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Remember, remember, the 6th of November...

NEWS STORY
12/11/2013

It was recently reported that Bernie Ecclestone would be appearing before a German court to discuss bribery charges on 6 November. "The initial phase of the process is to decide whether or not Ecclestone should be indicted" said the report which of course proved to be far from accurate.

The truth is that not only has Ecclestone already been indicted for bribery but he was not in Germany on 6 November as was broadcast all over the world thanks to his entertaining encounter with a revolving door in a London court on the same day. The reports which said he would be in Germany were wrong but they raise an important point about the proceedings currently taking place in London.

To recap, Ecclestone's encounter with the revolving door marked the first day of evidence he was giving in a case which has been brought against him by former F1 shareholder, the German media rights firm Constantin Medien. Rather than being anxious about taking to the stand Ecclestone said he was positively looking forward to it. Writing in the Independent on 29 October when the trial began, Pitpass' business editor Christian Sylt quoted the F1 boss saying that he "will be delighted when this goes ahead." There is good reason for this.

In a nutshell, Constantin's case revolves around its allegation that a major stake in F1 was undervalued when it was sold by German bank BayernLB to current owner, the private equity firm CVC, in 2006. The lawsuit accuses Ecclestone and his Bambino family trust of paying a 27.5m ($44m) bribe to Gerhard Gribkowsky, the banker in charge of the sale. Constantin claims that CVC was Ecclestone's preferred buyer as it had agreed to retain him as F1's boss.

The reason that an undervaluation would affect Constantin is is that it had an agreement entitling it to 10% of the proceeds if the stake was sold for more than 690m ($1.1bn). CVC placed the highest bid but it only paid 510m ($814m) so Constantin did not get any money. Constantin alleges that if Gribkowsky had not been bribed to sell to CVC another buyer would have come forward which would have paid more.

In 2011 Constantin filed a lawsuit against Ecclestone, Gribkowsky, Bambino and its former lawyer Stephen Mullens. Gribkowsky is not in court in London as he is currently serving an eight-and-a-half year jail sentence in Germany where last June he was convicted for receiving the alleged bribe.

Ecclestone admits paying Gribkowsky but denies that it was a bribe. He says that Gribkowsky threatened to tell the UK tax authorities that he controlled Bambino if the money was not paid. Bambino is based offshore but Ecclestone is a UK resident so 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.

In May Ecclestone was indicted in Germany meaning that he was charged with paying the alleged bribe. However, he has not been convicted of this and authorities have not yet decided whether to bring him to trial. If he was put on trial for this it is hard to imagine he would have the time to run F1 at the same time and last year he told Sylt that CVC "will probably be forced to get rid of me if the Germans come after me. It's pretty obvious, if I'm locked up."

There would be a great deal at stake for the prosecutors too if they brought a criminal trial against Ecclestone for paying the alleged bribe. They are well aware that he would give them the biggest legal fight they have ever seen and if he was found innocent of paying the bribe it could call into question why they found Gribkowsky guilty of receiving it.

However, as Sylt points out in his recent article in the Independent, the German prosecutors have an opportunity to avoid this risk. Instead of forcing Ecclestone to appear in a German court now as the F1 website writer wrongly suggested, it makes much more sense for the prosecutors to wait until the outcome of the UK case before deciding whether to bring the F1 boss to trial in Germany.

The important point this raises is that if the UK case goes in Ecclestone's favour it would dramatically decrease the chances that he will be put on trial in Germany. It explains why Ecclestone was "delighted" about the case going ahead as if he is not put on trial in Germany it would put to rest the legal wrangles which have been plaguing F1 since Gribkowsky was arrested in 2011. If that happens then Constantin will indeed remember, remember the 6th of November as being the day that they failed to get one over Ecclestone in court.

To be fair, the court case, like the F1 industry in general, is highly complex so it is no surprise that errors are made by reporters who don't have a track record specialising in writing about the business of F1. The F1 website writer in question started on the back foot as he has not been present at the trial. However, others who were there have made equally significant slip ups.

Most recently, Roger Blitz, a leisure sector reporter at the Financial Times, claimed that "completion of the sale to CVC was dependent on the signing of a 100-year agreement with the motorsport governing body, Federation Internationale de l'Automobile." In fact, the agreement to grant Ecclestone's company the 100-year rights to F1 was signed five years before completion of the sale to CVC. This is revealed on page 173 of the prospectus for the stalled flotation of F1 which states that "the 100-Year Agreements... were signed in April 2001 between certain of our subsidiaries, including Formula One World Championship Limited, and the FIA."

The blunder follows another FT article, which claimed 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." This is of course not accurate as in fact Ecclestone denies that the payment was in connection with the sale by BayernLB of its F1 stake to CVC.

Reporting standards at the FT have been covered by Pitpass before but we expected better given that the subject matter is now a court case.

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1. Posted by Hardliner, 12/11/2013 19:14 (moderated by an Adminstrator, 12/11/2013 19:29)

"The legal situation is relatively convoluted, and Pitpass [un-named authgor] does us all a great service by repeating the gist of the arguments when bringin on a new point. I wish the more complex or long-running news stories in every media did a bit of this. Perspective is a wonderful thing"

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