$650 Million Demand in Formula 1 Deal

     MANHATTAN (CN) - An investment firm claims in court that an English business magnate's $44 million bribe to preserve his Formula 1 auto racing empire cost it $650 million.
     Bluewaters Communications sued Bernard Ecclestone, Gerhard Gribowsky, CVC Capital Partners and four other corporate defendants in New York County Supreme Court.
     "This case arises out of a $44 million bribe paid by defendant Ecclestone to defendant [German banker Gerhard] Gribkowsky using money supplied by defendants CVC and BayernLB," the complaint states. "Gribkowsky was prosecuted and convicted of taking the bribe and is now serving an eight-and-a-half year prison sentence. Ecclestone orchestrated and paid the bribe to preserve his status as head of an automobile-racing empire known as 'Formula 1.'"
     (BayernLB is defendant Bayerische Landesbank Anstalt des Öffentlichen Rechts.)
     The complaint continues: "Plaintiff was the high bidder for the purchase of Formula 1, but Ecclestone bribed Gribkowsky-using CVC's and BayernLB's money-to steer the sale of Formula 1 to CVC for CVC's and Ecclestone's benefit. Plaintiff has been damaged in an amount exceeding $650 million.
     "Formula 1 racing is one of the most popular spectator sports in the world, and Ecclestone has stood atop it for decades. The tabloid press refer to him as 'F-1 Supremo.'"
     Ecclestone lost control of Formula 1 to a bank group in 1994, the complaint states. The bank group, which included BayernLB, controlled Formula 1 through Speed Investments Limited.
     The complaint continues: "At about that time, two members of the Bank Group-Lehman Brothers and J.P. Morgan-raised the topic of Formula 1 with plaintiff's representative John Gregg, and encouraged him to buy the Bank Group's shares of Speed Investments, which together constituted a controlling interest in Formula 1. Gregg, acting through Bluewaters, secured one billion dollars ($1,000,000,000.00) in financing for the transaction from two New York private equity firms, Apollo Global Management ('Apollo') and King Street Capital Management ('King Street'). Bluewaters' agreements provided that it would receive a 'carried interest'-that is, a pre-determined share of dividends and capital gains.
     "With the support of Lehman and J.P. Morgan, Bluewaters negotiated extensively with the third member of the bank group, BayernLB, including its senior representative, Gribkowsky, to acquire control of Formula 1.
     "In a letter dated April 21, 2005, BayernLB stated in writing that it had 'carefully considered' an early offer from Bluewaters and that if Bluewaters were to meet eleven specified conditions BayernLB would then 'proceed with our decision making process.' Lengthy discussions and exchanges ensued, including subsequent offers by Bluewaters.
     "On November 15, 2005, Bluewaters submitted a written offer to BayernLB offering to purchase the Bank Group's shares of Speed Investments for one billion dollars ($1,000,000,000.00). The offer contained evidence of Bluewaters' financing commitments, and it was submitted under cover of a letter to Gribkowsky stating that 'Bluewater is prepared to pay 10 percent more in cash consideration or other
     forms of equally valued securities above any genuine bona-fide offer put forward by any other accredited buyer.'
     "Ten days later-on Thanksgiving day-defendant CVC announced that it had bought BayernLB's shares of Speed Investments and that it was keeping Ecclestone on to run Formula 1.
     "As an integral part of CVC's acquisition of Formula 1, BayernLB paid a $65 million 'fee' to Ecclestone with CVC's money earmarked for that purpose. It is not possible to understand what legitimate services Ecclestone could have provided to justify this huge 'finder's fee,' in his role as a director and the top executive officer of the operating entities of the Formula 1 enterprise. Ecclestone was bound as a director by a fiduciary duty to act in the best interests of his shareholders and to do everything
     possible to maximize the price that all shareholders received for their shares. Instead, Ecclestone manipulated the sale by using cash given to him by BayernLB and CVC to bribe Gribkowsky. In exchange, Gribkowsky made sure that BayernLB (which owned the largest block of the Bank Group's stock) sold the company for a lesser amount to CVC. Ecclestone did this because CVC would allow him to continue to run Formula 1. The 'fee' is even more difficult to understand as legitimate since Ecclestone immediately (and secretly) used the money to bribe Gribkowsky to steer the deal to CVC instead of to Bluewaters. On the very day of the announcement, Ecclestone began creating sham corporations to channel the bribe to Gribkowsky. Ecclestone, Gribkowsky, and CVC kept this corrupt payment a deep secret for many years. Bluewaters did not know about the bribe at the time it was paid."
     Also sued are Alpha Prema UK Ltd., Alpha Topco Ltd., and Delta Topco Ltd.
     Bluewaters, the sole plaintiff, seeks punitive damages for fraudulent concealment, tortious interference and unjust enrichment.
     It is represented by Kent Yalowitz, with Arnold & Porter.