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Germany to Open Criminal Case Against Formula One Boss

German Banker confesses to Formula One Bribes
Bernie Ecclestone

Bernie Ecclestone, who built the racing circuit into a global TV juggernaut, is accused of paying more than $44 million in bribes to a German banker.

German prosecutors said Thursday that they would begin criminal proceedings against Bernie Ecclestone, the CEO of the Formula One racing circuit, over allegations that he paid nearly $44 million in bribes to German banker Gerhard Gribkowsky.

The allegations go back to events in 2005-2006, when Gribkowsky, as leading risk assessor for the BayernLB bank, approved a much-discussed deal to sell a 48 percent stake in Formula One to an Ecclestone-friendly investment group. Gribkowsky has admitted to accepting bribes from Ecclestone in exchange for waving the deal through.

The stake in the lucrative racecar circuit – featured in Ron Howard's recent film Rush -  had previously been valued at between $1.5 billion to $2.5 billion, but BayernLB, under Gribkowsky’s guidance, sold it to investment group CVC for much less, a reported $837 million.

After the deal went through, Ecclestone transferred – via numerous holding companies and middlemen - two lump sums worth close to $44 million in total to accounts controlled by Gribkowsky, prosecutors say. They claim the money came largely from BayernLB itself, while Gribkowsky approved a $41 million payment to Ecclestone and his family investment film Bambino for brokering the deal.

Ecclestone denies all charges. He does not deny transferring the cash, but claims that the bribe was Gribkowsky's idea and that the German banker was blackmailing him. Ecclestone said Gribkowsky had threatened to make false claims about him to U.K. tax authorities that could have triggered  a U.K. tax investigation and cost Ecclestone billions.

In 2012, Gribkowsky received an eight-and-a-half-year prison sentence for offenses including tax evasion and bribery.

The criminal case, set to begin in April, could drag on for years. Ecclestone last year also faced a $140 million damages case connected to the BayernLB/Formula One sale. German rights group Constantin Medien brought the case before Germany's high court, claiming BayernLB’s alleged undervaluation of its shares in Formula One meant Constantin lost out a large commission as a result of the deal. A judgment on the damages case is expected later this month.

CVC currently owns a 35.5 percent stake in Formula One after it sold down its holding from 63 percent last year. Plans to float CVC on the Singapore stock market were put on hold pending the outcome of the legal actions against Ecclestone. If Ecclestone is found criminally guilty, CVC co-founder Donald Mackenzie has said he would be fired.

There has also been chatter that CVC could further reduce its stake.

A former used-car salesman, the 83-year-old Ecclestone built up Formula One from a small racing circuit to one of the world's largest sporting empires.