12/05/2013
NEWS STORY
Just over a year ago a court in Munich found Formula One’s former chairman Gerhard Gribkowsky guilty of receiving a £28.6m ($44m) bribe from the sport's boss Bernie Ecclestone and his Bambino family trust. Gribkowsky was sentenced to eight and a half years in prison and it sparked a stream of reports in the German media predicting that Ecclestone would soon be charged with paying the bribe. As every day has passed this looked increasingly unlikely but the rumours in Germany haven't gone away.
The rumours tend to originate from the Suddeutsche Zeitung newspaper which wrote a flurry of reports last year claiming that prosecutors in Germany want to bring Ecclestone to court over the bribe. One of its journalists even predicted when Ecclestone would be charged. After this failed to happen his articles about the case became less frequent and his botched prediction is a thing of the past. Now he is at it again.
To recap on a bit of the background, Gribkowsky became F1's chairman through his position as chief risk officer for state-owned German bank BayernLB which was the biggest single shareholder in F1's parent company SLEC. BayernLB owned 47.2% of SLEC and it got the shares from German media company Kirch which went bankrupt in 2002. BayernLB had given Kirch a £643m ($987.5bn) loan to buy the shares so when it went under the bank seized them in order to sell them and recoup its money.
Gribkowsky was in charge of the sale and the Munich court ruled that it in return for receiving the £28.6m from Ecclestone and Bambino he agreed to sell F1 to its current owner, the private equity firm CVC. The court claimed that Ecclestone instructed Gribkowsky to sell to CVC because it had agreed to retain him as F1's boss. In contrast, Ecclestone says that Gribkowsky threatened to make false allegations about him to the UK's tax authority HM Revenue & Customs (HMRC) if the money was not paid.
In July 2011 Ecclestone revealed to Pitpass' business editor Christian Sylt that Gribkowsky threatened to tell HMRC that he had control over Bambino. The trust has made billions of Pounds from selling stakes it owned in F1 and, crucially, since it is based offshore in Liechtenstein no tax has been paid on the money. Since Ecclestone is a UK resident he pays tax in the country and, under the Income Tax Act 2007, if he was found to have power over the trust he would liable to pay tax on the money in it.
So if HMRC had believed Gribkowsky it could have left Ecclestone with a huge bill to pay. In November 2011 he confirmed this when he was a witness in the trial against Gribkowsky and told the Munich court that he would have had to pay "probably in excess of £2bn." In the end the court didn't go along with this version of events as Gribkowsky gave testimony which corroborated the theory that he had been bribed. It was reported that Gribkowsky suspected the court would find him guilty anyway and giving this testimony reduced his sentence.
Soon after being found guilty Gribkowsky lodged an appeal against the decision but it recently came to light that this has been dropped. It is hardly surprising given that his own testimony was used as evidence to convict him. The more surprising news was soon to follow.
On Saturday the Suddeutsche Zeitung wrote that German authorities have completed an investigation into Ecclestone's role in the affair "and will bring charges in the Munich district court in May." The newspaper added that the charges could be filed with the court "maybe even before Pentecost (19 May)." So, that gives them 19 days at most and 7 at the least. The funny thing is that we have been down this road before.
The latest article was written by Klaus Ott who was responsible for the predictions last year about when Ecclestone would be charged.
Ott got off to a flying start. 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." Of course that never happened and this brings us neatly back to Ott's piece on Saturday which insists that the German authorities "will bring charges in the Munich district court in May." Many people may well see this as crying wolf or perhaps coming up with so many alternatives that one may prove to be accurate. Either way, it clearly isn't reliable reporting.
Let's pretend that Ott is correct and charges are indeed brought against Ecclestone by the end of May. The first question would be why has it taken so long for the authorities to reach their decision? Were they waiting for new evidence and, if so, what was it? All the key facts would seem to be in the public domain already since the majority of them were flushed out in the trial against Gribkowsky.
Crucially, the German authorities have known for well over two years that Ecclestone paid the money to Gribkowsky yet, although they arrested the banker as soon as they found out about it, the F1 boss has remained a free man. Indeed, Ecclestone spent the vast majority of 2013 in London but who's to say he will continue to do this?
For the sake of argument, let's say that he puts stock in the latest speculation from the Suddeutsche Zeitung and after the Spanish Grand Prix in Barcelona heads to a country which has no extradition treaty with Germany. If the authorities did charge him, as the newspaper suggests, then it would be in vain and this would put even more importance on the question of why they didn't act last year. One possibility is that they haven't acted yet because they aren't going to do so in future.
An alternative is that the authorities have been taking their time to ensure that the case against Ecclestone is as strong as possible. This then raises the question of what they could be concerned about and the answer is not as obvious as it may seem.
Clearly, if they charge Ecclestone they will have one almighty battle on their hands. Not only is he one of the most cash-rich people in the world but he is also committed to his job and, as he told Sylt in December last year, 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."
