Ecclestone says he is staying in F1's driving seat

30/12/2012
NEWS STORY

Back in October Pitpass described the saga surrounding Formula One's former chairman Gerhard Gribkowsky as "one of the longest-running scandals in the history of the sport." Two months later and the scandal shows little sign of abating with Ferrari chairman Luca di Montezemolo the latest to wade in with comment.

A brief summary is in order before we get to details of a new development, which comes in today's Telegraph courtesy of an article by Pitpass' business editor Christian Sylt. Gribkowsky became F1's chairman through his position as chief risk officer for state-owned German bank BayernLB which, until 2006, owned a 47.2% stake in the sport's former parent company SLEC Holdings. Gribkowsky was responsible for selling the bank's shares in SLEC and in 2006 F1's current controlling shareholder, the private equity firm CVC, paid 527m ($839m) for them.

For four years everything was rosy. BayernLB was happy with the amount it received and CVC was busy building up F1. Then, in early 2011 a dark cloud came along. Gribkowsky was arrested in January last year on suspicion of tax evasion, breach of trust and receiving a bribe. He was kept in Munich's notorious Stadelheim prison to prevent him from fleeing the country and in July 2011 he was formally charged with tax evasion, breach of trust and receiving a bribe. The catalyst for these charges was a payment to Gribkowsky of 27.5m which he received from Ecclestone and his family's Bambino trust during the two years following the sale to CVC. Prosecutors in Germany were convinced that this money was connected to the sale of F1.

The money was paid into accounts in Austria where it was taxed at a lower rate than in Germany where it should have been declared since Gribkowsky is resident there. This is why Gribkowsky was charged with tax evasion and he was also accused of breach of trust because he kept the payment secret from his bosses at BayernLB. Then comes the bribery charge.

As Pitpass revealed last year, the bribery charge was driven by the Munich prosecutors' belief that Gribkowsky received the money in return for him agreeing to sell to CVC which was allegedly Ecclestone's preferred choice because it wanted to retain him as F1's boss.

Ecclestone has disputed this version of events and last year revealed to Sylt "I had a contract with BayernLB so they couldn't have fired me. [CVC] bought the contract so they had to take me as well." He added that Bambino paid its share of the 27.5m because Gribkowsky was doing property consultancy for the trust. In July 2011 Ecclestone revealed to Sylt that he paid his share of the 27.5m because Gribkowsky threatened that if he did not get the money he would tell the UK's tax authority that the F1 boss controlled Bambino.

Ecclestone is adamant that there was no substance behind Gribkowsky's threat, however he says that he would have had to spend years in court defending it if the tax authority had been tipped off. At the time, it had not given its seal of approval to the trust and in the event that a court decision had gone against Ecclestone it would have been costly. Bambino has made around 2.4bn from stakes it has owned in F1 but no tax has been paid on the money since it is based in Liechtenstein. Ecclestone is a UK taxpayer so if he was found to be in control of the trust it could be declared a sham meaning that he would have to pay tax on the money which would leave him with a bill of around 1bn.

Ecclestone's testimony as a witness in court in November 2011 reflected the news revealed by Sylt four months earlier. However, despite Ecclestone testifying that Gribkowsky essentially blackmailed him, the court still ruled that the 27.5m was paid to Gribkowsky as an incentive to steer F1 to CVC. He was sentenced to eight and a half years in prison and since then there has been rampant speculation in the German press in particular that Ecclestone will be charged with having paid a bribe to Gribkowsky. German prosecutors are still investigating Ecclestone's role in the affair but he has not been charged with any wrongdoing.

One of the leading lights of the speculation about Ecclestone being charged has been the Suddeutsche Zeitung newspaper which has had reason to cover the subject in detail since it is published in Munich where the trial against Gribkowsky took place. Suddeutsche Zeitung reporter Klaus Ott has not just speculated that Ecclestone will be charged, he has said that the F1 boss can expect this to happen. Indeed, he even put a timeframe on when Ecclestone would be charged.

Ott got off to a flying start in June this year. Four days before Gribkowsky was found guilty on 27 June he wrote an article entitled 'Ecclestone in court! A trial of the Formula 1 boss is the cleanest solution'. It became a recurring theme which ultimately suggested it was all but inevitable that Ecclestone would be charged by the end of 2012.

The following month Ott wrote that "investigators want to bring the Formula 1 boss to court." This was repeated in August when he claimed that "after Gribkowsky, the prosecution also wants to bring Ecclestone to court." It didn't change in September with the claims that "the Briton has to expect a bribery charge" and that the prosecutor wants "to complete its investigation in autumn into bribes paid to the public official Gribkowsky and sue the racing boss." This was followed up on 26 November with Ott's allegation that "the indictment against Ecclestone is expected in the coming weeks." We are now more than one month down the road and still Ecclestone has not been charged so will it ever happen?

