Why Ecclestone faces a trial which could end his control of Formula One

2014 F1 season

Bernie Ecclestone, Singapore, 2010Thursday’s news that Bernie Ecclestone’s power over Formula One had been diminished amid allegations of him bribing a German banker was a watershed moment in a story which has developed over the past three years.

Ecclestone’s decades-long spell at the helm of the world’s most famous motor sport is not yet at an end – but this could be the beginning of the end.

The idea of Ecclestone relinquishing control of the sport he revolutionised would have been unthinkable not long ago. How has it become a realistic possibility?

Ecclestone first crossed swords with Gerhard Gribkowsky, an employee of Bayerische Landesbank, in 2003. BayernLB was one of three banks which shared a 75% stake in Formula One at the time.

Among the most effective of Ecclestone’s tactics, which have helped him amass a personal fortune estimated to be over £2.3bn, has been the art of selling ownership of F1 without yielding control over it.

But Gribkowsky thwarted Ecclestone’s attempt to recoup the 75% stake for the bargain price of $600 million. According to a 2011 biography Gribkowsky challenged Ecclestone’s control of the sport, telling him “you are just the CEO working on the shareholders’ behalf”. This began a struggle between their pair for control over the sport.

Gribkowsky scored another victory in December 2004 when Justice Andrew Park gave a ruling which handed to the banks control of Formula One Holdings, one of the myriad companies set up by Ecclestone to run the sport.

Now Gribkowsky’s attention turned to another of these companies, Formula One Administration, in which even more power was vested. Another case was due to be heard in May 2005 but two months before that Ecclestone and the banks reached a deal out of court.

The details were not disclosed but in a statement Gribkowsky declared the banks had “regained the influence that corresponds to the shareholding structure with this deal”.

Later that year a new potential buyer of Formula One emerged: CVC Capital Partners. It was in the course of F1′s sale to CVC that Ecclestone is alleged to have made a deal with Gribkowsky which now threatens his power over the sport. Here is how events have unfolded since then.

Timeline: The Bernie Ecclestone-Gerhard Gribkowsky affair

Date Event
April/May 2005 Around this time Ecclestone is alleged to have reached an agreement with Gribkowsky, which prosecutors claim constituted a bribe, details of which emerged later.
25th November 2005 CVC announces purchase of F1 from BayernLB and Ecclestone. It subsequently buys shares in F1 from other banks, and also purchases Allsport Management which sells F1 track signage and runs the lucrative Paddock Club.
5th January 2011 Gribkowsky is arrested and held in Stadelheim prison in Munich.
April 2011 Ecclestone meets with prosecutors in Germany.
20th July 2011 Gribkowsky is charged with breach of trust, tax evasion and being in receipt of corrupt payments. Prosecutors claim Ecclestone paid £27m ($44m) in bribes to him.
21st July 2011 Ecclestone admits making the payment to Gribkowsky and says he did so because Gribkowsky “threatened” to make false allegations regarding Ecclestone’s link to Bambino Holdings, his Swiss-run family trust, which would attract the attention of the UK tax authorities. “He was shaking me down and I didn’t want to take a risk,” said Ecclestone. The allegations are later revealed to involve whether Ecclestone controlled the offshore trust, through which the alleged bribe was paid.
3rd August 2011 Ecclestone says former Benetton and Renault boss Flavio Briatore “did make a payment for me” because Gribkowsky “did not want the money paid direct from the UK”. “In no shape or form is Briatore involved in this,” Ecclestone adds.
24th October 2011 Gribkowsky’s trial begins.
5th November 2011 HM Revenue and Customs declare an interest in investigating whether Ecclestone was involved in tax evasion.
8th November 2011 The court is told Ecclestone lied about his reason for paying the bribe. Documents shown to the court claim he initiated payments to Gribkowsky to ensure he retained control of F1 after its sale to CVC.
16th January 2012 Ecclestone’s aide Andre Favre says at Gribkowsky’s trial in Munich: “Ecclestone told me to transfer $5 million of his money to Mr. Gribkowsky by using a special company so his name wouldn’t appear”.
20th June 2012 Gribkowsky tells the court the bribery charge against him is “essentially true”.
21st June 2012 Ecclestone says he “was a little bit stupid” to pay Gribkowsky. “Normally I would have told him to get lost.”
27th June 2012 Gribkowsky is sentenced to eight-and-a-half-years in prison after the court finds he acted to protect Ecclestone’s interest in the sale of the stake and helped Ecclestone receive commission worth £25.4m ($41m) from the bank. State prosecutor Christoph Rodler says Ecclestone was “not the victim of an extortion but the accomplice in an act of bribery”. Gribkowsky later appeals against the verdict.
29th December 2012 Ecclestone says CVC “will probably be forced to get rid of me” if he is charged over the Gribkowsky affair.
10th May 2013 Gribkowsky withdraws his appeal against his conviction.
15th May 2013 German media reports claim Ecclestone has been charged with bribing Gribkowsky.
19th May 2013 Ecclestone describes the charges against him as “a complete load of rubbish”.
2nd July 2013 Ecclestone adds he is “not worried in the least because I have told the truth”.
17th July 2013 Ecclestone confirms he has received an indictment from the German prosecutors over bribery charges.
18th August 2013 The 256-page indictment of Ecclestone claims “Gribkowsky endeavoured to create pressure against Bambino and the accused [Ecclestone] by repeatedly insinuating that the accused was effectively in charge of the trust [...] this did not, however, present a real threat for separate tax treatment of the accused and the Bambino Trust on the part of the British tax authorities, since Dr Gribkowsky and BayernLB had no specific proof of any such connection”.
29th October 2013 German media group Constantin Medien brings a case against Ecclestone and others in the London High Court. It claims that Ecclestone’s payment to Gribkowsky resulted in F1 being sold to CVC at less than its true value. It seeks over $100m in damages.
19th November 2013 CVC co-founder Donald Mackenzie says Ecclestone would be fired “if it is proven that Mr Ecclestone has done anything that is criminally wrong”. Mackenzie adds Ecclestone told him he had forgotten about making the payment to Gribkowsky. “I had trouble believing you could forget payment of $40 million,” added Mackenzie.
5th December 2013 Ferrari are revealed to have the power to veto Ecclestone’s choice of successor if they have had prior involvement in an F1 team.
16th January 2014 The German authorities announce Ecclestone will go on trial in April on charges of bribery. The case will be heard by judge Peter Noll, who sentenced Gribkowsky in 2012. In the meantime Ecclestone steps down from the F1 board but retains day-to-day control, albeit with supervision.
17th January 2014 Ecclestone says “Everybody on the board is more than a million per cent supportive. They just want me to get on with doing what I always do. The minute the court case is over then I’ll be back on the board again.”

