Banker Gerhard Gribkowsky may have taken a $50 million kickback for engineering the sale of Formula One, the world’s most-watched motor sport, German prosecutors say. Who paid that suspected bribe, they aren’t saying.
That mystery has thrown a spotlight on the partnership between 80-year-old Formula One Management Ltd. Chief Executive Officer Bernie Ecclestone, a fixture of London’s tabloids, and the company’s buyer, CVC Capital Partners Ltd., one of Europe’s largest and most-private buyout firms. The case is also reviving the anger of media mogul Leo Kirch, who says the racing company he once owned was sold on the cheap. Meanwhile, Gribkowsky sits in a German prison that held Adolf Hitler.
The investigation is focused on the 2005 sale of a 48 percent stake in London-based Formula One to CVC by Bayerische Landesbank in Munich, which received a 10 billion-euro ($13.5 billion) government bailout following losses on U.S. subprime mortgages. That investigation is adding to uncertainties about Formula One’s future, making an exit more difficult for CVC, which manages 31 billion euros, including Europe’s second- largest buyout fund.
“According to the current findings, the suspect, in turn, received $50 million in payments disguised via two consultancy agreements,” Munich prosecutors said in the statement. A spokesman for the prosecutors declined to say who may have made the payments. No charges have been filed against Gribkowsky, who is being held while the probe continues. Ecclestone hasn’t been accused of wrongdoing.
The banker confided to people who worked with him that the $50 million was a consulting fee paid by Ecclestone, not a bribe, those people told prosecutors, German newspaper Sueddeutsche Zeitung reported Feb. 5, without saying where it got the information.
Formula One said in a Jan. 21 statement that Gribkowsky received only $50,000 a year since 2006 as a non-executive director of the company. “The Formula One group and Mr. Ecclestone have no knowledge of, nor any involvement in, any other payment to Dr. Gribkowsky nor to anyone connected with him,” the company said.
In an interview, Ecclestone declined to say anything more about Gribkowsky or the investigation.
“I’ve been advised not to talk to anyone about it,” he said. “A person has been detained.”
CVC, based in Luxembourg, said in a Jan. 5 statement that it “has no knowledge of, nor any involvement in, any payment to Mr. Gribkowsky or anyone connected with him in relation to CVC’s acquisition of Formula One.”
Kirch, 84, used loans to fund multiple acquisitions, including Formula One. He became the controlling owner after providing $987 million in 2001 to fund an option to buy 25 percent of the firm from Ecclestone and purchasing a 50 percent stake owned by EM.TV & Merchandising AG, a German maker of children’s programs. Ecclestone held the remaining 25 percent.
Kirch’s ownership was short-lived as his lenders seized control of his assets a year later. BayernLB, Kirch’s largest lender, ended up with 48 percent of Formula One. JPMorgan Chase & Co. and Lehman Brothers Holdings Inc., both based in New York, shared 27 percent.
Gribkowsky, representing BayernLB, became chairman of Formula One. He clashed with Ecclestone after the CEO claimed a single share in one of the racing company’s units gave him half of the voting rights. The banks sued Ecclestone, and the two parties settled their differences on the eve of a London trial.
‘Ticking Bomb’
Eight months later, in 2005, BayernLB sold its stake to CVC for an undisclosed amount. Gribkowsky, who became a member of the bank’s management board in 2003, ran the sale and stayed on the Formula One board as a non-executive director. By March 2006, CVC took over almost all of Formula One, buying the other lenders’ stakes as well as most of Ecclestone’s with $2.5 billion in loans.
Ecclestone, who remained CEO, said in an interview that he doesn’t hold any shares. He said his family’s trust, Bambino Holdings, whose beneficiaries are his former wife, Slavica, and his two daughters, reinvested some of the proceeds from the sale alongside CVC, owning less than 10 percent of the company now.
Ecclestone and his family trust received $67 million from BayernLB for brokering the CVC deal and the settlement of “an open claim,” Sueddeutsche Zeitung reported on Feb. 12, citing an unidentified person with knowledge of the bank’s books. Ecclestone didn’t return a call seeking comment on the report.
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