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Problems mount for Ecclestone as court demands F1 sale documents
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Posted By: James Allen  |  05 Aug 2013   |  8:27 am GMT  |  65 comments

Bernie Ecclestone’s legal problems relating to the sale of F1 are mounting up after it was revealed that a court in London has demanded that the F1 Group hand over a raft of documents relating to the 2006 sale of F1′s commercial rights-holding business to current owners CVC.

According to the Financial Times, among the papers the court wants to see are due diligence reports on F1 at the time of the sale and the refinancing, CVC’s loan application to Royal Bank of Scotland, documents relating to new revenue streams at the time of the sale including the then forthcoming Abu Dhabi Grand Prix.

German media group Constantin Medien is claiming damages of $171 million against Ecclestone and others. It claims that the stake in F1 owned by the bank Bayern LB was sold too cheaply as as result of the $44 million payment from Ecclestone to Gerhard Gribkowsky, who was managing Bayern LB’s interest in F1 at the time. Constantin Medien was contractually entitled to a slice of Bayern LB’s proceeds from a sale.

CVC bought Bayern LB’s 47% shareholding in F1 for $814 million, but Constantin Medien claims that its value was higher, according to the Financial Times, “CVC’s refinancing a year later implied a valuation of the stake of $2.8 billion.” Adding that, “in the disclosure hearing before Mr Justice Vos, Constantin Medien’s lawyers argued there was no proper valuation and marketing of the Bayern LB stake before the sale,” which they claim was due to the $44 million sum paid by Ecclestone to Gribkowsky, for which Gribkowsky was given an eight and a half year jail term on corruption charges and which is now the subject of Ecclestone’s own indictment.

Ecclestone’s lawyers say that the sale price at the time was fair and that the difference from the refinancing price a year later reflected new revenue streams opened up in the interim.

It has also emerged that the principle CVC figure in the F1 investment, Donald Mackenzie, described Ecclestone as “very powerful and difficult to manage” in a written submission to the Gribkowsky trial in Munich. Part of that submission was read out in the London court hearing over the Constantin Medien case.

Mackenzie and CVC are keen to float a percentage of the F1 business on the Singapore exchange, with an implied valuation of the entire business of around $9 billion, but cannot do so until these legal issues are resolved and the Concorde Agreement signed with the FIA and the F1 teams.

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65 Comments
  1. jpinx says:

    Has to be the quote of the year !!!

    “…… Donald Mackenzie, described Ecclestone as “very powerful and difficult to manage”…..”

  2. AlexD says:

    Let’s see how it ends. Unless I do not understand something, it was clearly a bribe.

    1. Sebee says:

      You just don’t understand! ;-)

      I hate to take it this far, but for perspective: If someone is shaking you down for 40m, I’m pretty sure 1m or less can ensure permanent resolution. Which means to me that Gribkowsky was needed alive.

      1. Random 79 says:

        For all your personal conflict resolution requirements please contact Seebee.com – no target too big or too small ;)

      2. Sebee says:

        You know my point is right. You don’t shake down a guy for 44m who’s business holdings carry Bambino name unless you know you’re valuable alive. Also, I’m surprised Gribkowsky didn’t go for round two 44m to keep Bernie out of it..

        As for conflict resolution, don’t blow my cover man! Ever hear of prism? No, not the one on the cover of DSOTM.

  3. Richard says:

    I’ve enjoyed F1 during the Ecclestone era, although I recognise what a controlling hand his has been. I think the alternative would have been worse, up to a point, as Bernie ultimately remains a fan of the sport and understands what is needed.

    We can argue at length about the lack of interesting circuits, or of moving this ‘world’ championship to far flung countries (I’ve had no problem with this, sporting-wise anyway), or his ‘selling-out’ to CVC, but ultimately I think Bernie has pushed the sport forward kicking and screaming.

    F1 is now a global powerhouse, and if you like your racing pure then go watch F2. F1 will always be political (it’s a world championship, after all), with legal issues (testing the boundaries of tech regs), and the huge financial issues with racing cars at the forefront of technical limitations.

