Former BayernLB Chief Risk Officer Arrested in Probe

Gerhard Gribkowsky, the former chief risk officer of German state-owned bank Bayerische Landesbank, was arrested today over allegations he accepted bribes during his tenure at the lender.

Munich prosecutors are investigating him on bribery, breach of trust and tax evasion allegations, Barbara Stockinger, a spokeswoman for the prosecutors, said in an e-mailed statement today. An arrest warrant was issued and executed today, she said.

The probe is reviewing the sale of a stake in Formula One motor-sports company which Gribkowsky, 52, was responsible for overseeing. BayernLB sold the stake in 2006 without it being properly evaluated, Stockinger said.

“According to the current findings, the suspect in turn received $50 million in payments disguised via two consultancy agreements,” Stockinger said.

Gribkowsky met with prosecutors last week to discuss the money, which was deposited into a private foundation in Austria known as Sonnenschein. Because Gribkowsky didn’t declare the money as income in Germany, he may have evaded taxes, Stockinger said.

Gerald Toifl, Gribkowsky’s lawyer, wasn’t available for a comment when Bloomberg News called the offices of his law firm in Vienna, Salzburg and Linz. He didn’t respond to an e-mail. BayernLB spokesman Matthias Luecke declined to comment.

CVC, Ecclestone

Buyout firm CVC Capital Partners Ltd. acquired BayernLB’s stake in the company as part of a deal with Bernie Ecclestone, who sold a part of his holdings in the car-racing series to CVC. BayernLB had acquired the ownership stake when it seized collateral following the 2002 collapse of German media company Kirch Holding GmbH.

CVC has no knowledge of any payment to Gribkowsky or anyone connected with him in relation to its purchase of Formula One, CVC spokesman James Olley said in an e-mailed statement. The firm wasn’t aware of the investigations and didn’t have any contact with authorities or Gribkowsky in the matter, he said.

Formula One’s Lucy Hibberd didn’t have an immediate comment.

German newspaper Sueddeutsche Zeitung reported earlier this week that Gribkowsky, while still on the board of BayernLB, received the payments from Mauritius and the British Virgin Islands. He then transferred assets to part of the foundation, which he created in May 2007, the paper said.

Toifl, who set up the Sonnenschein foundation, told the Austrian Press Agency that no Austrian laws were violated and that the money was declared and taxed in Austria. Austrian prosecutors dropped a money-laundering probe over the issue, he said, according to APA. He added that Germany hasn’t frozen the foundation’s assets.

BayernLB, Germany’s second-biggest state-owned bank, ousted Gribkowsky in April 2008 after the company reported writedowns related to the collapse of the U.S. subprime-mortgage market. BayernLB needed 10 billion euros ($13 billion) in capital from the German state of Bavaria to prop it up during the financial crisis.

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