Gribkowsky, CVC and the future of F1 UPDATE Private equity fund CVC Capital Partners Ltd. Thursday said it hasn't been contacted by German prosecutors regarding a probe launched into alleged bribes accepted by Gerhard Gribkowsky, former chief risk officer of German bank BayernLB.
Gribkowsky was arrested after Munich prosecutors launched a probe into allegations of corruption, tax evasion and breach of trust, the Munich district attorney's office said in a statement Wednesday.
Gribkowsky oversaw BayernLB's sale of car-racing events company Formula One to CVC in 2006 and is now accused of accepting bribes to divest the stake without undertaking a "current valuation" for the investment. Gribkowsky allegedly received $50 million in undeclared payments for his role in the sales process through accounts in Austria, Munich prosecutors said.
CVC acquired the stake in Formula One from BayernLB through a deal with Bernie Ecclestone, the head of Formula One management group who, at the time, was also selling his stake in the group that runs Formula 1 races to CVC.
CVC further said it has no knowledge or involvement in payments to Gribkowsky or anyone related to him through the Formula One stake purchase. The private equity fund also said it hasn't been in contact with Gribkowsky regarding the matter.
Neither Gribkowsky or his attorney were immediately available for comment. A spokesman for BayernLB declined to comment. WSJ/Dow Jones01/07/11 Although the private equity fund CVC Capital Partners has said that it has no involvement in the Gibkowsky Affair, the Bavarian state prosecution service in Germany says that it is investigating the former chairman of SLEC (at the time the Formula One group’s holding company) for alleged corruption, tax evasion and breach of trust. He is accused of receiving $50 million from someone unknown for his involvement in the sale of the shares in the Formula One group owned at the time by BayernLB, the Bavarian state-owned bank. The prosecutors are claiming that the sale was done without a proper valuation having been made on the value of the shares, which were, in effect, publicly-owned at that point. They claim that the $50 million that turned up in an Austrian foundation, where it was spotted by a German newspaper, came from the F1 dealings.
Whatever the details turn out to be this is not good news for the Formula One group as it once again casts the sport in a less than attractive light, something which potential sponsors consider before they invest in the business.
Negotiations are believed to be going on at the moment for CVC Capital Partners to sell the company to one of the sovereign wealth funds in Abu Dhabi, which will give the venture capital firm another substantial pay day, but will also rid the sport of an organization that has been involved solely to make as much money as possible from the sport, with little or no obvious interest in the sport beyond its value as a cash cow, which they have milked to the full. It is hoped that under the new ownership – if it happens- the sport will be treated with a little more respect. Abu Dhabi does not need the money as oil continues to pour from the ground and such an investment would be a strategic one, to enhance the country’s position as a major player in F1 and to help to generate new businesses in Abu Dhabi, in preparation for the day when oil runs out. It is important that this is done before a new Concorde Agreement is negotiated as the teams and the FIA are all clearly keen to stop the drain of cash from the sport. At the moment 50% of the money generated in Formula 1 disappears into the pockets of the promoters, to pay off vast loans that they took out to fund the purchase. Joe Saward