So we’ve been following the Gerhard Gribkowsky case since August 2011.

As you may recall it’s alledged that Bernie Ecclestone paid Gerhard a bribe of $44 Million so that the sale of the Kirsh Group’s interest in Formula One was not only below market value, but also so they would not participate in any profit sharing.  Bernie’s counter-contention was that it was merely an extortion payment to hide the fact that he and his wife were evading $3.2 BILLION in taxes on the family trust fund.

Well, Wednesday Gribkowsky admitted accepting the bribe in Court-

Ex-BayernLB Banker Admits Taking Bribe on Formula 1 Sale

By Karin Matussek, Business Week

June 20, 2012

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, 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.

…

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.

…

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.

Banker Admits Formula One Bribe

By LAURA STEVENS and DAVID CRAWFORD, The Wall Street Journal

June 20, 2012, 5:15 p.m. ET

Mr. Gribkowsky was arrested early last year after Munich prosecutors launched a probe into allegations that he accepted bribes from Mr. Ecclestone to divest BayernLB’s stake in Formula One for far below the actual value.

…

BayernLB, Lehman Brothers Holdings Inc. and J.P. Morgan Chase & Co. secured a combined 75% equity stake in Formula One in 2002, part of a debt settlement plan from the bankruptcy of German media company Kirch Group.

F1 : Ecclestone in crisis as Gerhard Gribkowsky Formula 1 bribery affair develops

F1SA

Friday, 22 June 2012 09:41

The reinvigorated Formula One bribery affair has raised questions not only about the viability of the sport’s planned floatation, but about whether Bernie Ecclestone will lose his job or even face jail in Germany.

“Will Ecclestone go to Hockenheim?” the Die Welt newspaper, obviously musing a potential arrest now that former Formula 1 banker Gerhard Gribkowsky has confirmed the Formula 1 Chief Executive’s payments to him were indeed bribes, wondered.

…

German lawyer Sewarion Kirkitadze told Bild that Ecclestone ultimately face a prison sentence of “up to ten years”.

“He should also expect the prosecutor to prepare an international arrest warrant and an extradition request.”

Formula 1: Bernie Ecclestone Seeks Nothing Wrong in Paying Banker £28M

Auto Racing Daily

Jun 23, 2012

Bernie Ecclestone said that he had been “a bit stupid” to pay a German banker $44million (£28million) following the sale of Formula One to present owners CVC Capital Partners six years ago but insisted once again that he had done nothing wrong.

…

“I have always said that we gave him money but it was not for what he said,” said the 81 year-old, who appeared as a witness at the trial in November. “He was shaking me down a bit and saying I had control of a family trust which was not true. He was doing the best he could. I was a little bit stupid – normally I would have told him to get lost.” Telegraph.co.uk

Ecclestone, 81, told Reuters that Gribkowsky had been putting him under pressure over his tax affairs. He paid some 10 million pounds ($16 million) to the banker to “keep him quiet” and not as alleged to smooth the sale of the Formula One stake to private equity firm CVC Capital Partners.

Ecclestone puts brave face on Gribkowsky’s £28m bribe confession

David Tremayne, The Independent

Saturday 23 June 2012

As investment banker Gerhard Gribkowsky awaits sentence in Germany after confessing to taking a $44m (£28m) bribe, allegedly from Bernie Ecclestone, there has been inevitable speculation whether Ecclestone can escape being dragged further into the sport’s latest cause célèbre. It has already led to a delay in the proposed flotation of F1 in Singapore even though the $10bn (£6.4bn) valuation sought by rights holder CVC Capital Partners had been achieved by a recent sale of shareholdings to American investors.

Theoretically if somebody is found guilty of receiving a bribe then the person making the bribe can also be charged but, for Ecclestone, Valencia has been business as usual and he does not appear to have a care in the world. He blamed Gribkowsky for “shaking him down” while testifying at the Bavarian banker’s preliminary hearing, and his attorney Sven Thomas issued a statement after Gribkowsky’s confession claiming that it would have no impact on the prosecutors’ investigation into Ecclestone’s dealings.

