Starement by Mr Justice Newey could be a blow to German media rights firm Constantin Medien, which claims that Ecclestone undervalued Formula One in selling it to CVC
Bernie Ecclestone's chances of winning a $140m (£85m) high court trial were boosted when the judge cast doubt on allegations that the Formula One boss paid a $44m bribe to undervalue the motor racing series.
The case has been brought by a German media rights firm Constantin Medien and concerns the sale of Formula One in 2006, by a consortium of banks and Ecclestone's Bambino family trust, to the private equity firm CVC.
The German media company claims Ecclestone undervalued Formula One in the CVC deal and that he colluded with the German banker Gerhard Gribkowsky – who was jailed last year for eight and a half years for accepting a $44m payment – to keep control of the sport. Ecclestone denies wrongdoing.
Gribkowsky was an employee of the German bank BayernLB, which was Formula One's single largest shareholder. Constantin claims that Mr Ecclestone and Bambino paid a $44m bribe to Gribkowsky, then Bayern LB's chief risk officer, so that he would agree to sell the bank's stake to CVC. Last year a German court jailed Gribkowsky for receiving the alleged bribe and in May Ecclestone was charged by German authorities with paying it.
Constantin's lawsuit alleges that CVC was Mr Ecclestone's preferred bidder as it had agreed to retain him as chief executive, whereas a rival consortium of banks had considered firing him in the event of a takeover. CVC paid a total of $2bn for Formula One with BayernLB getting $814m. Constantin says it lost out because it had an agreement with BayernLB which entitled it to 10% of the proceeds if the bank's stake had sold for more than $1.1bn.
Constantin claims that other bidders would have paid more if the alleged bribe had not been paid to sell to CVC. However, in court this week Mr Justice Newey said: "I have to say I find the idea of a bribe being paid to get rid of the banks more plausible than the idea of a bribe being paid to undertake an arrangement under which shares were sold at an undervalue."
It could be a big blow for Constantin as it needs Newey to rule that the stake was undervalued in order to win its $140.4m damages claim against Ecclestone, Gribkowsky, Bambino and its former legal adviser.
"A key question, were I to decide there has been a bribe, would be whether Mr Ecclestone thought that the shares were being sold at an undervalue or possibly might have been sold at an undervalue," said Newey, adding that "a lot depends on exactly how Mr Ecclestone gets to his figure of two billion".
To answer the question, Philip Marshall QC, for Constantin, referred to evidence given in November by Ecclestone. He said CVC initially offered a total of $1bn for F1: "That's the figure I think I said to Gerhard and he said he needed it to be double that," Ecclestone told the court last month. When asked by Marshall whether he thought that $2bn properly reflected Formula One's value Ecclestone said: "I don't know. I didn't value the company. I've no idea. I didn't own any shares so I didn't have to worry about that."
In response to Marshall's reference of Ecclestone's testimony, Newey said: "I am not sure that helps you … you have to show that Mr Ecclestone realised it might have been sold at a wrong price and approvingly accepted the risk."
Newey's position on the valuation reflects his comments on the first day of the trial in October when he prevented Marshall from putting on the record details of the German charges against Ecclestone. "It is not as if you would agree with a number of the arguments put forward in the indictment," he said. "It would be fatal to your case, wouldn't it, what they say about the purchase price?"
Referring to this, Robert Miles QC, acting for Ecclestone, told the court that following the sale to CVC, BayernLB's former chairman Werner Schmidt said "we were given the opportunity to get out of the shareholding with extremely high proceeds.
Miles also read out evidence from Kurt Faltlhauser, the deputy chairman of BayernLB's supervisory board, who said it was "very satisfied with the purchase price of Formula One shares which were, at the time, already heavily written down in the bank's balance sheet."Ecclestone and Bambino deny paying a bribe and say that Gribkowsky threatened to make false allegations about Ecclestone's tax affairs if the money had not been paid. The trial comes to a close on Friday with judgment expected in early 2014.
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