Anyone who thinks that the answer is yes needs to answer the question of why Ecclestone would be charged now when there has been ample opportunity to do this earlier.

Soon after the prosecutors discovered that Gribkowsky had received the money, and had not paid enough tax on it, they arrested him for fear that he would flee to a country which had no extradition treaty with Germany. Way back then, in January 2011, the prosecutors had evidence that the money came from Ecclestone and they believed it was a bribe (initially they thought it had been paid in return for Gribkowsky undervaluing F1). So, why did the prosecutors not arrest Ecclestone on suspicion of paying a bribe when they arrested Gribkowsky on suspicion of receiving one?

Likewise, why did the prosecutors not charge Ecclestone with paying a bribe when they charged Gribkowsky with receiving one? And again, why did they not charge Ecclestone with paying a bribe when Gribkowsky was found guilty of receiving one? It has now been more than six months since Gribkowsky was found guilty so what are the prosecutors waiting for? How long do we have to wait before we realise that they aren't going to charge Ecclestone?

Clearly, Ecclestone has even more resources than Gribkowsky to be able to flee to a country which has no extradition treaty with Germany. So, if the prosecutors really do think that Ecclestone paid a bribe to Gribkowsky then one could argue that it is not responsible to have left it nearly two years without charging him.

There is continued coverage in the sports media suggesting that Ecclestone will still be charged but this is no evidence that it will happen. Indeed, it is perfectly possible that Ecclestone may like the idea of journalists writing articles saying that he is doomed because it gives him an opportunity to prove them wrong and emerge appearing ever more invincible. A quick look through the annals of F1 history reveals a tremendous number of articles suggesting that Ecclestone's reign was over. As each one failed to live up to its billing it made it look increasingly unlikely that Ecclestone would be toppled.

Earlier this year it came to light that, as part of the plans for the stalled flotation of F1, CVC had engaged head hunting agency Egon Zehnder to draft a short list of potential replacements for Ecclestone. This brings us nicely back to Sylt's news in today's Telegraph. Ecclestone told him that although CVC engaged the head-hunters, this doesn't mean that it has any intention of getting rid of him. "They said they had hired a head hunter to find somebody in the event that I was not going to be there. If I was going to die or something. It is the normal thing they do to keep people happy."

It isn't just journalists who have been on the attack. Last week di Montezemolo said "if Bernie is accused under process I think he will be the first to give a step back in the interests of Formula One." He added "the era of the one man show cannot continue: we are slowly approaching the end of a period characterised by the style of one man who has done significant things."

Ecclestone is quite open about the risk to him and 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." You can't argue with him because the situation is indeed black and white: if Ecclestone is imprisoned then he will have to be replaced but until then, nothing changes. Unless there is evidence (not speculation) that Ecclestone will be imprisoned, there appears to be no threat to his position in F1's driving seat.

It is a completely different matter to speculate who will take over from Ecclestone at F1's operating company Formula One Management (FOM). This is something which really does seem inevitable in the long run given that Ecclestone turned 82 in October. Enzo Ferrari died aged 90 and as Ecclestone seems to be in rude health, he may last until then or even longer. Although replacing him isn't an imminent issue, it is something which has been discussed.

Long-time associate and three-time F1 champion Sir Jackie Stewart tips Ian Todd, president of ISG, the stadium financing firm which helped to secure funding for the construction of Wembley, as a suitable successor to Ecclestone.

"Ian Todd, I would say, is perfectly capable of doing a FOM job but I don't suppose he has ever been asked." He adds, "nobody is irreplaceable. Bernie Ecclestone has done a remarkable job. There is nobody in the history of sport who has actually made more money out of it and I don't think there has been anybody else in sport who has had so many other people make a great deal of money out of it... I can understand people saying it is never going to manage without Bernie Ecclestone but the infrastructure is there. It's all [at F1's London headquarters] in Belgravia and there's a lot of people there with a lot of knowledge."

Stewart dismisses speculation from within F1 that Red Bull Racing boss Christian Horner will take over from Ecclestone, having steered his team to three championships since joining it in 2005. "I doubt very much [Ecclestone's replacement] will be anybody in the F1 paddock and I don't think it should be. I think they should go out and head-hunt the best of all."

He compares F1 to the Bank of England which, in November, appointed Canadian Mark Carney as its governor "The governor of the bank of England is not British, he is Canadian. Somebody had the peripheral vision to go out and say 'who do you think is the best guy?' They have gone and got a Canadian whose currency is still strong. I've got at least two of my contracts in Canadian dollars because I had confidence in the Canadian currency and how it was managed. That's down to the guy who was managing it though I don't know him at all."

Stewart has no worries about the outlook for F1. He says that the uncertainty over Ecclestone's future "isn't something that hangs over Formula One. I was with a very large company the other day and they were more concerned about if Bernie is not there rather than being concerned because he might be removed. That's a real statement."

Article from Pitpass (http://www.pitpass.com):

Published: 30/12/2012
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