By Quentin Spurring, Crain News Service
LONDON (Oct. 29, 2013) — The first of two major civil actions against Formula 1 boss Bernie Ecclestone — and others — over the sale of Formula 1 to a private equity firm almost eight years ago, has opened in the London High Court.
The judge has heard preliminary statements from barristers acting for Constantin Medien, a sports-focused German media group based in a suburb of Munich. The four defendants of the action are Mr. Ecclestone, his former lawyer Stephen Mullens, jailed banker Gerhard Gribkowsky, and Bambino, the Ecclestone family trust. Constantin is suing them for $100 million.
In 2002, Constantin was trading as EM.TV when it defaulted on loan-interest payments to three banks. Its shares in the Formula One holding company, which it had offered as security on the loans, were taken over by the banks. As part of that arrangement, Constantin claims, it retained the rights to a commission if its shares were subsequently sold.
The gist of Constantin's case is that Mr. Gribkowsky, a BayernLB executive charged with selling its shares and those held by Lehman Brothers and JP Morgan Chase, had been paid to undervalue the company when selling it for $1.7 billion to CVC Capital Partners in March 2006—thus depriving it of commission due.
In June 2012, Mr. Gribkowsky was jailed for eight years and six months for tax evasion, breaching fiduciary duty, and accepting a bribe. He had taken a payment of $44 million from Mr. Ecclestone. BayernLB subsequently paid Mr. Ecclestone a similar amount in commission on the sale.
Mr. Ecclestone has admitted paying the money to Mr. Gribkowsky but denies any wrongdoing, claiming it was not a bribe and instead that he was the victim of extortion when Mr. Gribkowsky threatened to make false claims to authorities regarding his tax affairs.
This past July the public prosecutor's office in Munich formally charged Mr. Ecclestone with making a bribe, but has since postponed until January 2014 its decision on whether to proceed to a criminal trial.
The other civil action has been initiated by Bluewaters Communications Holdings, an American private equity investor that attempted to buy F1 at the same time as CVC. In November 2012, Bluewater filed a $650 million lawsuit in the Supreme Court of New York State, citing Messrs. Ecclestone and Gribkowsky and BayernLB, CVC, and three current offshore F1 group companies, named Alpha Topco, Alpha Prema and Delta Topco.
Bluewaters claims that in November 2005 it offered $1 billion to purchase a 47.2-percent stake in the F1 business that was being sold by BayernLB. However, Bluewater also claims Mr. Ecclestone paid the alleged $44 million bribe to Mr. Gribkowsky to undervalue that 47.2-percent stake—which it then sold instead to CVC for a reported $839 million, or effectively a price that was $161 million less than Bluewaters offered.
CVC subsequently paid about $210 million each to JP Morgan and Lehman Brothers for their smaller stakes in F1.
This report appeared on the website of Autoweek magazine, a Detroit-based sister publication of Tire Business.