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CVC investors edgy over F1 bribery case
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Posted By: James Allen  |  28 Jul 2011   |  5:50 pm GMT  |  16 comments

My colleagues at the Financial Times have written a story with comments from investors in CVC saying that they are uneasy with the the lack of response from the private equity company that owns 75% of the commercial rights of Formula 1, to the ongoing bribery allegations surrounding the sale of F1 five years ago.

They want the private equity firm to take a lead and provide more information.

“There has not been much communication from CVC on F1 and we are slightly worried about it. We do not know more about this than what we read in the media,” one investor told the FT. Investors also suggested that the group appear “paralysed” over the issue.

CVC manages capital on behalf of some 300 institutional, governmental and private investors worldwide.

CVC issued a statement in January to say that it had no knowledge of any payments to Gribkowsky, but has made no comment since the formal charging of the banker last week.

The purchase of F1 by CVC is being probed by prosecutors in Munich, who are holding Gribkowsky, once chairman of F1′s holding company and who is alleged to have taken bribes during the sale process. Prosecutors confirmed last week that Gribkowsky will be charged and that Bernie Ecclestone is under investigation.

It is alleged by prosecutors that Ecclestone received $41.4 million from Gribkowsky’s bank Bayern LB and that the Ecclestone family trust Bambino received a further $25 million.

Ecclestone in turn confirmed that he paid the $44 million to Gribkowsky, but says that Gribkowsky was threatening to make allegations to the Inland Revenue about Ecclestone’s relationship with the Bambino Trust. “He (Gribkowsky) was shaking me down and I didn’t want to take a risk, ” Ecclestone told the Telegraph last week.

He also claims that the moneys he received were approved by the bank and were a standard 5% commission for his part in the sale.

Ecclestone with Gribkowsky (L) and Mackenzie (R)


The FT’s sources have told them CVC boss Donald Mackenzie is “incensed” that neither Ecclestone nor Bayern LB told him about the payments.

Investors are also said to be at odds with CVC over Ecclestone’s ongoing role, disputing Mackenzie’s firmly-held view that the business is worth far more with the 80 year old at the helm than not.

CVC invested $1.7 billion in F1 five years ago and has already had a good return on it. The value of its stake has undoubtedly increased, but the question is when will they try to exit?

There is speculation that CVC is shaping up for a sale in 2012. A consortium involving News Corp and the Agnelli’s investment vehicle Exor, has expressed an interest in buying CVC’s stake.

To realise maximum value from their investment CVC need the teams all signed up to a new Concorde Agreement from 2013 onwards. That negotiation has yet to start.

The F1 teams are much more co-ordinated now than at any stage in their past. They have formed their won association, FOTA chaired by Martin Whitmarsh. They are working now on establishing exactly what they want from the negotiations and it is likely that, once this is decided, their negotiating position will be unified.

That all lies in the future. For the moment, the anxious investors also acknowledge that F1 is a massive cash cow, giving great returns,

“It is one of those situations where investors are willing to put up with a lack of communication as CVC has simply shown great returns,” an investor told the FT.

CVC has a diverse portfolio of investments in companies, from paper and packaging to telecoms, postal services, chemicals, insurance and breweries.

Its website says, “Over the years, we have raised US$44 billion and invested US$28 billion. The capital of our investors is committed for ten years or more to closed-end funds that we manage on their behalf.”

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16 Comments
  1. rpaco (other rpaco) says:

    Good stuff James, we note that Bernie has never attempted to explain the €20 or 25M that went into Bambino.
    That he was threatened with exposure that Bambino is his is a remarkable claim since everybody knows that already.
    Bernies claim of 5% commission would make the deal €828M but from what I understood it was very considerably less than this, indeed this was the foundation of all the accusations in the first place.

  2. Mandrake says:

    CVC really had to have known about Ecclestone’s foibles prior to getting into bed with him, and have none to blame but themselves

    Now that this, the culmination of a fraught relationship between them is threatening CVC’s exit strategy and the real prospect of their coming away with nothing. They are faced with a choice of burying their heads in the sand, as NI did for years or as the FT has suggested and NI was finally forced to, disclose the details (of the deal).

    Ecclestone has been consistent in his inconsistency on his involvement in the affair, and for such a sharp operator continues to regale the media with fairy stories a five year old would see through. Now I’ve never rated Max Clifford but on this occasion I’d recommend Bernie to get down to his office like yesterday and sideline Christian Sylt.

    CVC may be blameless in all of this and if you suspend your incredulity perhaps Ecclestone as well but in the absence of disclosure by CVC we’ll never know of whether they incentivised Ecclestone through a substantial holding in the F1 fund linked to the acquisition price and if so this would provide the necessary and powerful motive to corrupt Gribkowsky.

  3. Tim Atkinson says:

    Great article – thanks. Might want to elaborate a bit about Gribkowsky – the initial mention implies we know what ‘happened’, and who he is, and although you expand slightly, it doesn’t stand alone.

    Keep up the good work…..

  4. Randy Torres says:

    James, any actual financial information on CVC’s F1 investment and returns? Would love to see a snapshot of those numbers (and I’m betting so would some of the teams, especially HRT, Sauber and Williams). Also, I wonder what Ferrari’s position within FOTA will be if Exor ends up owning a piece of F1. Great stuff by the way nothing like a little financial intrigue to spice up an already Ferrari red hot sport!

