Formula 1 was thrown into turmoil today as the prosecutors in Munich announced that they intend to bring Formula 1 CEO Bernie Ecclestone to trial on bribery charges this Spring. The move has meant that while he still has an executive role, his powers have been curbed.
At a meeting of the F1 board, following the Munich announcement, Ecclestone stood down as a director. But the board decided to keep him in his position of CEO, running the day to day business of the sport, albeit with two significant restrictions.
His activities will be closely monitored and subject to scrutiny and he will not be able to sign off on significant contracts. That will be the job of chairman Peter Brabeck-Lemathe and of Donald Mackenzie, boss of F1’s leading shareholder CVC Capital Partners.
This is unchartered territory for Ecclestone, who is used to acting on his own and has not had to operate like this before.
So what does this all mean for F1?
Ecclestone has hitherto run the business and had absolute control over the deals that get done, albeit answerable to the board. But he has very much been in control of all aspects of the business. While he does have people on his team who can negotiate TV and media rights deals, such as Ian Holmes and sponsorship deals, like Alex Wooff, he doesn’t have anyone beneath him who can do the big deals with governments on signing up new Grands Prix.
He is also the only one who can really join the business up and for these reasons it was important for lead shareholder CVC and the F1 board to keep him in his day to day post.
The trial is likely to be heard in April/May, according to the Munich prosecutor and this will clearly be a major distraction for the 83 year old. The man he is accused of bribing, former Bayern LB banking official Gerhard Gribkowsky, is serving an eight and half year sentence for corruption. The matter relates to the 2005 sale of a 47% stake in F1 to CVC.
Meanwhile Justice Newey is due to deliver his verdict soon in the 2013 civil case brought against Ecclestone in London by Constantin Medien, which alleges that the $44 million Ecclestone (and his family trust Bambino) paid to Gribkowsky relating to the 2006 sale of F1 to CVC, was intended to lower the value of the business, from which they lost out.
Ecclestone has recently arranged bilateral deals to 2020 with the teams and with the FIA, but there is still no Concorde Agreement tying all the stakeholders into a single agreement. That is an example of something that will need to be approved by the F1 board on which Ecclestone no longer sits. It could be argued that it is not in his interests to see a Concorde Agreement being signed.
Without a Concorde Agreement CVC will not be able to float the F1 business on the Singapore Stock Exchange, as it has long planned to do. So who is going to lead the process towards a Concorde Agreement?
Perhaps more interestingly, the teams will now sense a once in a lifetime opportunity. Logic suggests they should use an occasion like this to come together and take a strong position, which gives them more of a say (and maybe a stake) in the future of the sport.
However, although there are signs that they want to come together, there is also concern that the strongest teams, Ferrari, Mercedes and Red Bull will not be able to resist making a land-grab of the sport for themselves, leaving the others behind in secondary roles.
Ferrari president Luca di Montezemolo had called a meeting of all teams in Maranello for the start of 2014, but that is not now taking place.
Instead – perhaps in a move intended to head off the team’s getting themselves united – Ecclestone and FIA president Jean Todt have called a meeting with the teams next Wednesday in Geneva. Cost control is on the agenda, as is the controversial double points rule, but clearly there will be an elephant in the room now as well and it will be interesting to see what comes from it. Sources suggest that the double points rule might survive the likely turmoil on a “trial basis” for 2014.
Meanwhile the seven teams still supporting the F1 Teams Association (all except Ferrari, Sauber, Red Bull and Toro Rosso) plan a meeting in early February to decide on their own next move as a body.
Although he is believed to have spent over £10 million already on legal fees, there are seasoned observers who wonder to what extent Ecclestone is concerned over the latest developments. He is 83 years old and a multi billionaire, he still gets to run the business and what does he really have to fear from the German courts? Even if convicted, would he really be jailed?
Responding to the announcement from Munich today, Ecclestone’s lawyers said, “The accusations, which are based on statements by Mr Gribkowsky, are false and in view of the established facts don’t present a convincing picture,”
Ecclestone has so far given evidence in Gribkowsky’s 2012 trial and in the Constantin Medien case. He denies bribery and maintains that the money was paid in a “shakedown”, because Gribkowsky threatened to expose details about his family trust and tax arrangements.