    To me, Bernie has done something a bit fishy in paying Gribkowski but nothing so illegitimate as to try and get a cheaper price for his sport. What an absolute load of rubbish – I would expect nothing less from Bernie than to get the highest, most ridiculous price possible for F1, from any buyer, and I highly doubt he’d have spent $44m of his own personal wealth to secure a LOWER one… Who came up with this?!

    1. Dai Dactic says:

      Not rubbish – he secured a deal favourable to the venture capitalists such that they made a lot of money and allowed him to remain in control of the sport – and…er…make a lot of money too.

      That is, his goal was for FOM to benefit from F1, not to generate wealth for the teams.

      Fair enough, as the teams have always been too damn short-sighted to work together for their own financial benefit.

      1. James Allen says:

        As the teams have been on at least 50% of the commercial revenues, they were always set to benefit from wealth gained by FOM for the sport

      2. dean cassady says:

        …but let’s have a look at the new Concorde ‘agreement’.

      3. Dai Dactic says:

        Granted –
        But was that 50% a figure the teams were happy with or simply stuck with considering their inability to form a united front for negotiation?

        Bernie would be well aware that below a certain minimum cut the teams would fold and his revenue stream would disappear.

      4. Peter Freeman says:

        James I don’t think the teams get 50% of the capital gains generated through the selling and further refinancing of the ownership of the rights to the sport. What this does is push huge sums of capital into the hands of the buyers and subsequently drives up the cost of tickets and television coverage.

        And as for “50% of the revenue”, how is this calculated? Simply adding up the total income take and dividing it by 2, or do “costs” get deducted and the remainder divided by 2?

        Somehow seeing the likes of Sauber struggling to make it through a season tells me that the teams are NOT getting what they should out of the income the sport generates. If the sport is currently valued at 9 billion, it is because the income from it for CVC is that of a $9 billion company and therefor TEAMS are also getting the income of a $9 billion company. Are they?

      5. James Allen says:

        The teams didn’t get any of the sale price of the sport

        They are now sharing 63% of EBITDA on around $1.5bn annually, but not evenly as some teams get extra payments for historic results

      6. Roger W says:

        Just before someone asks EBITDA is an acronym for Earnings Before Interest, Taxes, Depreciation, and Amortization. As its name suggests, it is created by considering a company’s earnings before interest payments, tax, depreciation, and amortization are subtracted for any final accounting of its income and expenses. The EBITDA of a company gives an indication of the current operational profitability of the business (i.e. how much profit does it make with its present assets and its operations on the products it produces and sells).

    2. Quade says:

      The bribe receiver is already in jail. Its logical that the giver will follow.

      Whatever Bernie has done to raise F1 is of no consequence to the case; it isn’t even a mitigating factor.

      1. Sebee says:

        Remeber that it was a German bank that had this asset sold off at below value. And so it’s not only about the bribe, there are other German interests at stake here.

      2. Quade says:

        True, there could be all sorts of intriguing gang ups and counter alliances – rabbits out of hats stuff. Things of the sort that could make Lucifer rise in awe and applause. Lol!

        Unfortunately for Bernie, he is well matched this time and the German judicial system is not known for loopholes and “kindness” to the high and mighty.

      3. dean cassady says:

        Quade?!?
        Your logic applied to our irrational world, is not sound.
        While the alleged ‘bribe receiver’ may have been officially acknowledged, the other side is not so straight forward as this.
        I believe that in this game of high stakes dealings, the clarity between ‘legitimate’ business practices and … whatever, is purely subjective opinion.
        Bernie is definitely no guiltier than all of these Wall Street executives who caused the 2008 financial meltdown, only to get paid out in hundreds of millions of taxpayer dollars and walk away free.
        Non?

      4. Frique says:

        So then because they got away scott free, so should he? Your yard stick of morality might be a tad low there son:-)

      5. David Ryan says:

        Actually, it’s a pretty simple question of what the legislation says. Under German law, both paying and taking a bribe are offences – as is the case here in the UK. As such, if it is established that Bernie did indeed pay a bribe then there is nothing subjective about it – he will be guilty of an offence.

      6. Quade says:

        Sadly, you could be right. The World of high finance is a World of magic.

