Wednesday, August 6, 2014

German Law and Bernie

Formula One racing has a pretty long and twisted history.  You can trace the start back to the 1920s, and show the growth of the racing industry all the way to the 1950s....when it kinda reached a stagnant period (interest and money-making had seemed to peak).

In the 1970s....this British guy....Bernie Ecclestone came along and figured the way to sell Formula One at different levels...push interest higher...and make the whole thing into a very profitable deal.

A piece of Formula One around eight years ago was owned by the Bayern Landesbank (the big-name Bavarian bank).  They had engaged into investment opportunities and saw Formula One as a risky but profitable enterprise. It made sense to own a piece of the racing forum.

Bernie Ecclestone....thirty years later....is still at the helm of Formula One racing.  Bernie has many connections and one day....eight years ago....he has this associate who is eager to buy in and enhance Formula One racing.  No one talks much over who this was and why Bernie was eager to see this person get in on the action.  But Bernie decides it's a deal for Formula One racing and the Bayern Landesbank just needs to part with their chunk of ownership.

The Landesbank didn't see it as Bernie did....and quietly declined (no public discussions or acknowledgement that such a deal might even occur).  So Bernie went to the next step.....he "gifted" the chief bank officer to ensure that the Landesbank sold their chunk of Formula One to Bernie's new friend.

What we generally know today is that roughly the equivalent of forty-four million Euro went to the bank officer.  No one has said if this went via the German banking system or via some Swiss account, nor has the German taxation of the forty-four million been explained.

The deal is then blessed, and everything proceeds forward....selling the Landesbank's chunk of Formula One racing.

At some point after this....everything gets discovered.  What Bernie says in public at this point is that he was blackmailed into giving the money to Landesbank loan officer, in order to achieve the sell.  Well....in German banking laws....it was illegal.  In some ways, I imagine that Bernie simply saw it as a "fee" and not a "bribe", "gift", or "under-the-table-payment".

It took several years to go through the legal system, and suddenly yesterday.....the court episode came to an end.

What the court in Bavaria suddenly said was that they had established that Bernie's comment of this being "blackmail" was not going to be accepted.

Generally....blackmail means you were screwing some hooker and got caught by the wife's private detective who wants you to pay him thousands to remain quiet.  Or, it means that you had a mistress in Paris, and the butler of the house finds out about this and wants you to pay hundreds of thousands to be quiet.  Bernie couldn't establish a case like that.

Bernie was in a pretty curious corner at this point.  The whole Formula One committee had met up months ago and said if Bernie was convicted.....they would lose faith in his ability, and fire him.  If he avoided the conviction of bribing.....they'd keep him on.

So, at the court episode yesterday in Bavaria....Bernie did the right thing once the blackmail episode was denied.....he bribed the court in Bavaria, and offered to pay them ninety-nine million Euro (plus one million to a Bavarian charity).  Naturally, they accepted and the case ended.

Sounds flaky?  Well....yeah.  So last night, as the 8PM news on Channel One (ARD) unfolded and they spent three minutes telling this update and explained the essence of the bribe to the court......most Germans were sitting there and shaking their head.  It made no sense.  Why bribe on top of a bribe?  Why let the guy walk away by paying a bribe?

Later in the evening.....the more in-depth report came up on Channel One and a good twelve minutes of national news time was spent telling this whole story.  It's front page news on Bild and the rest of the newspapers today.  The quote on Bild is "isn't' capitalism a wonderful thing".

What the Berlin crowd says?  Well....they say it's a pretty pitiful episode and they will need to tighten the rules to forbid stuff like this.  Timetable for such action?  Maybe in 2014?  I doubt it.  Maybe in 2015?  Maybe.....but it might never be fixed.

What happens now?  Bernie goes back to Formula One with his head held high.  He's the chief manager.....flying around the world to Formula One sites....ensuring the best TV packages are accepted in the bid process....and enjoying a pretty high standard of pay for his position.

What was this whole court episode about?  A shake-down?  As an American.....I'd generally say that some idiots wrote a pretty limited law on what constitutes a bribe, a fee, and a "gift".  You could view this in several ways, which means the law wasn't meant to be used in a sparingly way....it could be carved on anyone, at anytime, for any reason.  I naturally see Bernie in a corner with the Landesbank refusing to part with their chunk of ownership.....unless someone got active and helped to push it along.  The "gift" that Bernie gave....made that happen.  Maybe it can be perceived as illegal in some cases.....but if someone won't act on something unless you "gift" them....well, maybe thats the way that capitalism is meant to work.

As for the end?  Well....Bernie is happy....the Bavarians are happy....the Formula One racing folks are happy....and that's all that really matters.

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