  5. Mario Senna says:

    ‘It is one of those situations where investors are willing to put up with a lack of communication as CVC has simply shown great returns’, an investor told the FT.
    So is CVC, Bernie, FIA,…and FOTA. And that’s how it’s supposed to be, isn’t it? In that sense, any statement by any stakeholder are pure tacticts and PR. We really have no clue and I feel that any info or speculation we hear is originated by interested views serving those stakeholders…..

  6. Sebee says:

    I simply love this story, but not for the amounts involved – simply how it’s evolving as pressure is applied by the prosecutor.

    Mr. Ecclestone is my business hero – the man can put together a deal and a half. But as we’ve seen time and time again, it’s not easy to become a billionaire ethically. And this is yet another case.

    At this point in the court of public opinion Bernie is guilty – because he has lied about this and only when pressure was applied did he start admitting to the bribe. If he came clean at the start, I would have given the story benefit of doubt. But as it stands, this was a shady deal, he paid it and he’s at fault. The fact that he was “shaken down” is not believable and also not an excuse. I also don’t believe the bank lost only 67M on this, while more than 44M is obviously less than 67M, the gain is hardly worth the risk. I strongly believe the bank lost much more than 67M – we’ll only have a better idea of the loss if/when CVC sells.

  7. Bec says:

    They’re edgy if you believe the spin from Mark Kleinman, the business editor of Sky News, and he wouldn’t want to spin the news in any particular direction would he.

  8. rvd says:

    I think this will turn out to be a far different story than what’s been revealed so far.

    1. Sebee says:

      Absolutely!

      And when we do get the facts, this story won’t be about 44M, or 67M. It will be about 100s of millions. Obviously he benefited, but I don’t believe Bernie takes this type of risk to cost the bank 67M. This was for far more than that. This prosecutor will keep scratching at this one till he draws blood.

      1. Mandrake says:

        I believe you’er quite right.

        The way the story’s unfolded it hard not to believe Ecclestone’s at the heart.

        The problem is, there has to be a sufficiently strong motive for BE personally to pay Gribowsky $44m for undervaluing BayernLB’s stake?

        As you say, “Obviously he benefited” but was that money or benefit in kind? Speculation is, CVC rewarded him by way of a ‘free’ stake in their F1 fund and commensurate with the price paid below their valuation.
        That would be as you it, “about 100s of millions” and helluva motive for paying off Gribkowsky and cheap at the price.

        Ecclestone’s stake in the fund has never been disclosed, CVC apparently bought the Bambilo’s remaining SLEC 25% holding but no one knows the value of Ecclestone’s post 2006 holdings or how it was achieved.
        CVC really need to disclose Ecclestone’s investment and holdings position, if only because new (I believe?) SEC/FSA regulations for Hedge Funds in 2012 will require them to do so anyway.

  9. Werewolf says:

    The big issue here isn’t the number of millions involved or whether or of what Ecclestone is guilty but how this will effect F1 in the coming years. Nobody believes Ecclestone is as white as his shirts, anymore than we believe it of any other major power broker, be they world leaders, business captains, media moguls or senior bankers.

    F1, however, being such an eclectic mix of powerful interests, competitive instincts and super-egos, needs strong leadership, something Ecclestone has peviously provided in spades and which will not simply come with the job title of whoever takes over.

    The power vacuum that would be created by any unplanned fall, especially against the high-stakes-high-risk background of CVC’s potential pullout would be massive. It might, of course, be seen as an opportunity for beneficial change but is more likely to lead to factionalization, fragmentization and possibly destruction; and there are plenty of powerful, vested interests that would like to see it and be only too happy to help it on its way.

  10. Jaw Jaw says:

    Soros got out of the business when the US forced him to start reporting. I don’t think CVC would last 5 minutes in their business if they were forced onto similar US standards of reporting. CVC has lost alot of money in Australia. Old Kerry Packer used to say you only get one Alan Bond in your life, Packer jnr might well say you only get one CVC in your life. And yes, Bernie might say the same thing too.

  11. Charlie says:

    One question: if Bernie claims this was blackmail rather than bribery, why didn’t he report it to the authorities which, presumably, it is illegal not to do?

    Presumably he will say that it was in his interests not to do this as it would jeopardise the deal. If that is true, then why didn’t he report it after the deal had gone through?

    Smells more fishy than a school of tuna.

  12. rpaco (other rpaco) says:

    CVC need to sell now super quick, because the bbc/sky deal makes it F0.5 as far as the UK fans are concerned.
    Sponsors will leave in droves, teams will fold, fans in the UK will turn away in disgust.

    As if Murdoch was not already in the public eye for all the wrong reasons, now this!!

    Bernie you should be ashamed of yourself as should FOM, this is the first tolling of the death knell of F1. henceforth to be known as F 0.5

  13. theRoswellite says:

    Has BE’s F1 structure been formed from the unconsolidated self-interest of numerous parties, most of which view the series as simply a means to financial gain?

    This cynical observer might suggest a somewhat higher allegiance exists, one derived from the rich history of the sport and the devotion of millions of fans both present and past.

    Hopefully, no one will confuse “the house that Bernie built”, if I may be pardoned for a bit of prognostication, with the enduring nature of Grand Prix racing.

    This to shall pass.

  14. Sebee says:

    OH No!!

    Flavio is involved too in the bribes! Unbelievable.
    Bernie says Flavio was doing him a favor. And of course his credibility in this case is unshakable.

    This will be the scandal during the break.

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