05/05/2014
NEWS STORY
German prosecutors have made the stunning revelation that they believe Bernie Ecclestone was blackmailed by a former banker who received £26m ($44m) from the Formula One boss according to an article in the Daily Mail by Christian Sylt.
For the past three years Ecclestone's legal situation has hung over F1 like a dark cloud. In January 2011 former banker Gerhard Gribkowsky was arrested in Germany for receiving £26m from Ecclestone and his family's Bambino trust. The prosecutors soon revealed that they believe the payment was a bribe so that Gribkowsky would steer the sale of F1 in 2005 to Ecclestone's preferred buyer.
Two years ago Gribkowsky was convicted for receiving the alleged bribe and Ecclestone is now on trial for paying it. He revealed his defence for the first time in 2011 when he told Sylt that the money was paid because Gribkowsky was blackmailing him.
The claim was rubbished by the prosecutors and media alike with many observers failing to believe that Ecclestone could be put under so much pressure that he would pay someone millions. However, here we are three years down the line and it has finally come out that the £26m did indeed change hands because Ecclestone was being blackmailed. Remarkably the revelation comes from none other than the very same prosecutors who claim that the payment was a bribe.
The remarkable revelation gives perhaps the biggest boost to Ecclestone's chances in the bribery trial, which is just what he needs as he could be imprisoned for up to ten years if he loses.
The prosecutors haven't exactly shouted from the hills that they admit Ecclestone was blackmailed into handing over the money. Instead, the claim is buried deep in the 256-page indictment against him which Sylt has gone through with a fine tooth comb. To understand the prosecutors' revelation we need to start right at the beginning.
Gribkowsky was in charge of selling a 47.2% stake in F1 which was owned by his employer, the German bank BayernLB. In 2005 it was sold to the sport's current owner, the private equity firm CVC. Bambino sold its shares to CVC at the same time and F1's remaining owners - two banks JP Morgan and Lehman Brothers - soon followed suit.
Over the two years after the sale Ecclestone and Bambino paid Gribkowsky a total of £26m and BayernLB knew nothing about it. When German prosecutors found out about the payment in 2011 they arrested Gribkowsky because they thought it was a bribe for agreeing to sell BayernLB's F1 stake to CVC. The reason they thought that Ecclestone favoured CVC is that it had agreed to keep him on as the boss of F1. In contrast, according to the prosecutors, Ecclestone wanted rid of the banks because they posed a threat.
In 2005 the banks sued Ecclestone in London for personally taking control of F1's key operating company Formula One Administration (FOA). The previous year they had won a similar case against Bambino for seizing control of FOA's parent company Formula One Holdings (FOH) and Ecclestone too eventually gave in to the banks by settling the lawsuit.
He denies bribing Gribkowsky so that he would steer the sale of F1 to CVC. Instead, he says that Gribkowsky threatened to tell the UK's tax authority, the Inland Revenue, that he controlled Bambino if the £26m was not paid. Bambino has raised £2.4bn from selling stakes in F1 but no tax has been paid on the money as the trust is located offshore.
In contrast, Ecclestone is a UK taxpayer so if he was found to be connected to the trust he would have to pay 40% tax on its assets. Ecclestone says he was not the settlor of the trust, as it was set up by his ex-wife who is also a beneficiary along with their two daughters. Ecclestone is neither a beneficiary nor a trustee of Bambino but he says that he paid Gribkowsky even though his allegations were unfounded because if they had been reported to the Inland Revenue it would have triggered a lengthy and costly investigation.
Surprisingly, although the prosecutors claim that Ecclestone paid a bribe they admit that Gribkowsky blackmailed him about being connected to Bambino in order to get the money.
According to the indictment, the blackmail began when the banks were suing him. "Insinuations that Bernard Ecclestone was the ‘settlor' of the trust were made to Ecclestone and Bambino by the convicted Dr Gribkowsky especially during the litigation in Britain (FOA and FOH lawsuits). It was a strategy of BayernLB to put the Accused under pressure in the context of the civil litigation."
This won't come as a surprise to long-time Pitpass readers as we revealed it way back in October 2011 when Ecclestone told us that during the legal action in 2004 "when they were talking about the trust, Gribkowsky kept on saying ‘you mean Mr Ecclestone.' He said to me ‘I could have gone much farther and deeper at the time but I didn't and, you know, I wondered if it ever happened again what would I say?"
Gribkowsky's strategy succeeded as Ecclestone settled the case in favour of the banks. It sent a signal to Gribkowsky that he could put pressure on Ecclestone by claiming that he was connected to the trust. He soon took advantage of it again according to the prosecutors.
The indictment explains that "Dr Gribkowsky's subsequent insinuations, especially in 2006 and afterwards, were only caused by the fact that he had supported the sale to CVC, as arranged with the Accused, and now pressed for a concrete and actual fulfilment of the promised financial benefits."
In summary, the prosecutors are saying that Gribkowsky agreed to sell F1 to Ecclestone's preferred buyer and then the following year the banker blackmailed him to get him to pay up.
On the one hand it could be considered clever that the prosecutors have built blackmail into their argument. This is because it gives them an explanation for any evidence that Ecclestone produces to show that he was blackmailed. On the other hand, it could be considered suicidal for the prosecutors to have done this. This is because Ecclestone does not need to prove that Gribkowsky was capable of blackmailing him which is the claim at the heart of his defence.
Not only have the prosecutors admitted that Gribkowsky blackmailed Ecclestone by saying that he was connected to the trust but they have also accepted that this is how he extracted £26m from F1's boss. It means that Ecclestone does not have to convince the prosecutors that the facts at the heart of his defence are true. He simply has to show that he could not have paid a bribe.
Witnesses won't necessarily agree with the prosecutors as we found on Friday when the court heard from Martin Bauer, an investigator who interviewed Ecclestone before Gribkowsky was convicted. He said "it was never really clear what form this threat [from Gribkowsky] could have taken." Bauer added that "[it was] like a vanilla pudding that you can't nail to the wall."
On the face of it Bauer's comments may sound like bad news for Ecclestone but in fact the opposite is the case. After all, the last thing that the prosecutors need are witnesses who take to the stand and contradict the indictment against Ecclestone.
There is no suggestion that Gribkowsky actually had evidence connecting Ecclestone to Bambino. Ecclestone accepts this and says that the Inland Revenue would have taken Gribkowsky seriously as he was an F1 insider and it would have launched an investigation even though his allegations were unfounded.
This raises the question of why Gribkowsky has been charged with bribery and not blackmail as well. There may be a good reason for this.
Sylvia Schenk, a Frankfurt lawyer, and Transparency International's senior adviser for sport, says "as I am not familiar with all details of the case I can only guess. From my point of view it was seen as one action: accepting the offered bribe by acting as Ecclestone has asked for, then requesting the payment and - when Ecclestone did not fulfill his promise - to blackmail him to do so. In this logic the blackmailing was no new or additional criminal act but one action within a whole criminal proceeding. At least the blackmailing did not add to the breach of law, it was sufficient to punish Gribkowsky for accepting the bribe."
So there we have it. Ecclestone says he was blackmailed into paying £26m and the prosecutors agree. They also think that the same payment was a bribe and although they don't seem to have charged Gribkowsky with blackmail, they have charged him with bribery which has enabled them to put Ecclestone on trial too. Sounds like wheels within wheels.
The case continues and has been adjourned until 9 May because, as Pitpass also revealed, the prosecutors want Ecclestone to be able to run F1 at the same time as defending the charges. If the prosecutors continue accepting more of his defence then he won't have much of a case to answer.