Aug 1, 2011

Yet Another F1 Scandal

By JR Nerad

You just have to love Formula 1. The racing may not always be that interesting -- we favor racing in which drivers actually pass one another now and then -- but the behind-the-scenes imbroglios are ever-fascinating. The latest in a series of scandals associated with F1 is the pending bribery case against German banking executive Gerhard Gribkowsky. He was recently indicted in Germany for taking bribes in return for undervaluing BayernLB bank’s stake in Formula 1 during the sale of that equity to CVC Capital Partners, a holding company and investment firm that is privately held.

The prosecution alleges that Gribkowsky sold the bank’s equity position in Formula 1 at a lower price than the bank could have received otherwise in return for personal cash considerations disguised as “consulting contracts.” He claims the consulting work was legitimate and not tied to the F1 sale.

As usual, Formula 1 head honcho Bernie Ecclestone has a unique take on the proceedings. He claims that he has cooperated fully with the German investigation of the incident and is not worried about facing prosecution himself, yet he told London’s The Daily Telegraph that he paid Gribkowsky $44 million when the accused banker threatened “to cause trouble for him with Inland Revenue,” the British equivalent of the IRS.

Ecclestone says that at the same time the sale involving a 47 percent interest in Formula 1 took place, he was in the midst of a change in his estate to protect the potential inheritance of his former wife, Slavica, and that he paid Gribkowsky $44 million in hush money to avoid a possible inquiry into his estate that the German banker threatened to initiate. At the same time, he stopped short of accusing Gribkowsky of extortion. And, of course, he completely denied the accusation that the $44 million he paid to the accused German had anything to do with the sale of nearly half the shares in Formula 1 at a lower-than-market price.

This is, of course, vintage Ecclestone -- matching an outrageous story with an ever more outrageous excuse and then expecting it all to go away. Interestingly, virtually all the former brouhahas involving F1 have gone away, so why do we think this time will be different?

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