      7. dup says:

        Stop been naive,there is no logic here,and bernie need fear nothing.do you know Bernie s background?so you should know that his kind never gets in jail .NEVER,aka,Roman Polansky,Dominique Strausskhan,Marc Rich,etc etc.So please stop worrying about Bernie Ecc

      8. Quade says:

        I’d love to see your face if Bernie is convicted, or if he is forced to step down as F1 boss regardless.

    3. blackmamba says:

      I think he has done enough though, and should get out now and hand over to somebody else, preferably somebody not previously connected to another F1 team.

    4. IgMi says:

      Are we talking about the sport or business here? True enough two are in a form of symbiosis as one cannot truly exist and thrive without the other, with politics always in the mix. That being said it is hard to always see to what motivates a particular party at a particular moment to make a particular move. For venture capitalists, investment firms, and banks, that may be a little bit easier to articulate and understand, for others that is somewhat masked. As a fan I think it would be great to see sport having the priority. However, realistically speaking money spins the world – and F1 wheels. I just hope that we would not, individually and collectively, go too far with that approach to irreparably damage what F1 as a sport delivers today.

  4. R M says:

    I know there would be far-reaching implications, but I can’t help but hope that CVC loses EVERYTHING on this… this story needs some moral ending linked to sporting endeavor, rather than simply ‘Hey kids, greed pays!’…

    Then close this chapter, bring in someone like Parr and let’s refocus our energies on mending the bridges with the common (and loyal) fans.

    1. Michael Roberts says:

      If only. I fear that the bankers will always win.

      1. dean cassady says:

        unfortunately likely

      2. Frique says:

        You mean Banksters!!

  5. Paige says:

    James,

    In your best estimate, how much longer can we realistically expect that Bernie will remain in his position? He certainly shows no signs of slowing down or losing motivation, but given the circumstances, his time has to be up at some point soon, right? Has there been anything in the grapevine that you’ve heard regarding a timetable for him stepping down?

    One interesting name that I’ve read around the net who could potentially replace him is Christian Horner. He has run perhaps F1′s most commercial team, so he certainly knows that side of the business, and at some point in life, everyone seeks a new challenge. What have you heard about this possibility?

    1. James Allen says:

      On your first question I’ve no idea. He’s not your average CEO and F1 isn’t your average business

      if the Munich court formally charges him and sets a trial date, it’s hard to imagine him carrying on, but you never know.

      As for the latter, I don’t think Horner would be the person. It would need to be someone all the teams trusted and it would need to be someone capable of running the F1 business in terms of selling races to governments and selling TV rights, which are highly specialised businesses

      1. Tim L says:

        James so there really is no line of succession??

        If not scary someone has never forced the issue1

      2. bbobeckyj says:

        “I don’t think Horner would be the person. It would need to be someone all the teams trusted…”
        Revealing and or insightful comments like these are the reason that I follow the comments section of each article. If only there was an option to subscribe to your posts.

      3. ACx says:

        With due respect to James, it is not revealing or insightful to suggest the other team bosses don’t trust Horner. No team boss trusts another team boss. Take any one you like. Monty? Ron Dennis? Brawn? Even my fav, dear old Sir Frank would be lucky to be trusted with F1. All of them will have enemies. And that isn’t a big deal either. All team bosses look out primarily for their team, and will get anything they can over the other team bosses to win. And rightly so.

        In fact, I would go as far as to say that you are not a credible F1 team boss if you are trusted. Not being trusted makes you one of the club as it were.

        But no way in hell is Horner some sort of lone mistrusted figure of shame. He’s just right in the game with the others, wheeling and dealing just like the rest of them.

      4. blackmamba says:

        There were rumors a while back – actually not rumors but reports – that Sainsbury Boss Justin King was in line to take over. Surely there is no smoke without fire, and Bernie might have realised early on how much trouble he could find himself in and made plans accordingly?

      5. floodo1 says:

        the level of capital involved is staggering

      6. Mike J says:

        James
        What about Judith Griggs. She was spoken about 1 or 2 years back as possible successor. She was hand picked Bernie. To be considered??
        BE probably has 2 or 3 in his mind.

