2014 F1 season
Bernie Ecclestone may draw only limited satisfaction from his court victory today against Constantin Medien.
Justice Newey may have ruled in Ecclestone’s favour but his 114-page verdict (PDF) makes it clear he believes the Formula One boss bribed the now-jailed banker Gerhard Gribkowsky in 2006.
The judge also called into question Ecclestone’s reliability and truthfulness as a witness.
With the Formula One boss set to go on trial in Germany on charges of bribery in April, this was not the complete victory he was hoping for.
Why Constantin Medien lost
Constantin Medien, a German media rights company, alleged that Formula One’s sale to current owners CVC Capital Partners was arranged for less than its true value because of a bribe paid by Ecclestone to Gribkowsky. It claimed it was owed compensation for commission lost on a potentially more valuable sale.
In dismissing the case the judge did not find that the bribe did not take place – quite the opposite – but rather that its intention was not to influence the sale price.
Justice Newey ruled that Ecclestone and his former lawyer Stephen Mullens did not intend for shares in Formula One held by Bayerische Landesbank to be sold at less than their true value:
“It was no part of Mr Ecclestone’s purpose (or Mr Mullens’) for BLB’s shares to be sold at an undervalue, and neither Mr Ecclestone nor Mr Mullens had any desire for the shares to be sold at an undervalue or believed the price at which they were in fact sold to be below market value.”
“No loss to Constantin has been shown to have been caused by the corrupt arrangement with Dr Gribkowsky,” he added. “That fact is fatal to the claim as against all the defendants.”
The judge also rejected Constantin’s case on other legal grounds.
What the case revealed about the Gribkowsky deal
However the judge was in no doubt a bribe was arranged between Ecclestone and Gribkowsky, stating as much in a stark five-word sentence in his conclusion: “The payments were a bribe.”
But rather than being a bribe to influence the price of the sale, the judge rule Ecclestone paid it to maintain his position in control of Formula One.
That power is something Ecclestone has always jealously guarded, but Gribkowsky emerged as a potential threat to it before 2005. The testimony given in court and statements from in ongoing legal proceedings in Germany revealed new details of how the deal came to pass.
In March 2005 Gribkowsky presented his employer BayernLB’s management board with three options for the strategic future of Formula One. These included a “strategic alliance with Bambino [Ecclestone’s family trust] / [Mr Ecclestone]” and a “strategic alliance with contractors / teams”.
He also proposed a third option which he described as the “end of the BE era”, meaning Ecclestone, including his “removal as CEO at FOA, FOM and removal from the boards of the future main companies FOAM and FOWC”.
Gribkowsky described Ecclestone’s control of F1 and the labyrinthine companies governing it as follows:
“[Ecclestone] headed up and continues to head up the predominantly non-transparent and unnecessarily complex [Formula One group] like ‘a lord of the manor’. His business methods are not transparent and on occasion in a very grey area.
“[Ecclestone] makes it quite clear with his actions and active press work that this should also remain the case. An honest willingness to design the future with the teams with the participation of the banks cannot be identified.”
On April 7th, BayernLB’s supervisory board “unanimously agreed to the suggested course of action that after regaining control of the operative businesses of Formula One the basic strategy that will be followed is that of entering into a strategic alliance with the manufacturers/teams and implementing the associated measures accordingly.”
Shortly after this Ecclestone made his move to bring Gribkowsky on-side in a meeting. “[Mr Ecclestone] made it clear to me that given the situation, there were two possibilities: either he presented me with a buyer and I helped him get the sale through, or he would kick us out,” said Gribkowsky.
The judge also noted: “Dr Gribkowsky is also reported as having said this: ‘Basically, what Mr Ecclestone said at this meeting was that if I helped him then – literally – ‘I will take care of you!’ I took the phrase ‘I will take care of you’ to be an offer to change sides and to join him.”
“At the time I understood that Mr Ecclestone was offering me a job, namely to transfer to Formula One as an advisor, in conjunction with a fee of course. And that would be in return for me not obstructing a sale…”
The fee was agreed the following year at the season-opening Bahrain Grand Prix, which Gribkowsky described: “At lunch on the Saturday, a conversation took place between Mr Ecclestone and myself in the motorhome belonging to FOA/FOM.”
“During this conversation, Mr Ecclestone enquired first of all whether I had received a bonus from the bank for the sale to CVC. I said that I had not, which Mr Ecclestone commented with the words ‘fucking bank’.
“Mr Ecclestone then asked me about my further plans for the future. I took this to be a hint and reference to our agreement back in April/May 2005, and I told him that I could imagine working as a consultant in Formula One and that I had already spoke to Mr Mullens about it.