The outcomes of Ecclestone’s various ongoing legal challenges could have profound implications for the future of the sport. If he manages to regain the control he once had over the sport it will be his greatest feat so far.

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40 comments on Why Ecclestone faces a trial which could end his control of Formula One

  1. Shimks (@shimks) said on 20th January 2014, 11:23

    Fascinating stuff!

    I really can’t see him getting away with this one.

    • petebaldwin (@petebaldwin) said on 20th January 2014, 11:37

      It doesn’t sound good for him really does it….

      I don’t really understand how his argument would get him off the charge. He’s admitted paying the money and his reason appears to be that he didnt’ want the tax office to look into him! If everything was ok on that side of things, why would he care if they had a look?

      It’s essentially like appealing a speeding ticket saying that you had an excuse – you were trying to get away from a store that you just robbed.

      • Prisoner Monkeys (@prisoner-monkeys) said on 20th January 2014, 11:58

        @petebaldwin – Because even if everything in the Bambino Trust followed the letter of the law perfectly, an audit would take time to prove it. And because the Bambino Trust is so big and so complex, we are talking about an audit that would last for months at least. In the meantime, the Trust would be suspended, unable to do any kind of business while the tax authorities went through it with a fine-toothed comb. So even if it was perfect under the letter and spirit of the law, an audit would be a massive inconvenience to Ecclestone. It would seriously limit his ability to grow the sport, to attract any kind of investment in it, or to carry out negotiations. And given that Gribkowsky went after Formula One Holdings and Formula One Administration so aggressively, an audit of the Bambino Trust would give Gribkowsky leverage to assume control over even more of the sport.

        • petebaldwin (@petebaldwin) said on 20th January 2014, 22:32

          @prisoner-monkeys – Yeah fair enough… As you say, there’s no guarantee that everything is to the letter of the law but that would make sense as a reason why he would want to avoid an audit. The fact he paid such a high sum to avoid the audit doesn’t exactly shout “Everything is ok – I’d just rather you didn’t” though does it?

          Not totally sure “I paid him off to avoid a tax audit” is usually an acceptable excuse in the courts either!

          • Prisoner Monkeys (@prisoner-monkeys) said on 21st January 2014, 5:54

            @petebaldwin – Ecclestone has always claimed that it was extortion, not a bribe. The catch is that Gribkowsky acted within the law. He would be well within his rights to arrange for an audit of a company he was doing business with; it’s just due diligence. And if that audit showed that everything was squeaky-clean, nobody could say he had done anything wrong. But he still would have massively inconvenienced Ecclestone, and that is what Bernie was trying to avoid, because the threat came at a crucial time for the sport’s ownership. Gribkowsky had already put himself in a position to control large portions of the sport; with Bernie distracted by the tax man, he could have done a lot more. Maybe even taken a controlling interest.