Formula One chief Bernie Ecclestone faces fresh allegations over £28 million ‘bribe’

By Tom Cary, F1 Correspondent, The Telegraph

10:31PM BST 20 Jun 2012

If Munich’s state prosecutors decide to go after Ecclestone, sources have indicated they might try to agree a financial settlement rather than go through a lengthy and costly trial with a billionaire in his eighties.

Should they press charges, it remains unclear what action, if any, CVC will decide to take. Ecclestone told The Daily Telegraph earlier this year that the private equity firm “could get rid of me tomorrow if it wanted to”.

These are extremely delicate times in the sport. CVC has sold more than £1.3billion worth of shares over the past few months ahead of a mooted flotation on the Singapore stock exchange later this year, although it says it intends to remain F1’s controlling shareholder. CVC declined to comment on Wednesday night.

I’ll be extremely surprised if any of this is mentioned today.

Speaking of surprises, in racing related news the headline is ‘Scuderia Marlboro UPC fails to advance to Q3’.  Timo Glock is too sick to race so only 23 cars will start.

Tire choices are Mediums and Softs.  Hardly any Softs escaped unused among the contenders in Qualifying so some of the big names in the back might attempt an early charge and extend strategy.  It will be Soft, Medium, Medium and after Canada I’d hardly expect any team to deviate.  It’s a fuel and brake hog so there could be some failures.

One newsworthy exchange that did air during Practice or Qualifying, I misremember, is that the stands are pretty empty this year.  The commentator observed that it’s hard to justify $400 for a ticket with 24% unemployment.  What did not get said is that there is discussion about dropping Valencia next year.

live stream?

• Formula One Official Site
• Valencia
• Guardian Interactive Circuit Guide
• Speed Racecast
• Formula One: Valencia Qualifying

Pretty tables below.

So, do you want to talk about tires?

Me either, but the engineers want to talk about tires because they’re very unhappy, calling them ‘unpredictable’.

Pirelli, for their part, deny this, saying that not only are they utterly reliable in their performance, but that durability and speed are consistent (though variable) throughout the range of racing temperatures which are beyond their control (being weather based and all).

All of this precipitated of course by Alonso’s spectacular late race, 7 place fold in Canada as he attempted to execute a skip pit advantage strategy that went disastrously wrong.

Please forgive my complete lack of sympathy for the Maranello crybabies of Scuderia Marlboro UPC.  The sad fact of the matter is that the Rules Committee is getting exactly the kind of competition they designed with 7 different winners in 7 races so far.  It’s a personal disappointment to me also since I’d prefer to see the possibility of a two stop vs. three stop, but I’d like a fuel weight strategy too and longer stops mean less ability to run away and hide in the lead.

So I entirely disagree with the concept that when you pit and for what is the dominant factor- they are like the weather, sucking equally and for everyone at the same time.  It’s still about qualifying to the extent of balancing saving tires and getting good position, a good start, and staying within a stop of the lead and out of trouble.

And if pit idiocy were eliminated McLaren would have a good team, so count your blessings.

Tomorrow’s broadcast is going to be challenging.  Tape delayed @ noon on Faux it makes my life miserable because the Speed Racecast at 8 am and that’s where I get my in-race positions.  I expect I’ll suffer through it like silent radio, taking periodic measurements.  Speed.com is supposed to live stream it too.

• Formula One Official Site
• Valencia
• Guardian Interactive Circuit Guide

Frederik Pohl and Cyril M. Kornbluth, 1955

Wikipedia–

(I)n this novel corporate lawyers… have gained a stranglehold on the world. Business Law is an extremely lucrative career, while Criminal Law pays enough to afford some of the luxuries of life but not enough to save for the future.

Success means living in a luxurious automated “bubble home” constructed by “GML”, a corporation which is nominally public but whose shares are never traded openly. All work contracts include GML housing as part of the pay scale. Not having a contract job means having to live in a community such as “Belly Rave”, originally a post-war suburban development for returning soldiers, now a slum ruled by teenage gangs. Its original name was “Belle Rêve”.

For the common people, there are bread-and-circuses entertainments in the form of gladiatorial games of various kinds, with monetary rewards for the winners. Some games pit elderly people against each other armed with padded clubs, but others are more deadly.

