Former Bayerische Landesbank Chief Risk Officer Gerhard Gribkowsky confessed to charges Formula One Chief Executive Officer Bernie Ecclestone bribed him during the 2005 sale of the lender’s stake in the racing company to CVC Capital Partners Ltd.
Gribkowsky told the Munich Regional Court today the indictment against him was “in most parts” correct. He made his declaration after closed chamber negotiations between the court, prosecutors, and his defense lawyers. In exchange for his confession, the judges informally agreed Gribkowsky would get a prison term of 7 years and 10 months to 9 years, Presiding Judge Peter Noll said at the hearing.
Prosecutors last year charged Gribkowsky, who managed Munich-based BayernLB’s interest in Formula One, with accepting bribes, breach of trust and tax evasion. They claim he received $44 million in bribes to steer the sale of the bank’s 47 percent stake in the racing circuit to CVC, a U.K.-based buyout firm, and also agreed to a sham contract under which Ecclestone received a kickback. Until today, Gribkowsky denied the claims.
“It took me a long time to come to terms with what I have done and to admit even to myself: Yes, it was bribery and yes, I should have paid tax,” Gribkowsky said in his first comments to the court since the trial began in October. “Still today I have troubles accepting this as a reality.”
Ecclestone’s attorney Sven Thomas didn’t immediately reply to an e-mail seeking comment. Ecclestone, who is being investigated by Munich prosecutors over the issue, has said he was caught up in a sophisticated shakedown and bribed Gribkowsky because he feared the banker might tell U.K. tax authorities about a family trust controlled by his then wife.
Gribkowsky said that, at a meeting in May 2005, Ecclestone indicated he would give him a job as a consultant for Formula One in the future if he helped to sell the stake. Later that year, Ecclestone presented CVC as a potential buyer and when the sale was finalized, Gribkowsky got a consultant contract under which he received $44 million, he said.
Over time, it became clear he would never actually work as a consultant and that the money was a bribe to ensure the sale would work according to Ecclestone’s plans, said Gribkowsky.
BayernLB’s 47 percent share was sold for 840 million euros ($1.07 billion). Ecclestone asked for a kickback of $100 million from BayernLB for his role in setting up the sale, Gribkowsky told the judges. Gribkowsky reduced the amount to $66 million in negotiations and said he agreed to it knowing he had the power to reject Ecclestone’s demand completely.
“Ecclestone wanted us out as much as we wanted to get out” of Formula One, Gribkowsky said. “With hindsight, I know now that I should have said no to his demands.”
BayernLB acquired the Formula One stake after the 2002 bankruptcy of Leo Kirch’s media group. Gribkowsky clashed with Ecclestone and sued him in London over corporate-governance rules changed to limit the lender’s influence.
Another motive was that BayernLB didn’t grant him a bonus for the sale, which was considered a big success, he said.
“I felt I deserved some form of recognition for a result I had achieved by years of very hard work,” he said. “When the little man made the offer, he hit the right button.”
Because Ecclestone didn’t want cover the cost of the bribes, Gribkowsky set up another scam to funnel money from BayernLB to the Formula One executive, according to the indictment. The bank manager signed a sham contract under which BayernLB had to pay Ecclestone a kickback of $41.4 million and another $25 million to his then wife’s trust, prosecutors claim.
One reason he didn’t speak out earlier was his concern about what would happen to Formula One if he disclosed what he knew, Gribkowsy said. The auto racing series’ planned initial public offering may have to be canceled, Gribkowsky said.
CVC sold a $500 million stake in the auto-racing series to Waddell & Reed Financial Inc. last week. The sale values Formula One at $9.1 billion and boosts Waddell & Reed’s holding to 20.9 percent, CVC said in a statement.