The Ecclestone trial unravelled

The settlement of the Bernie Ecclestone/Gerhard Gribkowsky (alleged) bribery affair by the Munich bench spelt an extraordinary ending to an extraordinary affair.

Both the hearing and subsequent swift ending created headlines across the world, and proved once again that Formula 1's backstories still abound even when the sport itself is on summer vacation.

The story is a mirror of F1 itself, high stakes, evidence being given of secret meetings held in exotic locations between bankers, lawyers and the sport's supreme negotiator, money trails stretching across tax havens galore as transfers made their ways from bank account to secret bank account, finally ending up in a trust (Sunshine Foundation) in Austria.

Ironically the entire affair came to light not through the millions that flowed across continents, but as a result of an investigation into the multi-billion Euro collapse of mortgage lender Hypo Alpe Adria, acquired by Bayern Landesbank and managed by banker Gribkowsky, the high-flying, legally-trained son of a brewery executive.

When Adria collapsed, Bavarian-state-owned BayernLB suspended its once-star banker on full pay (half a million Euro/annum), prompting intensive delving by the German media.

The Sonnenschein Stiftung, founded by Gribkowsky in Salzburg with a donation of around £30m, was reviewed during investigations. The trail led back to Ecclestone, not Adria.

After months of silence Gribkowsky claimed he had been bribed by Ecclestone - although during Ecclestone's hearing he 'forgot' exactly why - allegedly to massage the sale of BayernLB's then-47 per cent holding in F1's commercial rights to a buyer of Ecclestone's choice. Private equity fund CVC Capital Partners was the eventual purchaser.

The bank had originally acquired its holding by default after Kirch Media, owner of 75 per cent of F1's commercial rights, went into the German equivalent of administration, owing a trio of banks a nine-figure sum. It was thus an unwilling owner seeking to cover its exposure.

F1 carried on business as usual while its ringmaster was on trial © LAT

For his part, though, the F1 tsar alleged he had been "shaken down" by the banker over his (and his family's) rather complex affairs, and had paid up because Gribkowsky insinuated he would otherwise get the British fiscal authorities to investigate his tax affairs. Although Ecclestone said his affairs were in order, he did not want to get tied up in a lengthy investigation so he paid up.

Gribkowsky was sentenced to eight-and-a-half years in a Munich prison, and Ecclestone stood in the dock answering to charges that he had bribed and embezzled. Crucially, Gribkowsky was described, as a then-employee of a state-owned bank, as a "civil servant", and bribery of such an official ranks as an extremely serious offence in Germany.

Ecclestone's evidence was that he had not bribed Gribkowsky, but had been a blackmail victim who willingly paid "the cheapest insurance policy I have ever seen" to prevent forensic audit of his family's billion-pound wealth.

In the end proceedings reached stalemate, with the state unable to prove matters either way, and unable to prove that Ecclestone was aware that Gribkowsky was even considered a civil servant.

Worse: the trail was nine years old, at least, and the accused well into his eighties and in declining health. All this left Munich prosecutors in a quandary: here was a case in which one man had been sentenced after admitting to having been bribed, yet the man who had allegedly committed the act stood in court pleading innocence; convincingly portraying himself as blackmail victim in a foreign conspiracy...

As F1 headed for Hungary for the final grand prix before the sport's summer break, both sides feared for the worst: Ecclestone that it would go against him; the prosecution that its charges would collapse. Expert evidence had been presented by both sides, and it was simply too close to call.

When Ecclestone was first charged, CVC's board vowed to fire him should he be adjudged guilty of any crime, and thus there existed a distinct possibility that the sport would be left in turmoil should Judge Noll, who sent Gribkowsky down, pronounce the worst.

F1's boss came out fighting to clear his name, at first saying he would not avail himself of the (peculiar) legal provisions in Germany's legal code that could secure freedom at a (substantial) price.

Under Section 153a of Germany's legal code accused parties are permitted to settle cases in exchange for fees forfeit to the State and/or a recognised charity, subject to the bench and all affected parties agreeing.

Sums are set according to the severity of alleged offences and the accused's means, but are usually relatively trivial - a million or so quid at most - and alleged contraventions correspondingly minor.

