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Formula One Chief Bernie Ecclestone Settles Bribery Case for $100 Million Formula One Chief Bernie Ecclestone Settles Bribery Case for $100 Million
(about 5 hours later)
LONDON — Bernie Ecclestone, the billionaire head of Formula One motor racing, settled a bribery case against him on Tuesday by agreeing to make a $100 million payment, apparently clearing the way for him to resume full control of the sport. LONDON — Nothing in a lifetime of cutting fast deals has quite matched what the Formula One billionaire Bernie Ecclestone achieved Tuesday, when a judge in a Munich court agreed to let him pay a $100 million penalty in return for quashing a criminal case of bribery that could have sent him to jail for up to 10 years.
The judge in the case, Peter Noll, agreed to the deal between the defense and prosecutors, formally ending the criminal case without making a ruling on Mr. Ecclestone’s guilt. The judge in the case, Peter Noll, agreed to the deal between the defense and prosecutors, formally ending the criminal case without making a ruling on Ecclestone’s guilt. The settlement brought harsh criticism.
At a time when many of the racing teams are pressing for radical changes to address declining TV audiences that are undermining the sport’s financial viability, Mr. Ecclestone formally surrendered his day-to-day financial powers over the sport at the start of the trial in April. He did retain the role of chief executive of Formula One Management, the body that controls all the commercial aspects of the sport, and continued to appear in the paddock at this season’s Formula One races around the world. “Obscene Deal,” screamed a headline in the Frankfurter Allgemeine Zeitung, one of Germany’s most influential newspapers, and a columnist in the Suddeutsche Zeitung, a powerful regional paper published in Munich, called the $100 million deal “an example of the commercialization of criminal proceedings.” Sabine Leutheusser-Schnarrenberger, Germany’s justice minister until last year, said the financial penalty had sent a message that the wealthy can buy their freedom in criminal cases.
Donald Mackenzie, head of CVC Capital Ventures, the London-based venture capital company that secured a controlling interest in Formula One in 2006, said he would dismiss Mr. Ecclestone as the chief executive of Formula One Management if convicted. “This is something we would massively criticize in other countries,” she said. “The issue should be, did someone commit a serious crime — in this case corruption, bribery and a breach of trust — or not?”
At the weekly sessions of the court in Munich, Mr. Ecclestone faced charges that he paid a $44 million bribe to the German banker who approved the $1.4 billion sale of the Formula One rights to CVC in 2006, a deal that stipulated that Mr. Ecclestone would retain his lucrative position as the sport’s overseer. Mr. Ecclestone acknowledged making the payment to the banker, Gerhard Gribkowsky, who is serving a jail term of eight and a half years for his role in the deal, but said that the payment was made under blackmail threats from the banker, who had, according to Ecclestone’s account, threatened to denounce Mr. Ecclestone for tax evasion on a family trust to the British tax authorities. Among Formula One insiders, characteristically unwilling to say anything publicly critical of Ecclestone, the reaction was divided. The sport is rife with drivers, team bosses, track owners and others who regard him conversely as the indispensable genius of the sport, or as the man who may ultimately destroy it.
A spokeswoman for the Munich court, Andrea Titz, told reporters that the proposed settlement did not mean there was an admission of guilt. This was a key element for Mr. Ecclestone in negotiations for a settlement that began last week, because conviction would have disqualified him from serving as an executive of any publicly traded company, as well as exposing him to a jail term up to 10 years, though his age, 83, made that unlikely. But after the Munich settlement, those who had hoped that a conviction in the German trial would lead to an end to the Ecclestone era after nearly 40 years of secretive maneuvering were facing up gloomily to a new prospect: that their hopes for a new, more open style of management, one that could deliver a more equitable share of the sport’s billion-dollar earnings to the racing teams and save some now faltering on the edge of bankruptcy, will be a casualty of Ecclestone’s deal in Munich.
