German bank BayernLB has threatened to sue Bernie Ecclestone for undervaluing Formula One as his lawyer says he has refused to settle with it according to an article in the Daily Telegraph by Christian Sylt.
The dispute surrounds the sale of a controlling stake in F1 by BayernLB to the private equity firm CVC for £500m ($828m) in 2006. Last year Ecclestone was charged in Germany with paying a £26.6m ($44m) bribe to steer the sale to CVC and earlier this month he paid a settlement of £60.4m ($100m) to the prosecutors to end the case.
BayernLB claims it lost out as higher bidders would have come forward if Ecclestone had not engineered the sale to CVC. He recently offered the bank £15.1m ($25m) to settle its claim against him but this was rebuffed. A BayernLB spokesman says that it wants a similar sum to the amount received by the prosecutors but Ecclestone's lawyer, Sven Thomas, has revealed that he doesn't intend to boost the offer.
"We are not prepared to make a new offer. BayernLB have rejected the offer as expected. At the moment we don't do anything. We wait to see what they are going to do. If they try to sue, they shall have no chance at all. I don't think they will try to sue and if they want to then OK but at the moment we don't do anything. We made a sensible offer and they rejected it so let's wait."
A spokesman for BayernLB says "we didn't agree with the settlement and perhaps Ecclestone or his lawyers will think about it and call BayernLB." He adds that "perhaps the $25m doesn't match with this settlement structure and perhaps somebody has to think about it because the state prosecutors in Germany got $100m."
BayernLB chief executive Johannes-Joerg Riegler told journalists last week that "if the overall package is right, we wouldn't be closed to it." He added that "it is still open whether it will come to a settlement or we will have to sue."
If Ecclestone is sued he would not risk being put in prison if he loses. This is because the allegations are civil, as they relate to unpaid money, rather than criminal like the bribery charges that he recently faced.
The biggest roadblock to BayernLB's chances comes from the verdict of a court case in London in February. He had been sued by German media rights firm Constantin Medien which had an agreement entitling it to 10% of the proceeds if BayernLB's F1 stake sold for more than £660m ($1.1bn). However, Constantin received nothing as CVC paid £500m. Like BayernLB, Constantin claimed that if Ecclestone had not paid a bribe to smooth the sale to CVC then another buyer would have come forward with a higher offer.
In the final few days of the Constantin trial BayernLB announced that it would sue Ecclestone for £240m ($400m) which is the difference between what it was paid and the amount it believed it would have received from a higher offer. However, the brakes were put on BayernLB's lawsuit in February when Constantin lost its case. The judge ruled that although Ecclestone had entered into a "corrupt agreement" by paying the £26.6m to steer the F1 stake to CVC, it had not been undervalued as a result.
"There is no chance of BayernLB suing for $400 million because in the UK trial this claim was rejected," says Thomas.
Further boosting Ecclestone's position is the fact that the settlement preserved his status of innocence. The judge Peter Noll stated that he is neither guilty nor innocent which means that his criminal record remains clear since, in the eyes of the law, someone is innocent until proven guilty.
He denies paying a bribe and in his concluding remarks Noll said that "the charges could not, in important areas, be substantiated." In a statement, the court added that "prosecution of the accused due to bribery is not probable as things stand." It claimed that after hearing the evidence so far, "the court did not consider a conviction overwhelmingly likely from the present point of view."
If it was not likely that Ecclestone would be convicted then it raises the question of why the prosecutors demanded £60.4 million from him to settle. The payment was requested under paragraph 153a of the German legal code which is the mechanism to settle criminal cases. Accordingly, it was perfectly legitimate for the prosecutors to demand money in return for settling the case. It was not at all wrong for them to do this but was it moral?
If the prosecutors believed it was "not probable" and was not "overwhelmingly likely" that Ecclestone would be convicted then perhaps it would have been more appropriate for them to demand a nominal sum such as a single Pound rather than £60.4 million. Noll said that the enormous sum has nothing to do with the events in the case but instead stands in relation to Ecclestone's wealth which is estimated at £2.5bn. Nevertheless, it is questionable why a court should demand money from someone to settle a case when it believes it is "not probable" and not "overwhelmingly likely" that they are guilty.
Ecclestone clearly realised that he had been bested as he said afterwards that he was "a bit of an idiot" to settle. Taking a positive from it, he added that "the judge has come back and more or less said it's an acquittal, which he didn't have to do." There is good reason why Ecclestone was satisfied with his decision to settle.
The trial only took place on Tuesdays and Wednesdays to allow him to run F1 at the same time. However, the strain on him was still showing. In May, proceedings were postponed for a week because Ecclestone had developed a chest infection and before the settlement had been agreed Thomas told the court that the trial had become "extremely burdensome" for the 83 year-old. Lessening his workload wasn't the only driving force behind the settlement.
Thomas recently told Forbes "we have to keep in mind that Formula One must go on and if it went on with this trial for the next five months then it would mean that problems in Formula One could arise so Bernie said 'OK I do not intend to go on with this if I get a settlement without conviction and the presumption of innocence is still valid'. The rest of course was just a question of money and that was what Bernie had to decide. I think he really decided on this because he wants to go on with Formula One."
Ecclestone has been in F1's driving seat for around 40 years but the trial raised the possibility that he might have to be removed. In November last year CVC co-founder Donald Mackenzie said "if it is proven that Mr Ecclestone has done anything that is criminally wrong, we would fire him." That's not something that Ecclestone needs to worry about any more.