Long before his 'F1 tsar' days, Ecclestone in team boss mode at Brabham in 1975 © LAT

Thousands of cases annually - possibly up to a quarter of all Germany's criminal trials - are resolved thus, begging the question of whether Gribkowsky, having had his foundation frozen, was simply too poor to 'cut a deal'. However, having shied away from any deal pre-trial, when such settlements are traditionally struck, Ecclestone seemed set for the long haul - all 26 days set down for the trial.

On Hungaroring Sunday, as he walked the grid pre-race, Ecclestone smiled enigmatically. According to sources, a settlement in the region of £18m had been tabled. Despite earlier denials, it seems such an amount had been proffered at the outset, but rejected by the prosecution.

Negotiations reopened in July, ironically during the German Grand Prix. Ecclestone maintains prosecutors (this time?) opened negotiations.

"Too low" said the prosecution, desperate for a headline number to salvage a modicum of pride, of the £18m offer. They sensed that Ecclestone could be open to a deal, for in the event of conviction CVC would surely carry out its threat.

The Germans want headlines? He'd provide them, and, crucially, cut himself a 35 per cent discount. Thus he offered dollars despite the prosecuting state being a staunch defender of the Euro zone. $100m (£60m) was his full and final offer - $99m to the Bavarian state, $1m to a hospice - with deadline four days hence.

It was rapidly accepted by prosecutors themselves pleased to the see the end of a sorry saga that dragged for a decade.

They accepted subject to BayernLB agreeing. Asked by the judge whether he could "liquidate" such vast sums within the specified period (seven days of agreement), Ecclestone gave his landmark lopsided smile before nodding a firm "yes" in the direction of the bench. Case dismissed. The sum was due to be transferred as this column was written, after which the trial will be officially abandoned.

BayernLB is, though, expected to demand at least £25m via civil action, for indications are that the sum paid to Gribkowsky had originally flowed to Ecclestone as commission for brokering said sale to CVC.

Following Gribkowsky's bribery admissions, BayernLB may have a case for its return - and possibly incremental damages. Indeed, according to recent media reports, Ecclestone has made BayernLB an offer of a settlement, which has been rejected.

While Ecclestone was on trial in Germany, the nation's grand prix was one of many on the calendar facing challenges © XPB

Further civil action from other aggrieved parties may follow; indeed, the court's statement specifically states that such proceedings are not prohibited by the $100m deal.

However, as with most matters Ecclestone, the settlement sets a record by a not inconsiderable factor, suggesting Ecclestone was extremely eager to draw a line under this most unsavoury affair, which has severely tainted all those who came into its orbit.

That said, Judge Noll later stated that a conviction was unlikely, while Ecclestone subsequently said: "I was a bit of an idiot to do what I did to settle, because it wasn't with the judge, it was with the prosecutors."

Furore predictably followed the deal, both in Germany and elsewhere.

"Paragraph 153a of Germany's code of criminal procedure seems to combine the solemnity of justice with the efficiency of the market," wrote London's Financial Times, noting that a court spokesperson said Ecclestone was "neither acquitted nor convicted".

"Where is the justice in this?" asked Bild, Germany's largest red-top, while former justice minister Sabine Leutheusser-Schnarrenberger called it "effrontery [that is] not in keeping with the sense and purpose of our rule of law".

Still, Ecclestone is a free man, although the fact that he shelled out two-and-a-half the indicted amount - ironically the same amount McLaren was fined after being found guilty in 'Spygate' - in return for the case coming to an end will always leave people asking questions about this matter and Germany's judicial system.

CVC, too, is under the spotlight, criticised for having no structured succession plan in place and keeping Ecclestone at the helm of its most profitable company despite his age and the moments of crisis his absence from office caused the sport. Public statements from the ultimate controller of F1's commercial rights are totally conspicuous by their glaring absence.

Thus open questions to Donald Mackenzie, co-funder and chairman of CVC: What did your company learn from this experience? Does a formal, structured succession plan exist? When are you going to provide details to reassure the teams, their employees, sponsors and partners and F1's legion of fans?