Trial begins over F1 bribery claims

The German case could have repercussions for Bernie Ecclestone and the racing body's owner

Germany's biggest post-war corruption trial gets under way in Munich today, and among its keenest observers will be the Formula 1 chief executive, Bernie Ecclestone, and CVC, the private equity investor which owns most of the multibillion-dollar sport.

Neither Mr Ecclestone nor CVC has been charged, but their involvement with F1 could be affected by the outcome of the case. On trial is F1's former chairman Gerhard Gribkowsky, who has been charged with receiving a $44m (£27.5m) bribe in connection with the sale of F1 to CVC for $1.7bn in 2006.

Mr Gribkowsky's position as F1's chairman came through his job as chief risk officer for the state-owned bank BayernLB, which held a 47.2 per cent stake in the sport's holding company SLEC. Prosecutors allege that Mr Gribkowsky informed BayernLB's board about two deal-breakers connected to the sale to CVC. The first was paying $25m to Mr Ecclestone's family trust to settle a loan it had given to SLEC in 1998.

The second was paying Mr Ecclestone 5 per cent commission, which came to $41.4m. Mr Ecclestone says he was paid this for facilitating the sale and giving BayernLB "an indemnity for an awful lot of money that all the accounts were in good order because the bank would not give it". At the time of the sale to CVC, F1 was in a state of disarray, with teams threatening to leave the sport, but Mr Ecclestone says he vouched for its health.

Unbeknown to BayernLB, following the sale, Mr Gribkowsky received $44m from the trust and Mr Ecclestone, who says the banker was paid the money because he threatened that he would otherwise report false allegations about Mr Ecclestone's financial affairs to the Inland Revenue.

The prosecutors allege that, in fact, Mr Ecclestone and the trust requested the payments from BayernLB to compensate for giving $44m to Mr Gribkowsky, and if the bank had known this it would not have paid them. Mr Ecclestone said: "They are saying that if they hadn't paid me a commission that money would have been in their hands. But if they hadn't have paid me a commission they would still have the company. It wouldn't have been sold."

As a result of the payments to Mr Ecclestone and the trust, the prosecutors say BayernLB incurred damages of $66.4m. They add that if Mr Gribkowsky is found guilty, the $44m he received must be paid to the bank since it came from the sale of its asset. Mr Gribkowsky allegedly agreed to sell to CVC only if he was paid the money, yet he should have done this regardless since the private equity firm was the highest bidder. This is the driving force behind the prosecutors' allegation of bribery.

A spokesman for BayernLB said investigations had found that the sale process followed correct procedure, the amount received met the bank's expectations and the fee paid to Mr Ecclestone was not abnormal.

If Mr Gribkowsky's is found guilty he will lose the $44m. But because Mr Ecclestone and his family trust have simply been called as witnesses, prosecutors would then have to sue Mr Ecclestone and the trust to recover the remaining $22.4m shortfall suffered by BayernLB. It is hard to see how this could succeed, given that the bank's investigations showed that it agreed to the fee and other board members were aware of it.

CVC, meanwhile, will be watching with interest because the case poses an obstacle to it selling its asset. The race to clear it begins today.

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