        • HoHum (@hohum) said on 21st January 2014, 4:33

          @prisoner-monkeys, you are still making the mistake of thinking Bernie is using his money to “grow the sport” he doesn’t and he hasn’t, and an even worse mistake is to assume he could use funds from Bambino trust, if he could use Bambino trust money then Gribkowskis allegation would be true, but you wont believe that.

          • HoHum (@hohum) said on 21st January 2014, 4:38

            And don’t forget Bernie hardly lost anything because he and Gribkowski organised a commission of $41m. from the same bank they were both dealing with, and possibly de-frauding.

          • Prisoner Monkeys (@prisoner-monkeys) said on 21st January 2014, 5:58

            @hohum – And you are making the mistake of assuming that Bernie is rotten to the core because he controls the sport, which you think should be in the hands of the teams. You are also making the mistake of assuming the teams are capable of working together, even when there are half a dozen historical examples of the teams putting their own interests before that of the sport.

        • BasCB (@bascb) said on 22nd January 2014, 11:20

          I do not know the British Tax Authorities, but several of those that I do know how they operate put the preassure on people they suspect of “wrongdoing” by starting off with an estimated sum in back taxes they put you down for, and then the Trust would have to pay this and only then can they start fighting back that claim @prisoner-monkeys

      • drmouse (@drmouse) said on 20th January 2014, 13:57

        If everything was ok on that side of things, why would he care if they had a look?

        Tax investigations can be incredibly intrusive, drag on for a long time, and threaten to hit the accused very hard, financially. It also drags the accused through the mud, no matter what the eventual outcome, when the accused is in the public eye.

        I’m not saying he is innocent, I’m just pointing out that a court case had the potential to be incredibly damaging… Just as this one is now.

    • KeeleyObsessed (@keeleyobsessed) said on 20th January 2014, 13:01

      We couldn’t really see Mercedes getting away with the secret tyre test after Barcelona either. I understand it’s a completely different system, but it goes to show that there are still different outcomes possible. Ecclestone has already said he was blackmailed into making the payment. I don’t think we’ve heard the full story yet..

  2. Magnificent Geoffrey (@magnificent-geoffrey) said on 20th January 2014, 11:38

    I think Formula 1 will only work with a dictator rather than as a democracy, due to how teams fail to put the sport’s interests above their own.

    If Ecclestone really is to go because of this, then I hope his replacement is more in the nature of a Dana White.

    • Prisoner Monkeys (@prisoner-monkeys) said on 20th January 2014, 12:00

      The teams don’t put their interests over the interests of the sport.

      The teams assume that what is in their interests is in the interests of the sport. Which is much more dangerous.

    • HoHum (@hohum) said on 20th January 2014, 17:30

      @magnificent-geoffrey, true but ultimately the teams have more to lose by ” fail(ing) to put the sports interest above their own” than the “dictator” in this case Bernie, who with help from Max has screwed both the sport and the teams for his own self interest.

    • Steph (@stephanief1990) said on 20th January 2014, 20:06

      with a dictator rather than as a democracy, due to how teams fail to put the sport’s interests above their own.

      That’s depressing if true but you can have a democracy that isn’t dominated by the teams. There could be driver votes/ a union, a voice for engineers and other staffers etc and potentially more elected representatives. F1 doesn’t need a dictator, the whole system is just in such a selfish, destructive state that it’s the simplest solution to just put one guy in charge instead of completely changing the formula to make it better.

    • Dana White is exactly who I would see as an example to avoid. He bans journalists and media organisations who have opinions he doesn’t like. He disparages and mocks former fighters, even former champs, who disagree with him. If Dana White ran F1 and Damon Hill criticised him, Dana would ban him from attending events and pressure the BRDC to remove Hill as a condition of retaining Silverstone as an F1 event.

      See the removal of Frank Shamrock from UFC history; the barring of Randy Couture; even the lack of support for GSP now.

      That could ruin F1, IMO.

  3. matt90 (@matt90) said on 20th January 2014, 12:04

    If he is guilty, I just wish this had happened a year earlier so the ridiculous super-mega-bonus-points-bonanza-finale wouldn’t be happening. That alone really should be punishable by jail time anyway.

  4. BasCB (@bascb) said on 20th January 2014, 12:54

    As often happens in life, I am sure that at the time Bernie felt he was completely sure about what he was doing, but now things from the past show to have a devastating effect for his control of F1.

