges are dropped by the German courts in the off-season and BE bows out gracefully head held high"

Rating: Neutral (0)     Rate comment: Positive | NegativeReport this comment

2. Posted by blackdog, 23/09/2013 17:26

"Interesting stuff BUT if Bernie was so well protected, why did he pay anything to Herr Grib?
He did not need to pay a penny. The other bankers have said the CVC offer was very good, so job done.
Anyhow, Herr Grib should never have been paid because such payment was a direct conflict of interests in relation to his position at the bank and his involvement in the sale.
I still smell a rat. What is very surprising is that Bernie is THE Mr Smooth operator, so how did he ever get himself in this rather unseemly mess.
"

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3. Posted by f1khun, 23/09/2013 9:32

"This is the article I was waiting for. I have been a faithful believer of the innocence of Ecclestone in this case, and I have analysed everything. But since Gribkowsky admitted the bribe in court, there became some legal value behind the story, even though it did not add up. Clearly, modern courts - or shall we say, modern prosecutors - are not looking for the truth, but more they are looking for a conviction.

It seems Mr. Ecclestone is in the clear now, and with that, all wrinkles that were on F1'a path to stock market listing are to be solved. I applaud the article, its writer and Pitpass for a job well done.

"

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