In short, if Ecclestone is charged he will put up one heck of a fight against the German authorities because his very existence will depend on it. The authorities could have nearly as much at stake because if he is found to be innocent of paying a bribe then that would call into question why Gribkowsky was imprisoned for receiving one. Not only would that cause significant embarrassment for the authorities but it could lead to distrust in the legal system, not to mention a potential damages claim from Gribkowsky.
The last thing that the authorities would want is for Ecclestone's lawyers to present in court evidence which proves that his version of events is true. The authorities may have spent the past two years checking to see if such evidence exists. It raises the question of whether they could ever explore all avenues of enquiry as this would surely take a lot longer than two years. Ironically, the answer may have been right in front of everyone's noses from the beginning.
The credibility of Ecclestone's explanation for the payment of the £28.6m essentially depends on one thing. That is the existence of plausible evidence which Gribkowsky used to allege that Ecclestone was in control of Bambino. Sylt recently revealed one explanation for this as Ecclestone told him that Gribkowsky claimed he was breaching the terms of the trust by managing the renovation work at Paul Ricard, the French circuit which is owned by Bambino. It isn't the only account of evidence which Gribkowsky used to threaten Ecclestone.
The background to this account stretches back nine years to when BayernLB sued Bambino claiming that it exerted more control over F1 than it was allowed.
At the heart of the 2004 case was the question of whether Ecclestone was connected to Bambino in his position as an F1 director. BayernLB said he was and this meant that Bambino had too many directors. Ecclestone denied it and although the judge ruled that he had been nominated by Bambino, he added that he was not necessarily its representative.
Gribkowsky turned up the heat on Ecclestone in 2005 after the F1 boss personally allocated himself a share in the sport's then operating company Formula One Administration (FOA). At a time when Ecclestone and Bambino were under the spotlight this was one way to prove he was acting in his own interests and not those of the trust. However, this wrested even more control from BayernLB so the bank sued Ecclestone personally. Sylt sat through pretty much every hearing (and encountered Gribkowsky in court several times) but was still astonished by the outcome.
In March 2005 Ecclestone and Bambino caved in to BayernLB and settled out of court. The bank issued a press release saying that Bambino and Ecclestone "have demonstrated prudence in backing down on all of the points under legal dispute in terms of content." Ecclestone is not known for giving in and this was one of very few occasions when he has settled a case against him personally.
Sylt says that before the 2005 settlement was announced he received a text message from a very senior manager, who was close to the dispute, and this said that Gribkowsky had what he believed to be a "silver bullet" to ensure victory in court for BayernLB. This fits with Ecclestone's comments to Sylt in 2011 that Gribkowsky's threats began around the time of the 2004 court case. Ecclestone told him that after the case, Gribkowsky "said to me 'I could have gone much farther and deeper but I didn't and, you know, I wondered if it ever happened again what would I say.'"
So what could Gribkowsky's "silver bullet" have been? A possible answer can be found in Tom Bower's biography of Ecclestone. On page 290, Bower describes an alleged meeting between Gribkowsky and Wolfgang Eisele, a TV rights manager who had a legal battle with F1 as a result of 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. To avoid its publication, Bambino settled the case with Gribkowsky on 23 March 2005."
What could this letter have contained that would make it so valuable to Gribkowsky and how did Eisele get hold of it? Eisele was paid off for dropping his anti-competition complaint and it is understood that he negotiated this deal with Ecclestone. If the money was paid by Bambino, accompanied with a letter saying that the trust had paid it as per Eisele's agreement with Ecclestone, it could be easy to interpret this as strong evidence that the F1 boss controlled the trust. It could be just the kind of thing which would spark an investigation from HMRC even though in fact there was no need at all.
Ecclestone naturally has the best interests of the trust at heart which is no surprise given that his children and ex-wife are beneficiaries. It would be therefore perfectly legitimate for him to inform the trust that paying Eisele would be in its best interests.
This explains why, according to the indictment against Gribkowsky, Ecclestone allegedly informed Bambino's former lawyer Stephen Mullens, about Gribkowsky's threat since it could have caused unnecessary hassle for the trust. The indictment claims that Ecclestone asked the trust to cover around half of the £28.6m fee to Gribkowsky so if the trust paid Eisele it would be no surprise. At the time, the trust owned 100% of F1 so Eisele's anti-competition complaint about the sport could have severely damaged its value.
Long-standing Pitpass readers will be well aware that Bower's book is error-ridden. Some of the highlights were first pointed out by Mike Lawrence in March 2011. Then Sylt revealed that Bower completely fabricated a claim that Frank Williams rigged the 1976 season. When the German version of the book was released Bower changed Williams for Surtees showing just how much confidence he had in his original work.
However, even though Bower made these errors, and many more, that doesn't mean to say that his details of the Eisele letter were flawed. You would have thought that the Munich court would have wanted to get to the bottom of it but, perhaps surprisingly, Bower was not amongst the many witnesses in the trial against Gribkowsky. The letter he alleged that Eisele had could be just the evidence Ecclestone needs to prove that his version of events is true if he ever ends up in court in Munich. The really big question is whether this is what will happen and there is still no evidence that it is.