S Bernie Ecclestone, the man who holds the keys to Formula One, will reportedly be indicted for bribery in Germany within the next month. If convicted, he could face nearly a decade in jail and be out of Formula One before the end of the year. It's confusing. Here's what you need to know.
So why is he being charged with bribery?
The charges stem from the 2005 sale of Formula One's commercial rights to CVC. CVC was allegedly Ecclestone's preferred buyer, although Ecclestone denies this. Ecclestone reportedly bribed German banker Gerhard Gribkowsky of BayernLB to the tune of $44 million to make sure the sale of the bank's shares went to CVC.
Did CVC get the rights?
Yep, CVC paid $1.7 billion for all of the rights, which was a 70 percent higher value than previously estimated. And Ecclestone's family trust, Bambino Holdings reportedly netted a healthy $478 million from the sale. F1's 75 percent shareholders, JP Morgan, Lehman Brothers and BayernLB took in the rest of the money.
So why the bribery?
The bribe was allegedly for Gribowsky to undervalue shares of Formula One that were being sold to CVC. BayernLB was one of the creditors for Constantin Medin, formerly EM.TV, which previously owned 47 percent of F1. In the sale, which was brokered by Gribkowsky while he was Chief Risk Officer at BayernLB, the shares went to CVC for $800 million. Constantin Medien says that they lost at least $171 million on the sale, since they were contractually obligated to 10 percent of any sale of rights for more than $1 billion.
A sale for $800 million got them out of paying anything to Constantin Medien, who are now suing for that money in a civil case. This is in addition to the criminal investigation that is just coming to a close in Germany.
Are they the only ones?
Nope. American group Bluewater Communications Holdings is suing for $650 million, saying that they put up an offer up that was 10 percent higher than any other offer. Ecclestone says that this claim is absurd, since there wasn't a bank's guarantee behind that 10 percent higher payoff.
Oh, well, this sounds bad. Did they let Gribkowsky off?
They didn't, and that's what makes it look bad for Ecclestone. Gribkowsky was sentenced to eight and half years in prison for accepting the bribes. He also didn't pay taxes on them, which has to be some sort of double face slap. Gribkowsky did have an appeal lodged, but he withdrew that last week.
Did Ecclestone have an excuse for paying the bribe?
Bernie has said that it was part of a "very subtle shakedown" by Gribkowsky. It actually sounds like Ecclestone feels like he was blackmailed, as he says that Gribkowsky threatened to make false allegations to tax authorities that could have cost Ecclestone billions.
What's next for Ecclestone?
Reports now state that German authorities have completed their investigation and could be indicting Ecclestone within the month. The punishment could be similar to Gribkowsky's, which would mean nearly a decade in jail for the 82 year old.
So he's definitely going to jail if indicted?
Well, if he is indicted, it doesn't sound good for Bernie. He has said that if he faces charges he will probably have to step down as the head of Formula One. He's wealthy and well connected so it's always possible that he gets a plea deal and can avoid criminal proceedings. CVC has been working on a succession plan if Ecclestone has to step down. It's probably not a bad idea anyway, since Bernie is quite old.
Ah, I think I get it.
Right? Here's the TL;DR version: A banker accepted around $44 million in bribes from Ecclestone to undervalue Formula One and sell it to CVC. CVC bought it, the value of F1 is skyrocketing, and now banks and private companies have reason to believe they were cheated out of millions while billionaire Ecclestone got richer. The banker is in jail, Ecclestone could also be heading that way.