      7. James Clayton says:

        “As for the latter, I don’t think Horner would be the person. It would need to be someone all the teams trusted…”

        While your other comments are certainly valid, I’m not sure this one holds too much water. I don’t think the teams hold too much trust in Bernie, do they?!

        Also, it reminds me of the Jean Todt to head the FIA fiasco. I doubt the likes of Williams and McLaren really had a great deal of trust in that situation, but at the end of the day their views don’t really matter to the shareholders… well only as much as making sure the teams don’t walk – and it’s been proven time and again that when it comes to the end of the day, the teams won’t walk.

        I have a feeling that, for better or worse, it’s most likely that whoever replaces Mr E won’t have much of a racing background.

      8. kfzmeister says:

        …in other words, it requires the expertise of yet another used car salesman? :-)

    2. billy says:

      My recomendation would have to be Carmelo Ezpeleta, Dorna CEO for MOTP GP. Unbiased and proven track record

  6. Grabyrdy says:

    If the refinancing deal within a year of the sale implied that CVC had acquired F1 for a knockdown price (35% of its true value, according to these figures), is there any particular reason that Medien is only suing now ? Or did they start earlier and the usual jet-propelled legal system has ensured that it’s only now feeding through ?

  7. buried deep within the pile of documents covering this entire episode will be details of intrigue and, no doubt, a modicum of bastardry to boot.

    hopefully all will be revealed in the not too distant future. these are serious amounts of money and as a result the players often move outside the accepted rules of the game. exciting business F1, on and off the track.

  8. JR says:

    Bayern LB has stated in the past that its F1 stake was sold “clearly above its book value.” and that the sale of the F1 shares “decisively contributed to the positive result.” While “The price we (Bayern LB) were offered by CVC was surprisingly high and it came as a great relief.”

  9. Julian F says:

    “very powerful and difficult to manage”
    That’s understating things slightly, and I reckon Donald Mackenzie would have seen a few such characters in his time….

    Thanks for your story James, this’ll really put the cat amongst the pigeons. I can’t wait to see a summary of the documents if they are ever made public. I reckon this case will really shake up F1.

  10. elie says:

    Well there is really only one solution for CVC if it wants to move forward and distance itself from corruption allegations isnt there..It must terminate the services of Bernie Ecclestone immediately. I appreciate that this is something much easier said than done. But seriously when will F1 start to act like a true sporting organisation rather than its current dictatorship. Like all ‘great things’ they must come to an end. Until this happens the est.worth of 9Billion will become dramatically reduced if Ecclestones indictment goes to trial.It could be also be that the real worth would be even more-we just cant be sure with all this hanging over the sale of F1 in 2006. Maybe the sport is worth 10-12 Billion

    Whats more-Bernie is 15 years over retirement age anyway and as brilliant a tactician he is- surely there must be a better person(s) for the job.Comments or more to the point “No comment” on the matter from Luca Di Montizemolo and other team principals have been festering for some time. Sure F1 may go backwards before it goes forward, but this long drawn out procastination is only detrimental to all parties involved.

    Further what are the chances that CVC maybe forced to pay massive damages to not only to Constantin Medien, but also to another US Corporation that was bidding in 2006-what was their name again James ?.

  11. Bryce says:

    White collar crime is IMO the some of the worst type of crime. It is planned and purposeful, carried out by greedy people, usually over a long period and with little or no regard for others.

    It really irks me that they rarely get adequately punished. Obscene wealth only comes from one source, though not directly, in the long run it always comes from the poor, upon whom they and their cohorts capitalise.

  12. pcoops says:

    If Gribkowsky has been convicted of receiving the $44 million as a bribe, how can Ecclestone not be found guilty of paying the bribe? To claim it was blackmail is hardly valid when you are talking about financial gain…

    1. AndyFov says:

      If anyone can make that defence stick it’s Bernie.

      Most people would be absolutely terrified of being in his situation, yet I imagine him being thrilled to have a fight on his hands.

      Despite all the megalomania and ruthless avarice you’ve still got to admire the man. I’d not have the stomach for it.

      1. James Clayton says:

        “I imagine him being thrilled to have a fight on his hands”

        I really, highly doubt that!

