Bernie Ecclestone’s role in Germany’s biggest post-war corruption case was under scrutiny in November when the Formula 1 boss took the stand in the trial of banker Gerhard Gribkowsky, who is facing bribery charges.
Ecclestone made it clear that he believes Gribkowsky is being made a scapegoat for the huge losses suffered by BayernLB, the state-owned bank he represented. Gribkowsky was BayernLB’s chief risk officer and has been charged with receiving a $44 million (£27.5m) bribe from Ecclestone and his family trust in return for agreeing to sell the bank’s 47.2 per cent stake in F1 to its current owner, private equity firm CVC, in 2006. Neither CVC nor Ecclestone has been charged, but the F1 boss is a key witness in the case.
Gribkowsky was arrested in January and has been in jail in Munich since then. The trial against him brings this to a head, and it began in October with his lawyer Rainer Bruessow saying in a statement to the court that by arranging the sale to CVC, Gribkowsky had “defused a bomb” and saved taxpayers millions.
This is because in 2006 the car manufacturers involved with F1 were threatening to set up a rival series due to a dispute with Ecclestone over the teams’ share of F1’s profits. The value of BayernLB’s F1 shares could have been reduced to zero if a rival series had got off the ground. However, the sale to CVC averted this since the private equity firm agreed to increase the teams’ share to its current 50 per cent of F1’s profits.
Gribkowsky denies all the charges against him, and Bruessow said in his statement that “there was a witch hunt waged against my client”. He claimed that prosecutors conducted the probe “one-sidedly” because they were fixed on finding an explanation for the payments that would make them look criminal. Ecclestone has admitted paying the money to Gribkowsky but denies that it was a bribe.
Instead, Ecclestone claimed Gribkowsky was paid after he insinuated that he would contact the Inland Revenue with false allegations that Bernie controlled his offshore family trust. The trust is based in Liechtenstein where it is exempt from paying tax on around $4bn which it received from F1. However, as Ecclestone is a UK taxpayer he is not allowed to control the trust, otherwise that could make him liable to pay tax on it.
Ecclestone said that at the time Gribkowsky alluded to contacting the Inland Revenue it was in the process of giving clearance to the trust, so any suggestion of him controlling it could have disrupted this. “I don’t know what evidence Gribkowsky had but anything would have been a problem. If he had started a problem before the trust was cleared and settled that could have made trouble and the Revenue would have had to look into it,” Ecclestone told Motor Sport.
“The risk was a business risk to pay this [money to Gribkowsky] or have to pay that [tax on the trust]. We could have been mucking around for three years and it would have cost more in lawyers [than paying Gribkowsky].”
Although he admits to making the payment, Ecclestone stressed his separation from the trust. “I don’t control the trust, but if the Revenue had investigated, the burden of proof would have been on me to prove that I wasn’t,” he told the Munich court in November. Ecclestone added that if Gribkowsky had contacted the Inland Revenue, “he would have landed me with a lengthy investigation and massive legal costs, and I didn’t need it so I paid to get rid of the problem.”
Echoing Bruessow’s comments , Ecclestone claimed: “I think there is more there than meets the eye because they have locked up a lot of the bankers. That bank has been involved in all sorts of funny things over a period and I think they are just looking for someone.”He added that “it is terribly political in Munich”.
BayernLB has its headquarters in Munich and is Germany’s eighth-biggest financial institution. In 2008 Gribkowsky was fired from the bank, which needed a €29.8bn government bailout after making a number of bad investments.
F1 was one of these.BayernLB got involved with the sport almost by accident after loaning $1bn to German media firm Kirch, which used the money to buy a 75 per cent stake in F1. The loan was secured on the F1 shares, so when Kirch failed to repay it BayernLB took over the stake. However, the terms of a $1.4bn bond taken out by F1 in 1999 prevented it from paying a dividend, which meant that the bank could not get back its loan from the sport’s profits.
In his statement to the court, Bruessow referred to this situation as a “ticking time bomb” as BayernLB was forced to sell F1 to recoup its loan. CVC was the highest bidder but the threat from the car manufacturers reduced the sport’s value. BayernLB was paid $814.1m, giving it a loss of nearly $200m. If Gribkowsky is found guilty the bank will recoup another $44m.
Ecclestone’s outlook for Gribkowsky is bleak. He told Motor Sport that the prosecutors, “will have to find something. If they lock somebody up for 10 months they have got to.”