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Currencies

Euro suffers worst month against the pound since financial crisis

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Banks

RBS falls 2% after failing BoE stress test

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Currencies

China capital curbs reflect buyer’s remorse over market reforms

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Banks

Carney: UK is ‘investment banker for Europe’

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Categorized | Banks, Financial

Ecclestone still in prosecutors’ sights


Posted on June 29, 2012

Bernie Ecclestone is “the cat who has already proved he has nine lives”, says a senior executive at a Formula One racing team.

To observers who have seen up close how the 81-year-old has remained at the helm of motorsport’s multibillion-dollar circus over the decades, the F1 ringmaster this week looked as if he may have lost at least one of those lives.

    F1-graphicClick to enlarge

    It was a week that finally brought to a close the corruption trial that has hung over the sport like a noxious engine smell for more than a year and uncovered some of the intriguing ways in which Mr Ecclestone does business.

    Gerhard Gribkowsky was the chief risk officer presiding over the sale of German state bank BayernLB’s F1 stake to private equity group CVC Capital Partners in 2005.

    This week he was convicted in Munich
    of accepting corrupt payments, breach of trust and tax evasion and sentenced to eight and a half years in jail.

    Last week brought Mr Gribkowsky’s confession to having taken $44m in bribes from Mr Ecclestone and Bambino, a family trust for the F1 chief’s children. The confession secured the ex-banker a lighter sentence.

    With the trial over, Mr Ecclestone and CVC – hoping to exit F1 via a flotation – must have hoped the matter was finally laid to rest.

    Post-trial, Mr Ecclestone was attempting a business-as-usual demeanour. He put his name and money behind an unlikely project to stage a Grand Prix in central London. But no one believes German prosecutors are about to close the case.

    “The prosecutors’ attitude has been quite aggressive in the last couple of days,” says one person who knows Mr Ecclestone well.

    That much was clear when prosecutor Christoph Rodler summed up his case on Wednesday. He took issue with Mr Ecclestone’s claim in the witness stand that he paid the bribe because Mr Gribkowsky threatened to cause him trouble over his tax affairs.

    Mr Ecclestone’s witness box appearance back in October showed him in one of his whimsical, devil-may-care moods. At one point, he talked about the confrontation with Mr Gribkowsky like a scene from an old “gangster film”.

    To laughter from the public gallery in room A101 of the court near Munich’s Löwenbräu brewery, Mr Ecclestone said at one point: “I said I was going to make some sort of payment to him and we would sort out later what it is for.”

    Prosecutors also say Mr Ecclestone received a $41m commission from BayernLB for his role in the sale to CVC – for which help Mr Gribkowsky was found by the court to have caused the bank financial damage.

    Mr Ecclestone’s account was “nebulous”, Mr Rodler said. The court had heard evidence that the F1 chief was “not the victim of an extortion but the accomplice in an act of bribery”, he added.

    Judge Peter Noll added to Mr Ecclestone’s discomfort, saying he was the “driving force” whose “charm, sophistication, economic power and long experience” had brought Mr Gribkowsky into committing the crime and not the other way around.

    “No idea,” said Mr Ecclestone, when asked by the Financial Times whether he expected to face charges.

    To date, he has neither been accused of wrongdoing nor been charged, but he remains under investigation. “What we ought to do is wait and see, shouldn’t we?” he said.

    For CVC, whose co-founder Donald Mackenzie also appeared in court as a witness, the next move by German prosecutors could undermine its exit strategy.

    Indeed, the flotation prospectus listed among risk factors the potential damage to Mr Ecclestone’s reputation from the Gribkowsky trial as well as the fact he is facing a UK civil suit and an inquiry by HM Revenue & Customs. The prospectus also said F1 had a succession plan in place.

    What is understood is that any charges laid against Mr Ecclestone would result in his suspension as chief executive.

    CVC declined to comment. However, if prosecutors seek to extract a financial penalty from Mr Ecclestone to settle the case, the private equity group may stick with the status quo.

    That is because Mr Ecclestone remains the all-knowing king of F1.

    In his confession, Mr Gribkowsky described the F1 business as little more than a collection of contracts in a filing cabinet.

    CVC knows that better than most. Having paid $1.6bn to secure a majority stake in F1 six years ago, it harbours hopes of a $10bn valuation from a public listing, which has been delayed by market volatility.

    Stake disposals this year to institutional investors yielded $2.1bn for CVC, which retains 35.5 per cent of F1.

    But investor interest in the flotation is sufficiently high that CVC may still complete its exit whatever fate befalls the man it has relied on to drive the business forward.

    “Bernie Ecclestone is completely unique in what he does,” said the F1 racing team executive. “That is a positive thing as well as unconventional.”