Formula One Under Fire
Embattled CEO Ecclestone is caught up in $50 million bribery probe.
The popular and lucrative Formula One race car circuit is accustomed to scandal -- be it the "Nazi orgy" video three years ago involving one of its top executives or the waffling of its longtime CEO Bernie Ecclestone, 80, over whether to hold a race in the Arab Kingdom of Bahrain after its government brutally cracked down on protesters this year (the race was finally canceled).
But another scandal -- one that so far has missed the headlines -- could potentially do more damage to Ecclestone and Formula One than Arab dictators or Nazi hookers. The future of F1, a sport that drew 527 million TV viewers worldwide last year, may be decided in a Munich courtroom in July.
Munich's state prosecutors are expected to bring charges in a $50 million bribery case involving an ambitious Bavarian banker, Ecclestone and secret bank accounts in Mauritius and the Virgin Islands.
The banker, Gerhard Gribkowsky, has been in custody in Munich's Stadelheim prison since January on suspicion of embezzlement, corruption and tax evasion in connection with the $2.5 billion buyout of F1 by investment group CVC Capital Partners six years ago. Sources familiar with the case suggest Ecclestone also could be charged with aiding and abetting Gribkowsky's alleged crimes. Ecclestone, a billionaire and regular figure in the British tabloids, has denied any involvement.
Back in 2005, Gribkowsky was a risk manager at German state bank BayernLB and in charge of Bayern's 48 percent stake in F1. The stake had previously been valued at $1.5 billion to $2.5 billion, but BayernLB sold it to CVC for much less, a reported $837 million. After the deal was signed, Ecclestone and his family investment holding company Bambino received $67 million in fees for brokering the deal. Ecclestone also remained in charge of running Formula One. A few months later, Gribkowsky received the first of two $25 million deposits to his bank account.
Munich prosecutors believe the money might have been a bribe from Ecclestone, paid via front companies in Mauritius and the Virgin Islands, in a secret deal between Gribkowsky and the 5-foot-2 racing supremo the Brit tabloids refer to as Napoleon.
The case could hardly come at a worse time for Ecclestone. Formula One's contract with the sport's racing teams, an agreement that specifies how F1's $1 billion plus annual F1 revenue is divvied up, expires next year. Rupert Murdoch's News Corp. is circling the circuit, looking into a possible buyout together with Italian investment group Exor. A legal scandal, much less formal charges against Ecclestone, would severely damage the F1 brand as well as its negotiating power.
Ecclestone testified to Munich prosecutors in April and is cooperating fully with the investigation. So far at least, Formula One's Napoleon is still standing tall.