F1 Head Bernie Eccleston Officially Indicted in Germany
Photo courtesy of telegraph.co.uk
In a move that surprised relatively few, Formula 1 head honcho Bernie Ecclestone has been served indictment papers by German prosecutors investigating the 2006 sale of F1 to CVC Capital Holdings. Ecclestone faces bribery and corruption charges, and is alleged to have bribed Gerhard Gribkowsky, the German banker who handled the transaction, to the tune of $44 million in exchange for undervaluing F1 shares during the sale to CVC. Gribkowsky has already been found guilty of bribery, tax evasion, and breach of fiduciary duty, and is currently serving a sentence for eight-and-a-half years.
CVC Capital was allegedly not the highest bidder for the stake in Formula 1, and Jalopnik reports that the firm was favored by Ecclestone. At this time, Gribkowsky was the chief risk officer at the state-owned Bayern Landesbank, one of the creditors for Constatin Medien; prior to the sale, Constantin owned a 47% stake in Formula 1. During the sale to CVC, Gribkowsky admitted to taking a $44 million bribe from Ecclestone and his holding company, Bambino Holdings, for ensuring that CVC would gain the stake by undervaluing the BayernLB shares. One of the factors for the alleged undervaluation? Constantin was contractually obligated to 10% of the sale price for anything above $1 billion. By undervaluing the final sale price, Constantin claims that that 10% payout was avoided. The final $1.7 billion sale gave Bambino Holdings a healthy $478 million.
Ecclestone admitted to paying Gribkowsky the $44 million, but for an entirely different reason. He says the cash was not to force a lower value for F1, but because Gribkowsky threatened to make false allegations to tax authorities in the UK, which Eccelestone claims would have cost him billions to defend. If the indictment indeed heads to trial, Ecclestone’s teams will likely argue that the F1 head was blackmailed during the sale.
All of this is drawing attention to F1 and Ecclestone, both of which are in a bit of hot water due to hosting a Grand Prix in Bahrain despite protests against human rights violations that are apparently widespread in the tiny Persian Gulf island. Official charges could lead to Ecclestone either stepping down or being dismissed as the CEO of Formula One Administration and Formula One Management. He has admitted in the past that if the case indeed continued, it would be difficult to prepare for a possible trial and manage the world’s largest form of motorsport simultaneously.