Setback for Ecclestone over F1 sale case

Bernie Ecclestone is expected to be called as a witness, along with F1 chief financial officer Duncan Llowarch

Story highlights

  • The F1 chief executive face a claim from German media group Constantin Medien for damages of at least $171m
  • Constantin Medien had a contractual right to receive a contribution from the sale of BayernLB's stake in F1
  • Ecclestone's lawyers are already having to spend the summer on his response to the indictment served on him

Bernie Ecclestone's legal problems deepened after Formula One Group and owners CVC were ordered by a London court to release hundreds of documents relating to the sale of the motor racing series seven years ago, amid claims it was undervalued.

The F1 chief executive and other defendants face a claim from German media group Constantin Medien for damages of at least $171m. The German company claims that a 47 per cent stake held by BayernLB, the bank, in F1 was undervalued when it was sold to CVC in 2006. Constantin Medien had a contractual right to receive a contribution from the sale of BayernLB's stake in F1.

Ecclestone's lawyers are already having to spend the summer on his response to the indictment served on him by German prosecutors in Munich involving allegations of aiding and abetting breach of trust and of bribery.

But another Ecclestone legal team must now prepare for the Constantin Medien court case, which has been set for October 28 and is scheduled to last six weeks.

Ecclestone is expected to be called as a witness, along with F1 chief financial officer Duncan Llowarch.

The judge also ruled it was appropriate for Duncan MacKenzie, CVC's co-chairman, to be cross-examined even though CVC is not a party to the proceedings.

At a disclosure hearing in London last month, Justice Vos told lawyers for FOG and CVC their clients must release a number of documents to Constantin Medien.

    Lawyers for all parties received transcripts of the proceedings last week and are awaiting the judge's final written judgment about what has to be disclosed.

    The stake was sold for $820m when CVC completed the purchase of F1 in April 2006. But CVC's refinancing of F1 a year later implied a valuation of the stake of $2.8bn.

    In the disclosure hearing before Justice Vos, Peters and Peters, Constantin Medien's lawyers, argued there was no proper valuation and marketing of the BayernLB stake before the sale.

    The lawyers claimed the undervaluation was the result of the $44m payment made by Mr Ecclestone and Bambino, the Ecclestone family trust, to Gerhard Gribkowsky, the ex-BayernLB banker jailed last year for eight and a half years on corruption charges.

    Among the documents the judge ordered CVC to disclose are due diligence reports on F1 at the time of the sale and the refinancing; appendages to the disclosure letter from Ecclestone to CVC at the time of the transaction relating to F1 revenue streams; CVC's loan application to RBS relating to its purchase; investment committee minutes; financial models it relied upon for its offer; and a Deloitte tax report prepared for CVC at the time of refinancing.

    Lawyers for Ecclestone claimed the BayernLB stake sale represented fair value and that the value implied at refinancing was justified because of improvements to F1's revenues projections that had arisen.

    The judge said FOG had to disclose in-house financial models projecting revenues and costs, a memorandum of understanding signed by F1 teams that committed them to F1 until 2012, documents relating to the purchase of sponsorship and hospitality businesses; and documents relating to the addition of a race in Abu Dhabi to the F1 calendar.

    The other defendants in the case are Bambino, Gribkowsky and Stephen Mullens, former lawyer for F1 and Ecclestone.