By Christian Sylt, Crain News Service
DETROIT (Jan. 23, 2014) — Formula One boss Bernie Ecclestone has had a $650 million lawsuit against him by American investment firm Bluewaters dismissed in the New York Supreme Court.
Bluewaters said that it was the highest bidder when F1 was sold to private equity firm CVC in 2006 for $2 billion. The lawsuit claimed that Mr. Ecclestone and his Bambino family trust paid a $44 million bribe to Gerhard Gribkowsky, the German banker in charge of the sale, so that he would steer F1 to CVC.
The private equity firm was allegedly Mr. Ecclestone's preferred bidder, as it had agreed to retain him as the boss of the series.
In November 2012 Bluewaters sued Mr. Ecclestone, Bambino, CVC and Mr. Gribkowsky. It demanded $650 million in damages, claiming that CVC's profits from F1 "rightfully belong to Bluewaters and its financial backers."
However, on Jan. 21 Judge Eileen Bransten, justice of the Supreme Court, ruled against Bluewaters because "the 'critical events' underlying the claims in this lawsuit took place in Germany, England and elsewhere in Europe."
Although Bluewaters itself is now based in New York, at the time of its offer for F1 it was located on the island of Jersey off the coast of England—which is also the home of F1's parent company Delta Topco.
At the heart of Bluewaters' case is a written offer it sent on Nov. 15, 2005, to three investment banks, BayernLB, JP Morgan, and Lehman Brothers, which together owned 75 percent of F1. Bluewaters offered $1 billion for their shares, which was far lower than the amount paid by CVC.
However, Bluewaters said that its offer was submitted with a cover letter to Mr. Gribkowsky, saying that it "is prepared to pay 10 percent more in cash consideration...above any genuine bona-fide offer put forward by any other accredited buyer."
Justice Bransten said that "no party has submitted a copy of this alleged cover letter." Crucially, she added that CVC's offer stated that it was "governed by the laws of England, and that all claims and matters arising out of it would be dealt with exclusively in English courts."
Mr. Ecclestone admitted paying Mr. Gribkowsky but denied that it was a bribe. He said that Mr. Gribkowsky threatened to make unfounded allegations about his tax affairs if the money was not paid. It was dispatched from Mr. Ecclestone's bank accounts in Switzerland and the transaction was handled by a financial advisor based in the country.
Justice Bransten said that "this action is not about a lost business venture in New York, but rather on allegations that an English citizen bribed a German citizen to compel a German bank to sell its interest in a Jersey company to an English company rather than another Jersey company."
As a catch-all argument, Bluewaters claimed that the New York Supreme Court should hear the lawsuit because the alleged bribe was paid in dollars. However, Justice Bransten said that "Bluewaters' jurisdictional theory would vest a New York court with jurisdiction over any party anywhere in the world who does a dollar-denominated transaction even though the transaction has no connection to New York."
Mr. Ecclestone is due to be put on trial in April for paying the alleged bribe, and he is currently awaiting the verdict of another lawsuit connected to the sale to CVC. German media rights firm Constantin Medien sued him in London claiming that other bidders would have paid more than CVC.
The only one which has come forward is Bluewaters—and in the absence of its cover letter, it remains to be seen whether its offer was indeed higher.
To read the official court document from the motion to dismiss, click here.
This report appeared on the website of Autoweek magazine, a Detroit-based sister publication of Tire Business.