“With this type of ending the procedure there is no ruling on guilt or innocence of the defendant,” Ms. Titz said. “He is neither acquitted nor convicted. Rather, this is a special way of ending a procedure that is in theory available to all types of cases.” Ecclestone formally surrendered his day-to-day financial powers over the sport at the start of the trial in April. But he retained the role of chief executive of Formula One Management, the body that controls the $1.5 billion in annual revenues earned by the sport, and he continued to appear in the paddock at this season’s Formula One races, professing a blithe unconcern about the proceedings in Germany.
The $100 million payment, one of the heaviest financial penalties ever levied on an individual in the history of sports, reflected the extent of the fortune Mr. Ecclestone has made from Formula One since he began taking control of the sport in the 1970s. One of Britain’s wealthiest men, he is worth $4.2 billion, according to an estimate by Forbes.com earlier this year. Donald Mackenzie, head of CVC Capital Ventures, the venture capital company based in London that secured a controlling interest in Formula One in 2006, had said he would dismiss Ecclestone as the chief executive of Formula One Management if convicted. There was no immediate reaction from Mackenzie to the Munich settlement.
When Judge Noll asked if Mr. Ecclestone could make the $100 million payment within a week, the lawyer leading his defense team, Sven Thomas, replied: “That’s doable.” At the weekly sessions of the court in Munich, Ecclestone faced charges that he paid a $44 million bribe to the German banker who approved the $1.4 billion sale of the Formula One rights to CVC in 2006, a deal that stipulated that Ecclestone would retain his lucrative position as the sport’s overseer. That stewardship has enabled him to amass a personal fortune of close to $5 billion.
The settlement accepted by the chief prosecutor, Christian Weiss, followed a plea to the judge last week from defense lawyers that the trial be ended for lack of evidence showing that Mr. Ecclestone was criminally responsible and claiming that the proceedings were proving a strain on his health. Under terms set by the judge that left him free to attend grand prix races on weekends — 19 this year, held on five continents — Mr. Ecclestone has been commuting to the Munich court sessions on a private executive jet from his homes in Gstaad, Switzerland, and London, as well as from the yacht he keeps on the Mediterranean. Ecclestone acknowledged making the payment to the banker, Gerhard Gribkowsky, who is serving an eight-and-a-half-year jail term for his role in the deal, but he said the payment was made under blackmail threats from the banker to denounce Ecclestone to British authorities for tax evasion involving an offshore family trust — an allegation Ecclestone denied.
The type of settlement that the defense and prosecution teams worked out is not uncommon in Germany. The Associated Press reported that the German criminal code allows prosecutors to drop a case in exchange for conditions that can include community work or a fine, so long as the “gravity of guilt” in the case does not warrant a verdict. A spokeswoman for the Munich court, Andrea Titz, told reporters that the $100 million settlement did not mean there was an admission of guilt. This was a key element for Ecclestone in negotiations for a settlement that began last week, because a conviction would have disqualified him from serving as an executive of any publicly traded company, as well as exposing him to a jail term of up to 10 years, though his age, 83, made that unlikely.
But legal experts in Germany said the deal in the Ecclestone case was notable for the exceptional size of the fine, and for the fact that Judge Noll was ready to end the case despite his own role in the Gribkowsky case. In that trial, concluded in 2011, where he delivered a guilty verdict on charges that the banker accepted a bribe from Mr. Ecclestone and defrauded his employers in the state-owned Bayerische Landesbank. “With this type of ending the procedure there is no ruling on guilt or innocence of the defendant,” Titz said. “Mr. Ecclestone leaves the court a free man. He is neither acquitted nor convicted. Rather, this is a special way of ending a procedure that is in theory available to all types of cases.”