    Lets hope that the sport gets out of it in a state not worse than its now.

    • ??? What?

      What devastating effect on control? He just succeeded in NOT having to pay $140million, based on a decision that totally undermines the Munich case since it was found that there was no intent to defraud anyone during a sale of F1.

      Bernie will be exonerated and you’ll have to eat your words.

  5. GeeMac (@geemac) said on 20th January 2014, 13:04

    Say what you want about Bernie, but F1 wouldn’t be what it is today without him.

    • MazdaChris (@mazdachris) said on 20th January 2014, 13:13

      What, an overcomplicated gimmicky mess, run 50% in front of empty grandstands in countries who want to use F1 for political purposes, entered by teams who even at the front are barely financially solvent and need to be propped up by drivers paying for their seat, while a group of elite billionaires cream massive amount of money out of the sport never to be reinvested, while the opinions of fans are disregarded amid a toxic political situation which has had manufacturers deserting the sport in their droves in favour of sportscar racing?

      Yeah. Thanks Bernie!

    • HoHum (@hohum) said on 20th January 2014, 17:35

      @geemac, you are right, without Bernie, F1 might be a vibrant sport with well funded teams and the most talented drivers driving cars with constantly improving powertrains developed by all the leading car companies.

      • HoHum (@hohum) said on 20th January 2014, 17:37

        Just read @mazdachris, s response, Chris you say it so much better than I.

      • GeeMac (@geemac) said on 21st January 2014, 5:09

        @hohum I thought getting 4 major motor manufacturers developing advanced hybrid powertrains for F1 in 2014/15 in these tough financial times was quite a good achievement. ;)

      • Whilst many seem to dream that this sort of utopia would have sprung into place, to assume such a situation would have automatically come into existence is perhaps a little overly optimistic.

        After all, there were already proposals for cost caps and development restrictions, along with complaints that spending was out of control in the early 1990′s that pre-date the sale of the TV rights to Bernie – for example, once you correct for inflation McLaren’s accounts reveal they were spending just as heavily in the early 1990′s as they do today – so budgetary problems existed long before Bernie came along.

        That’s not to say Bernie made the situation any better, but at the same time a number of issues that effect the sport today were also present before Bernie gained hold of the commercial rights.

        • HoHum (@hohum) said on 24th January 2014, 17:14

          Anon, Bernie had a 12 year contract with the teams at that time, it was only when the teams started asking for a better share of the riches that Bernie outmanouvered them by buying the rights from the FIA for a fraction of their true worth.

  6. mantresx (@mantresx) said on 20th January 2014, 16:27

    Very good article Keith, until now I didn’t fully understand what had happened with Ecclestone and Gribkowsky but now is much clearer.

  7. Timothy Katz (@timothykatz) said on 20th January 2014, 17:26

    I remember when the story of the Prosecutor’s interest in Gribowsky first appeared in Der Spiegel some time in 2010. At the time it was dismissed as a minor irritation, but it was also obvious that if substantiated it could have had huge results. But I’m not sure I imagined them to be this big.
    Very useful timeline.

  8. Sven Örup said on 20th January 2014, 18:19

    Most interesting would be if all this could have an implication on the original deal where F1 was sold to Ecclestone
    by Mosely. Apparently Jean Todt have tried to have this deal brought up into question but not succeeded.
    Do you have any information about if this trial could have any influence on that.

  9. JimN (@jimn) said on 20th January 2014, 19:51

    Whether because of the trials, or simply due to old age or death, Bernie will go in the reasonably near future. I have watched his manoeuvrings and masterstrokes over the years to force everyone to move forward in a common direction, even though they naturally want to all head off in different ways. Along with the significant number of times to move things forward he has put his own money where his mouth is (usually coming out much richer in the end). It’s difficult to believe anyone or any organisation will be able to take over, hold everyone together and drive things forward like he has.

    Sadly I can only see F1 heading in one of two directions once he does go, either into essentially just entertainment with the sport element all but lost, such as is found in the World Wrestling Federation. Or dwindling again into something few other than enthusiasts are interested in as has happened to so much of motorsport over the years, from Indycar to Le Mans and even WRC.

    As an enthusiast I hope it’s the latter, unfortunately from the way things have been going recently and the enthusiasm from both teams and the FIA for gimmicks the former seems far more likely.

    • HoHum (@hohum) said on 21st January 2014, 4:48

      @jimn, another believer in this MYTH that Bernie actually invested his own money to promote F1, nothing could be further from the truth, Bernie only ever acted as an agent for the teams at the teams expense and to this day Bernies salary and all expenses are deducted from revenue before the teams get their miserable share.

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