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Jan. 9 (Bloomberg) -- CVC Capital Partner Ltd.’s managing partner told a Munich court he wasn’t informed about payments made to former Bayerische Landesbank Chief Risk Officer Gerhard Gribkowsky over the 2005 sale of Formula One racing.
Donald MacKenzie, who testified at Gribkowsky’s bribery trial in Munich today, said he and CVC only heard about the issue when the German press reported it a year ago. MacKenzie said Formula One Chief Executive Officer Bernie Ecclestone first told him he didn’t know about the payments before explaining them at a Feb. 2 meeting.
“Ecclestone told me the payment was necessary because Gribkowsky had threatened to disclose some tax-related information that was potentially damaging to him,” said MacKenzie, who isn’t accused of wrongdoing.
Prosecutors charged Gribkowsky, who managed Munich-based BayernLB’s interest in Formula One, with accepting bribes, breach of trust and tax evasion. They claim he received $44 million in bribes to facilitate the sale of the bank’s 47 percent stake in Formula One to CVC.
Gribkowsky demanded $50 million from Ecclestone as a reward for consenting to the deal and threatened to disclose possible tax violations by the Bambino family trust run by Ecclestone’s wife at the time, prosecutors said. Gribkowsky denies the charges.
MacKenzie testified he wasn’t informed about a separate agreement under which Ecclestone would get $100 million. While it may have been a breach of the Formula One sales agreement not to disclose it, arrangements in which shareholders pay executives an incentive are common, said MacKenzie.
‘Present From Heaven’
“Had I known about it at the time, I would have understood it,” he said. “We would have renegotiated the terms of the deal, though, and that would have delayed it.”
When asked by defense lawyers for the results of the internal investigation CVC commissioned from law firm Freshfields Bruckhaus Deringer LLP last year, MacKenzie first asked the court to allow him to answer the question in closed chambers because it would reveal an important business secret.
He later retracted the request and said Freshfields’ lawyers concluded that neither CVC nor any Formula One unit knew about the payments to Gribkowsky.
Ecclestone and Gribkowsky both acted like businessmen do in a negotiation process, hiding their cards and not letting the other side get the impression they are eager to sell, said MacKenzie.
Formula One’s situation was so bad that CVC was certain the shareholders, including JPMorgan Chase & Co. and Lehman Brothers Holdings Inc., were happy it was interested, MacKenzie said.
“Formula One was in a lot of trouble at the time, including the threat that the teams would leave it,” said MacKenzie. “We were in fact the only one of a very small group of companies who could buy it, so our offer must have been seen like a present from heaven.”
While MacKenzie had initially offered $1 billion as the total value of the company, Ecclestone had sought $2 billion. In the end, they settled at $2.1 billion minus a liability from a $313 million loan to the company, MacKenzie said.
MacKenzie said it was of primary importance to CVC that Ecclestone was kept on board because of his role in the business. CVC saw it as a risk that Ecclestone could switch sides and move to the teams with whom crucial negotiations were pending. CVC also wanted Gribkowsky to have a role at F1 after the sale, he said.
BayernLB acquired the Formula One stake after the 2002 bankruptcy of Leo Kirch’s media group. Gribkowsky clashed with the Formula One chief and sued him in a London court over corporate-governance rules Ecclestone changed to limit the lender’s influence. Ecclestone wanted to push BayernLB out and saw a chance when CVC showed interest, prosecutors said in the indictment.
--Editors: Peter Chapman, Heather Smith
To contact the reporter on this story: Karin Matussek in Munich via email@example.com;
To contact the editor responsible for this story: Anthony Aarons at aaarons@Bloomberg.net.