…

(T)he “public assistance” system … ensures that nobody starves, without actually making life worth living. … (R)esidents indulge in a kind of barter, or petty theft, extortion, and gang crime, or simply anaesthetize themselves with liquor.

…

Wall Street… has become a hybrid stock-market and public casino.

…

The plan Bliss hatches is to bankrupt GML rather than indulge in a proxy battle. Mundin is dispatched to sabotage certain GML houses, including the model in the Smithsonian, at the same time spreading rumors through his political connections.

…

(T)hey return to Wall Street where Mundin starts a run on the market by carefully selling off large chunks of the GML stock. After a while the selling takes on a life of its own.

…

As the market collapses, the plotters are left with large amounts of cash, which they use to buy up GML and other companies at bargain prices. At the end they are counting their riches and savoring their triumph.

Not currently in print.  Copies in very good+ condition available @ Rudy’s Books for $2.50.

As Mubarak Lay Dying

Posted by Lawrence Wright, The New Yorker

June 20, 2012

Sixty years ago, a group of military officers, led by Gamal Abdel Nasser and Anwar Sadat, forced Farouk I, an Ottoman leftover who styled himself King of Egypt and Sudan, Sovereign of Nubia, Kordofan, and Nubia, to rush to his yacht and seek exile in Monaco. In this effort, they were assisted by the C.I.A., which was dismayed by the decadence and corruption that characterized Farouk’s reign. The operation was known informally as “Project FF”-Fat Fucker. It was one of the many attempts to steer Egypt in what American policymakers think might be the right direction. They must look back at that period with a sense of woe-if, indeed, they ever reflect on history at all.

…

Nasser’s charisma and energy awakened the entire region to the postcolonial era, but he failed to find an accommodation with the Islamic trend, and he turned to Israel as a scapegoat. Sadat, his successor, had the courage to reach a peace treaty with Israel. He saw the foolishness of depending on the Soviet Union as an ally and socialism as an economic model. He also tried to find a way to incorporate the Islamists into civil society, at least by letting them out of prison, and they responded by murdering him.

Hosni Mubarak, who now may be dying-Tuesday, he was briefly reported clinically dead-was an excellent military officer, and a capable bureaucrat, but he had no independent vision and no idea how to escape the impediments to progress that the original coup had imposed. Immediately after Sadat’s assassination, in 1981, Mubarak imposed emergency rule, which essentially authorized unbridled dictatorial power masked by a façade of democratic elections. Under his rule, freedom of speech and assembly were tightly constrained. These restrictions on liberty crushed other forms of political expression, so that the Islamists-the Muslim Brotherhood and more radical forms of political Islam-became the only real way to voice opposition to Mubarak’s reign. Military dictatorship and Islamism became the axis upon which Egyptian politics revolved.

…

The decision by the Egyptian military to dissolve a freely elected parliament earlier this month-predicated on a court decision by Mubarak holdovers-amounts to a second military coup. Once again, it has been assisted by the American decision to continue to support the antidemocratic forces that have retarded the development of Egypt. A moderate Islamist government, responsive to the social needs of the country, is the best that the U.S. can expect now, and what the people of Egypt have demanded by their votes.

America is unlikely to have any influence on the future of Egypt if it continually opposes and demonizes the longing of Egyptians to achieve real democratic expression, with all its hazards. Sixty years of unaccountable military dictatorship have shown how sterile the alternative is. … (I)t’s time to pull the plug on American support of this antidemocratic, military regime.

Of course it could merely be a bathroom slip and fall.  Nothing to see here.

First a bonus track-

Green Shoots

Doing The Unthinkable

Terence Burnham is dead wrong.  Krugman actually does prefer Option B (“devalue through a new Spanish currency”)-

What are Spain’s alternatives here? Well, if they still had their currency, their own currency, the answer would be devalue, let the peseta drop, Spanish exports would become a lot more competitive, they’d be well on their way to recovery. They don’t have their own currency, so people are saying: Well, you have to do all this stuff to stay within the Euro. At some point you say: Well, you know if your answer to our problem is just ever more suffering, ever more you know… 25 percent, 50 percent youth unemployment. If that’s your notion of a solution, then maybe although it would be a very terrible thing to have the Euro breakup, maybe that’s better than what we’re doing. So that’s becoming a real possibility now.

