Report: Bribery scandal leaves F1's commercial future in jeopardy

[Haltech]

Filed under: Motorsports, Government/Legal, Earnings/Financials



Bernie Ecclestone has controlled the commercial rights to Formula One for so long it seems like he always has and always will. But that's not exactly the full story. While Ecclestone was the first to negotiate for control over the sport's commercial aspects - namely its television broadcasting rights - there was a time when he had to relinquish control. And that time may come again soon.

After wrestling for the commercial rights as a team owner and head of the Formula One Constructors Association (FOCA) in the 1970s, Ecclestone's burgeoning business empire was forced to sell a controlling interest to other parties. A German media conglomerate called the Kirch Group ended up acquiring much of the shares, but when it folded, the German state-owned bank Bayern LB ended up holding the bag.

Ecclestone eventually got the funds together to buy back F1 in the early 2000s, but the way in which he and Bayern LB went about it is now the subject of what's emerging as one of the largest bribery scandals of our time.

Prosecutors allege that Ecclestone gave an enormous bribe of $44 million to one Gerhard Gribkowsky, who at the time served as chief risk-assessment officer at Bayern LB. $41.4 million of that bribe, in turn, reportedly came from Bayern LB itself, and since the bank is owned by the government, that essentially means that Gribkowsky pocketed all that cash from public coffers. Ecclestone claims the payment was essentially blackmailed out of him as Gribkowsky threatened to falsify evidence of Ecclestone's financial mismanagement.

The ongoing trial comes at a time when Ecclestone's Formula One Management is gearing up to renegotiate with the FIA (the sport's technical governing body) and the Formula One Teams Association (FOTA, the successor of the previously-mentioned FOCA) over the terms of the secretive Concorde Agreement by which the sport's commercial earnings are distributed.

The outcome of the trial stands to seriously shake up the nature of the relationship between the relevant parties, and could result in the teams taking a larger share of the commercial rights and the resulting revenues - and potentially awarding contracts to new parties. A coalition consisting of Rupert Murdoch's News Corp, Carlos Slim's Telmex and Fiat chairman John Elkann's Exor has expressed interest in acquiring the sport's broadcasting rights. With F1's affairs in such tumult, there's no telling what could happen.Bribery scandal leaves F1's commercial future in jeopardy originally appeared on Autoblog on Thu, 27 Oct 2011 09:40:00 EST. Please see our terms for use of feeds.



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