10/10/2011
NEWS STORY
As Pitpass recently revealed, Bernie Ecclestone will be giving evidence next month at the trial of German banker Gerhard Gribkowsky who has been charged with receiving a $44m bribe in connection with the sale of F1 in 2006 to current owner, private equity firm CVC. In a world exclusive in July, Ecclestone revealed to Pitpass' business editor Christian Sylt that he paid Gribkowsky but that it wasn't a bribe and it was nothing to do with the sale of F1.
Ecclestone said he paid Gribkowsky because the German threatened to contact the British tax authorities and make unfounded allegations about the F1 boss being in control of Bambino, his family's independent offshore trust. The threats came at the worst possible time because, according to the indictment against Gribkowsky, Ecclestone was being investigated by the British tax authorities. Reports this weekend in Germany suggest that Gribkowsky had proof of a connection between Ecclestone and the trust and although this would explain why he was paid off, could it really be true?
The trust was set up on 2 December 1997 in Liechtenstein for the benefit of Ecclestone's children and ex-wife Slavica. Normally in the UK if someone dies their spouse does not pay tax on inheriting money from them. However, because Slavica was Croatian and, by 1995 had not lived in the UK long enough to be domiciled there, she would have had to pay a whopping 40% inheritance tax on any money or assets she received from Ecclestone if he had died. Ecclestone owned 100% of F1 so to prevent an unfairly huge tax bill being due on his death, he transferred his shares offshore to the trust so that his wife and children owned them and did not need to inherit them if he died. Given that he had heart problems, which led to a triple bypass in 1999, this was not out of the question at the time.
The one catch was that, as a UK taxpayer, Ecclestone was not allowed any control over the offshore trust otherwise it would be declared a sham and the tax would have to be paid on the money in its account. The basis for this comes from the Income and Corporation Taxes Act 1988 which has since been superseded by the Income Tax Act 2007. Section 739 of former act stated that if a UK resident transfers assets to a non-domicile and income becomes payable to the non-domicile, the transferor must not at any time have "the power to enjoy" that income otherwise it will be deemed to have been his own.
There is absolutely no evidence that Ecclestone controlled the trust or has ever had the power to enjoy the income from it. "I never had control of Bambino ever," he told Sylt in March adding "I can not even speak to the trust. I was told quite clearly if you speak to the trust it's bad news for you revenue wise." Gribkowsky was well aware of this and allegedly tried to gain from the situation.
According to a report printed yesterday in German magazine Spiegel, one of Gribkowsky's female former colleagues has said when questioned by the German prosecutors that she "met in 2004, on the instruction of the bank, a Heidelberg-based TV rights manager who had a legal battle with Ecclestone. The man gave her a paper which laid out a connection between Ecclestone and the family trust of his wife Slavica. Through proving such a connection, the trust allegedly has to make a tax back-payment of billions."
The report adds that Gribkowsky's colleague gave the document to him and it was used against him. Ecclestone has reportedly told the prosecutors under questioning that he "was scared," by this. The report adds that he also said "if Gribkowsky had been serious, Ecclestone, at the time 76 years-old, would have been broke, without a house, 'without a watch.' These were the only reasons for the millions [paid to Gribkowsky]."
This kind of claim has been made before in a far less credible publication - Tom Bower's biography of Bernie Ecclestone, 'No Angel'. On page 194 Bower alleges that Ecclestone's former lawyer, Stephen Mullens, "emphasised that following the transfer to the trusts, Ecclestone could exercise no influence over the fate of his fortune. If he disobeyed the rule, he was warned, and sought to contact Luc Argand and his wife, who would be appointed as trustees, the Inland Revenue would declare the transfer void and demand the payment of taxes."
Then, on page 290, Bower describes an alleged meeting between Gribkowsky and Wolfgang Eisele, who happens to be a Heidelberg-based TV rights manager who had a legal battle with F1 (following an anti-competition complaint he made to the European Commission in 1997).
Bower alleges that "Eisele welcomed Gribkowsky's arrival at his home in Heidelberg as a chance for revenge. During their discussions, Eisele revealed that among his documents was a letter suggesting a close relationship between Ecclestone and Bambino, the supposedly independent family trust. 'Can we have it?' asked Gribkowsky excitedly. 'It'll cost €100,000 replied Eisele." Bower adds that Gribkowsky later left a copy of the letter on Ecclestone's desk which, led the F1 boss to say "this is unhelpful...it could show that I am Bambino's puppet."
In typical Bower style, sources say that this claim contains an error as it is understood that Gribkowsky never met Eisele. If so, this would mean that the quotes from Gribkowsky were fabricated by Bower. That's quality journalism for you and it would be no surprise given that elsewhere in the book he makes allegations of race rigging which are utterly false as Pitpass has reported.
Sources say that, in fact, Eisele handed the document to one of Gribkowsky's colleagues and it is possible that this is who is referred to in the Spiegel article. However, there is no evidence for this and, Spiegel adds that the prosecutors have not uncovered a document like it in their investigations. Ecclestone claims to be unaware of the document and Spiegel says that the Heidelberg-based TV rights manager denies handing it over.
Pitpass has pointed out previously, that even if Gribkowsky had in 2005 (which is when he allegedly threatened Ecclestone) some kind of evidence which he believed showed that the F1 boss controlled the trust, it would probably not be much use now.
This is because UK individuals filing tax returns only need to keep their records for five years after the period they relate to. So, even if Gribkowsky (or anyone) had information relating to prior to 2006 about any UK tax payer it could be hard for the authorities to investigate or take action. The person being investigated could perfectly legitimately say they have destroyed all their records relating to the period in question and so cannot defend themselves.
So the question is why did Ecclestone pay Gribkowsky so much money simply to stop him speaking to the British tax authorities and making allegations which, by his own admission, are false? When Ecclestone gives evidence in the trial against Gribkowsky in Munich next month prosecutors may well want to try to prove that the F1 boss' explanation is false and claim that, in fact, the money was indeed paid in connection with the sale of F1. However, as Pitpass recently reported this argument seems to be complete and utter nonsense.
The reality is that it makes perfect sense for Ecclestone to have paid Gribkowsky, even if the German had no valid evidence to support his allegations, simply to stop him speaking to the British tax authorities as it would inevitably prolong their investigation into him.
For the sake of comparison, imagine that you arrive back in the UK late at night in pouring rain after travelling abroad. The only cab in the area is an unlicensed one and you take it in order to get back home with your luggage. The journey usually costs around £10 in a licensed cab at this time of night but as you approach your house the unlicensed cab driver informs you that it will come to a total of £30. We have all been in a similar situation. What are you supposed to do? Take the cab driver to court? Refuse to pay on the grounds that it is unreasonable? If you take the latter option you are likely to find yourself driven right back to where you started which is certainly of no use.
The same reason for payment seems to apply in both the case of the cab and Gribkowsky's alleged threats. For someone as rich as Ecclestone it really isn't unfair to compare a taxi fare with the $44m paid to Gribkowsky. Indeed the money represents just 1.1% of the total amount in the trust. Interestingly, Gribkowsky denies threatening Ecclestone and in court next month he will get his chance to make his case.