For Mr. Ecclestone, the settlement represented a signal change of fortune, in more senses than one. Over the past year, there were few in Formula One who believed he could survive as the sport’s mastermind in light of the forces arrayed against him: civil lawsuits in Britain and the United States centering on his role in the CVC deal; the criminal case in Munich; an investigation of his finances by British tax officials; and the mounting disquiet at his stewardship of Formula One among the racing teams involved, including major competitors like Ferrari, McLaren and Mercedes-Benz. The $100 million payment, one of the heaviest financial penalties on an individual in the history of sports, reflected the extent of the fortune Ecclestone has made from Formula One since he began taking control of the sport in the 1970s. When Noll, the judge, asked if Ecclestone could make the $100 million payment within a week, the lawyer leading his defense team, Sven Thomas, replied, “That’s doable.”
But, one by one, the legal cases appear to have been resolved. The civil cases in Britain and the United States were ended, in the British case by a trial late last year in which Mr. Ecclestone argued successfully that he had not defrauded a rival bidder of $140 million by securing the sale of the Bavarian bank’s controlling interest in the sport to the CVC bidders. This spring, the British tax authorities settled a nine-year inquiry into his finances, including his role in the management of a billion-dollar family trust set up in an overseas tax haven for his two daughters, with a $17 million charge. The settlement followed a plea to the judge last week from Ecclestone’s lawyers that the trial be ended for lack of evidence showing that Ecclestone was criminally responsible. They also claimed that the proceedings were proving a “heavy burden” on his health.
What remains are the mounting financial problems facing Formula One, many of which are traced by the racing teams to Mr. Ecclestone’s role in a succession of deals over the past decade in which he acquired a 100-year lease on Formula One’s commercial rights, then oversaw successive deals in which the rights passed to a German media company, the Kirch Group, and then to that company’s creditors, including the Bavarian bank, and finally to CVC. Under terms set by the judge that left him free to attend grand prix races on weekends — 19 this year, held on five continents — Ecclestone has been commuting to the Munich court sessions on a private jet from his homes in Gstaad, Switzerland, and London, as well as from the yacht that he keeps on the Mediterranean.
Mr. Ecclestone’s critics in the sport say that by making billions out of these deals — and overseeing the CVC takeover, which has allowed that company to make huge profits each year out of Formula One’s revenues, Mr. Ecclestone has left Formula One in such a parlous financial state that its long-term survival as one of the world’s major spectator sports is threatened. The type of settlement that the defense and prosecution teams worked out is not uncommon in Germany. But legal experts there said the deal in the Ecclestone case was notable for the exceptional size of the fine, and for the fact that the judge was ready to end the case despite his own role in the Gribkowsky case. In that trial, concluded in 2011, Noll delivered a guilty verdict on charges that Gribkowsky accepted a bribe from Ecclestone and defrauded his employers in the state-owned Bayerische Landesbank.
At the same time, many of these critics acknowledge that it was Mr. Ecclestone’s financial wizardry that turned the sport from the “garageiste” era of the postwar decades, when many of the teams worked out of back-street workshops and raced for modest prize money, to the billion-dollar sport with a worldwide following that it became under his stewardship. For Ecclestone, the settlement represented a signal change of fortune, in more senses than one. Over the past year, there were few in Formula One who believed he could survive as the sport’s mastermind in light of the forces arrayed against him: civil lawsuits in Britain and the United States centering on his role in the CVC deal; the criminal case in Munich; an investigation of his finances by British tax officials; and the mounting disquiet at his stewardship of Formula One among the racing teams involved, including major competitors like Ferrari, McLaren and Mercedes-Benz.
But, one by one, the legal cases appear to have been resolved. The civil cases in Britain and the United States were ended, in the British case by a trial late last year in which Ecclestone argued successfully that he had not defrauded a rival bidder of $140 million by securing the sale of the Bavarian bank’s controlling interest in the sport to the CVC bidders.
This spring, British tax authorities settled a nine-year inquiry into Ecclestone’s finances, including his role in the management of a billion-dollar, Liechtenstein-based family trust set up in an overseas tax haven for his two daughters, with a levy of $17 million, a fraction of the billion-dollar payment that some tax experts said could have been demanded if the probe of the family trust arrangements had gone against Ecclestone.