Slow continued Depression with a 50% chance of another Recession.

Bernanke Continually Keeping Powder Dry, Despite Clear Evidence of Economic Slowdown

By: David Dayen, Firedog Lake

Thursday June 21, 2012 7:38 am

(T)he Fed released another set of data yesterday, its updated forecasts for the economy. And it was really bad.

…

Bernanke clearly knows both that the economy has slowed, and that several factors contribute to that: fiscal consolidation at the state and local level, a poor housing market, and headwinds from Europe (Bernanke could aid the first thing, by the way, by having the Fed go into the muni market, saving state and local government’s $85 billion annually). So this was the big question from everyone at Ben Bernanke’s news conference yesterday: because the economic forecasts have been revised downward, what is the rationale for not doing more monetary accommodation at this time? Bernanke attempted to blame Congress, coming close to saying that the bullets are out of the gun on the monetary side and that what we really need is fiscal stimulus.

…

There’s an opinion out there that Bernanke paved the way for QE3 in August, after another look at the data. But the forecast alone gives you most of what you need to make that determination. The recent history of the Fed includes a lot of waiting for more data to confirm economic slowdowns. Anticipatory action simply doesn’t happen.

Paul Solmon is an ignoramus who never studied Samuelson.

Now remember, when things look bad and it looks like you’re not gonna make it, then you gotta get mean. I mean plumb, mad-dog mean. ‘Cause if you lose your head and you give up then you neither live nor win. That’s just the way it is.

Alabama Appeals Court Reverses Decision on Chain of Title Case, Ruling Hinges on Question of Bogus Allonges

Yves Smith, Naked Capitalism

Friday, June 8, 2012

We’d flagged this case as important because to our knowledge, it was the first to argue what we call the New York trust theory, namely, that the election to use New York law in the overwhelming majority of mortgage securitizations meant that the parties to the securitization could operate only as stipulated in the pooling and servicing agreement that created that particular deal. Over 100 years of precedents in New York have produced well settled case law that deems actions outside what the trustee is specifically authorized to do as “void acts” having no legal force. The rigidity of New York trust has serious implications for mortgage securitizations.

…

It’s difficult to know when the breakdown occurred, but it appears that well before 2004-2005, many subprime originators quit bothering with the nerdy task of endorsing notes and completing assignments as the PSAs required; they seemed to take the position they could do that right before foreclosure. Indeed, that’s kosher if the note has not been securitized, but as indicated above, it is a no-go with a New York trust. There is no legal way to remedy the problem after the fact.

The solution in the Congress case appears to have been a practice that has since become troublingly become common: a fabricated allonge. An allonge is an attachment to a note that is so firmly affixed that it can’t travel separately. The fact that a note was submitted to the court in the Congress case and an allonge that fixed all the problems appeared magically, on the eve of trial, looked highly sus(pect). The allonge also contained signatures that looked less than legitimate: they were digitized (remember, signatures as supposed to be wet ink) and some were shrunk to fit signature lines.

…

The court found that the judge put an improperly high burden of proof on Congress, applying a “clear and convincing evidence” standard. The court said that was a misapplication of precedent based on cases dealing with recorded deeds. The document under dispute was an allonge to an unrecorded note. The appeals court found the evidentiary hurdle should instead be that of a preponderance of evidence. In addition, the court also found that the lower court incorrectly focused on the issue of the validity of the signatures. The appeals court found that even though Congress seemed to be contesting the validity of the signatures (the appeals court notes the argument at points seemed to be a bit confused), her real bone of contention was that the allonge was bogus (emphasis original):

Congress appears to be arguing not that signatures on the allonge are forged or otherwise invalid to prevent enforcement of the note, but that the allonge was fabricated or, essentially, created after the first trial in order to remedy the apparent defect in the chain of indorsements.

Keep in mind that Alabama is hardly a consumer friendly jurisdiction; it’s former status as one of the preferred states for launching class action suits, thanks to favorable state statutes and easily riled juries, has led to a concerted effort to elect and place business friendly judges on the bench (Alabama has far and away the most costly Supreme Court elections in the entire nation). The fact that a higher court has finally decided to place the question of the legitimacy of suddenly-appearing allonges at the heart of a ruling is a welcome development.