“Mr Ecclestone commented this latter phrase with the words, ‘Forget Stephen’ and challenged me to ‘tell me a number’, whereupon I told him 50. To me it was clear that that meant $50 million. The conversation ended with Mr Ecclestone saying that he would think about it.
“On the Sunday before leaving for the airport, I handed over to Mr Ecclestone in an envelope the draft contract which I had drawn up and taken with me. Even if I denied it and turned a blind eye to it at the time, it was clear to me that this was the reward for my supportive involvement – along the lines Mr Ecclestone had wanted – in the sale to CVC of [BLB’s] stake in Formula One.”
The details were agreed in a subsequent meeting at the Rib Room restaurant on 10th May 2006. “Part of this meeting was spent discussing the issue of Formula One and part the prospective payments to be made to me by Mr Ecclestone,” said Gribkowsky.
“Mr Ecclestone said that I would receive 45 million. He meant US dollars, as was usual with Formula One. Mr Mullens was apparently going to take care of everything else, i.e. the contractual agreements and the processing of these. In this discussion, we also established that the Advisory Agreement between myself and Mr Ecclestone would begin on 1st June 2006.”
Why Ecclestone’s bribe defence was rejected
The judge noted: “In cross-examination, Mr Ecclestone said that it was agreed at the Rib Room dinner that Dr Gribkowsky would be paid a total of $45 million and that Mr Mullens would deal with the contractual arrangements.”
Howerver Ecclestone rejected Gribkowsky’s claim the payment was made to secure his support: “I made a payment to Dr Gribkowsky because he was shaking me down concerning some allegations that he could say to the [Inland] Revenue that I controlled our family trust, which would have been extremely expensive.”
“There was never a bribe,” he added. “I made a payment to Gribkowsky for completely different reasons. I had no reason to bribe him. I paid him money not to do what he said that he could and was capable of doing, which was informing the English Revenue that I was running the trust.”
Significantly, as far as Ecclestone’s forthcoming case in Germany is concerned, the judge doubted this version of events:
“Neither Mr Ecclestone nor Mr Mullens identified any specific threat from Dr Gribkowsky. Each instead referred to ‘insinuations’.
“When giving evidence in Germany, Mr Ecclestone said that Dr Gribkowsky ‘never specifically stated or threatened that any given event would take place’ and that there was no threat along the lines of ‘Either you pay or I go the tax office’.
“In the present proceedings, Mr Ecclestone explained in cross-examination that Dr Gribkowsky never said what he would tell HMRC and accepted that Dr Gribkowsky did not give any details of how he would substantiate any claim that Mr Ecclestone was to be identified with the Bambino Trust;”
“The evidence indicates that Dr Gribkowsky is unlikely to have been in a position to give HMRC information that could cause Mr Ecclestone or Bambino any serious difficulties.”
Ecclestone’s reliability questioned
The judge also questioned the reliability of Ecclestone’s evidence: “Mr Robert Miles QC, who appeared with Mr Richard Hill QC for Mr Ecclestone, did not maintain that Mr Ecclestone’s evidence had invariably been accurate.”
“He blamed some of Mr Ecclestone’s answers on a tendency to answer questions too fast: he suggested that Mr Ecclestone was inclined to say things quickly that might, on reflection, not be right. He also stressed that many of the relevant events happened a long time ago and that Mr Ecclestone is 83 years old; it is thus, Mr Miles said, not surprising that Mr Ecclestone’s
recollection of some things should be poor.
“I recognise that there is force in these points. Even, however, making allowances for the lapse of time and Mr Ecclestone’s age, I am afraid that I find it impossible to regard him as a reliable or truthful witness.”
He noted that in parts of his judgement he “cannot accept Mr Ecclestone’s evidence”.
The judge did not accept Ecclestone’s explanation for why he paid the bribe to Gribkowsky. Justice Newey deemed the payment was paid as a reward “for facilitating the sale of BayernLB’s shares in the Formula One group to a buyer acceptable to Mr Ecclestone” which would allow him to retain his power over the sport.
“Mr Ecclestone’s aim was to be rid of the banks,” he concluded. “He was strongly averse to their involvement in the Formula One group and was keen that their shares should be transferred to some one more congenial to him.”
The threat of further legal action in Germany has already loosened Ecclestone’s grasp on the sport. He has professed himself confident about the potential outcome, but while today’s victory goes some way towards vindicating that the detail of the verdict will surely give cause for concern.
The article below includes more background to this lengthy case and a timeline of events so far:
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Images © Jamey Price / James Moy Photography, Red Bull/GEPA