Mar 05 2011

In Other Formula One News

I’ll assume everyone who cares already knows that the March 13th Bahrain Grand Prix, the opening race of the 2011 season, and associated testing has been canceled because of domestic unrest right?

You might not have heard about this one-

Kickback Probe Tests CVC’s Ties With F-1’s Ecclestone

By Anne-Sylvaine Chassany, Karin Matussek and Alex Duff, Bloomberg BusinessWeek

February 15, 2011, 9:56 PM EST

Feb. 16 (Bloomberg) — Banker Gerhard Gribkowsky may have taken a $50 million kickback for engineering the sale of Formula One, the world’s most-watched motor sport, German prosecutors say. Who paid that suspected bribe, they aren’t saying.

That mystery has thrown a spotlight on the partnership between 80-year-old Formula One Management Ltd. Chief Executive Officer Bernie Ecclestone, a fixture of London’s tabloids, and the company’s buyer, CVC Capital Partners Ltd., one of Europe’s largest and most-private buyout firms.

The investigation is focused on the 2005 sale of a 48 percent stake in London-based Formula One to CVC by Bayerische Landesbank in Munich, which received a 10 billion-euro ($13.5 billion) government bailout following losses on U.S. subprime mortgages. That investigation is adding to uncertainties about Formula One’s future, making an exit more difficult for CVC, which manages 31 billion euros, including Europe’s second- largest buyout fund.

“According to the current findings, the suspect, in turn, received $50 million in payments disguised via two consultancy agreements,” Munich prosecutors said in the statement. A spokesman for the prosecutors declined to say who may have made the payments. No charges have been filed against Gribkowsky, who is being held while the probe continues. Ecclestone hasn’t been accused of wrongdoing.

The kickback case “has been a ticking bomb for at least a year now,” said Klaus Fleischer, professor of banking and finance at the University of Applied Sciences in Munich. “BayernLB is a money sink and is under enormous political pressure to clean up the whole mess of subprime, Hypo Alpe-Adria and Formula One.”

Gribkowsky didn’t run a competitive auction when BayernLB sold its 48 percent stake, two people with knowledge of the deal said. Kirch’s lawyers say the sale undervalued Formula One, according to a letter sent to the bank on Jan. 6.

Since the CVC acquisition, Formula One has been plagued by a cheating scandal, and the global economic slump led Honda Motor Co., Toyota Motor Co. and Bayerische Motoren Werke AG to quit. The average race audience fell to 44 million in 2009 from 52 million in 2004 as younger people watch less TV, according to London-based Future Sport & Entertainment.

The sport is betting on growth in Asia and the Middle East after France was dropped from the schedule because it couldn’t meet the costs and Italy and Germany lost one of their two annual races. This year, the championship has 20 races, including one hosted by India for the first time.

1 ping

Comments have been disabled.