    2. I know says:

      Well, in a case of blackmail, there is only one offender: it is illegal to blackmail someone, but it is not a crime to pay the blackmailer.

      However, Mr. Ecclestone will have a very hard time convincing a judge that the threat by Mr. Gribkowsky of all people was worth $44M, when a bribe would be so much more plausible. I think the “blackmail” defence, very probably not made under advice from his lawyers, will come to hurt him in the end (it is also a crime to falsely accuse someone else of a crime).

  13. Richard says:

    Somehow I don’t see them locking Bernie away, and he will through his lawyers fight very hard to disprove their case, but if things start to look dire for him, I don’t think he will remain in a place where they can get at him. – I wonder if he is already making preparations for a quick exit?

    1. Random 79 says:

      Yep, he’s already asked Vettel if he can borrow his RB9 when the time comes ;)

      1. JohnBt says:

        LOL! fitting for a cartoon in Pitpass.

  14. SteveH says:

    It’s even more complicated, as Bernie is being sued in New York over the sale. From Bloomberg News http://www.bloomberg.com/news/2013-03-14/ecclestone-is-subject-to-n-y-law-bluewaters-tells-court.html

    “Bluewaters Communications Holdings LLC, which claims a New York base, sued Ecclestone in Manhattan in November for $650 million, saying it was the high bidder for shares in the racing company, which it values at $10 billion.”

    Expect interesting times.

    1. JohnBt says:

      Wow. Didn’t see that coming.

  15. Bonaventura says:

    [mod] there will be a settlement at some point and it will all go away, money talks.

  16. Peter Miles says:

    I’m sure my view of this could be condemned as too simplistic but I have never understood why anyone except the teams and the circuit owners should make any money from F1 at all. The FIA should get a sufficient amount to cover their administration costs and everyhting else should go into the people who provide the sport. I really don’t see the need for Bernie or CVC to be involved in any way. If the venture capitalists want to make money then let them buy into a team.

    For the rest I don’t see how Mr Ecclestone can survive this. If someone is in prison for taking a bribe then how does someone else stay outside for giving it? Certainly if I was the one “doing time” I would find that a bit upsetting!

  17. DmitryL says:

    The net worth of Bernie Ecclestone seems about 8 billion. He says he no longer holds much of F1, so the money is elsewhere.

    So why does he charge CVC just 2.5 million per year to manage the sport for them?

    It’s not like Steve Jobs with huge amounts of company stock. Job’s 1 dollar salary made sense. Ecclestone’s 2.5 million salary does not make sense. He’s not the type to do charity.

    Constantin Medien should ask Bernie why he works for so little? The situation is curious to the extreme. Bernie may not want to answer questions like that, but in court he may have no choice.

  18. Danny Almonte says:

    We all love F1 despite Bernie. The sport is full of tax dodgers and cheats. I’m just hoping for some resolution.

  19. richard piers says:

    The whole thing stinks like so much in F1.
    It would also be good to finally know exactly how the FIA’s family silver was first sold for a mess of potage.
    It was always likely to end in tears and that seems to be where we are now.

  20. David Cooper says:

    Principle or Principal?

  21. Dave says:

    Hi James,

    Could I ask that you investigate the shambles that is the 2013 calender? So far this year we’ve had 4 x 3 week breaks and are currently in the middle of a 4 week break. Between the start of July and end of August there is 1 race.

    No other professional sporting code operates like this or treats it’s fan base with such contempt. I can’t imagine the teams would be too happy about it either.

    1. James Allen says:

      I know, it’s all over the place! This is due to some cancellations like New Jersey, the failure to get a July 21 event together after shifting Germany etc

      From Spa onwards it’s 9 races in 3 months – the opposite of loose!

  22. JohnBt says:

    Due respect to Bernie for what he has done to F1, one must give credit as it’s truly amazing. Shameful for getting caught now. However complicated it may seem, right is right, wrong is wrong.

    Hard to find a successor to fill his shoes too.
    His DNA is truly unique. Not pissed with him but more disappointed.

    Am looking forward to Spa as a high spirited fan.

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