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Prosecutors charge banker in F1 sale

7/19/2011 - Formula 1

FRANKFURT, Germany -- Prosecutors in Munich have charged a former executive at a German bank for allegedly taking bribes from Formula One CEO Bernard Ecclestone in connection with the 2006 sale of the bank's stake in Formula One.

Gerhard Gribkowsky, a former member of the management board at the regional bank BayernLB, was in charge of managing the sale of BayernLB's stake to private equity firm CVC Capital Partners.

Prosecutors have said Gribkowsky sold the stake without updating its valuation in return for bribes disguised as consulting contracts. He faces up to 10 years in prison if convicted.

Bernard Ecclestone, who was Formula 1 CEO at the time and retains the post, has met with prosecutors over the case and has said he is confident he will be exonerated of any wrongdoing.

Barbara Stockinger, a spokeswoman for the prosecution, said in a news release that Gribkowsky personally took $44 million in payments from the "Formula 1 CEO," identified in the release as "Bernard E.", and an affiliated company described variously as Bambino Trust and Bambino Holding. The release did not specify a motive for paying the money.

The prosecutors said Gribkowsky later used BayernLB's funds to pay the Formula One chief a commission of $41.4 million and added a further agreement for $25 million to Bambino Trust.

A court must now decide whether Gribkowsky will stand trial on the charges.

Prosecutors said the money was disguised as payments to an Austrian company set up by Gribkwosky under phony consulting contracts and paid through shell companies with addresses in Mauritius and the British Virgin Islands. They say Gribkowsky failed to pay German taxes on the money.

BayernLB, or Bayerische Landesbank, held a 48 percent stake in SLEC Holdings, which owned the companies that run the F1 racing series. At the time, 25 percent was owned by the family trust of Bernie Ecclestone, the longtime commercial head of Formula One, and the remainder was held by other banks.

CVC bought Ecclestone's and the BayernLB's stakes and regrouped them in a firm named Alpha Prema, becoming the Formula One's majority shareholder. The price of the deal has not been disclosed.

CVC has said it had no knowledge of any payments to Gribowsky.

Gribkowsky was BayernLB's chief risk officer and a member of the board between 2003 and 2008.

BayernLB, owned by Bavaria state's regional government and municipally backed local banks, traditionally focuses on helping to fund local businesses.

But big bets on global financial markets and large investments in securitized debt linked to the U.S. subprime housing market saw the bank tumbling during the financial crisis, forcing the government to bail it out with billions of fresh and state-guaranteed capital.