Judicial Equity

Formula One Chief's €100 Million Legal Settlement, Common in U.S., Britain, Sparks Debate in Germany

Ecclestone
Bernie Ecclestone leaves the regional court in Munich.
  • Why it matters

    Why it matters

    The large financial settlement adopted this week to end the trial of Formula One president Bernie Ecclestone will likely lead to future seven-figure resolutions in Germany, which up until now had resisted such large awards.

  • Facts

    Facts

    • A Munich court this week accepted an offer by Formula One President Bernie Ecclestone to settle his corruption.
    • Mr. Ecclestone agreed to pay €100 million to settle the case, a rarity in Germany.
    • Under terms of the settlement, Mr. Ecclestone did not admit to guilt.
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    Audio

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When Formula One chief Bernie Ecclestone agreed this week with German prosecutors to pay €100 million to bring his bribery trial to an end, he opened the door for more legal bargains of a kind that are more common in countries such as the United States and United Kingdom.

Legal experts say the size of the Ecclestone settlement, which is unprecedented in Germany, paves the way for similar cases to go forward.

“Ecclestone sets a precedent in the sense that the limits of what is financially possible have been stretched,” said Tido Park, a German lawyer with Park Wirtschaftsrecht, a law firm in Dortmund.

Mr. Ecclestone was indicted last July and went on trial in a Munich court on corruption, accused of having paid €33 million to a high-ranking executive with the Bavarian State Bank, Bayern LB.

Prosecutors alleged that the payment was a bribe to facilitate the sale of Formula One commercial rights at an undervalued price to its current holder, CVC Capital Partners – an ally of Mr. Ecclestone. Bayern LB came into possession of the rights after German media entrepreneur, Leo Kirch, filed for bankruptcy.

“Ecclestone sets a precedent in the sense that the limits of what is financially possible have been stretched.”

Tido Park, Partner at law firm Park

The bank’s executive, Gerhard Gribkowsky confessed to taking bribes from Mr. Ecclestone and has been convicted and sentenced to eight and a half years in prison. Mr Ecclestone has denied accusations of bribing Mr. Gribkowsky, claiming the latter threatened him over alleged tax evasion claims.

After the trial in Munich against Mr. Ecclestone started more than three months ago, the president and chief executive of Formula One, who is said to be worth an estimated €4 billion to €5 billion, told newspaper reporters that he wanted to get the trial out of the way and concentrate on his businesses again. He had attended court hearings twice a week during this time.

“It is certainly unpleasant to pay that much money,” Mr. Ecclestone said after the trial, according to German daily Bild. “But it is even more unpleasant to not having that kind of money in the first place.”

The Ecclestone’s case has stoked a debate over such huge settlements in Germany, and whether justice can be doled out according to the size of someone’s check book.

“In my eyes, there should not be negotiations in this dimension with justice,” said the former Justice minister of Germany, Sabine Leutheusser-Schnarrenberger, in an interview with German radio station Deutschlandfunk this week. “It doesn’t just leave a bad taste, it is really barefaced cheek.”

It is not uncommon in German court houses to settle a case in exchange of money paid by the defendant, but usually those cases involve petty crimes and the amounts are well below €100 million.

 

Sven Thomas Ecclestone Lawyer
Sven Thomas, Mr. Ecclestone’s lawyer in the Munich court. Source: DPA.

 

“But the amount of the settlement says nothing about the severity of the crime,” said Peter Noll, the Munich judge who handled Mr. Ecclestone’s case, adding that the sum always corresponds with the person’s wealth and income.

“It is not to be underestimated that the circumstances of each individual case play a huge role,” Mr. Park said. “The Ecclestone case does not provide a legal entitlement to such sums in the future.”

Of the €100 million paid by Mr. Ecclestone, €1 million will go to the German Children’s Hospice and €99 million will remain with the state of Bavaria, where the trial took place. Mr. Ecclestone has been given seven days to transfer the money beginning on Monday.

While the Ecclestone case is without precedent in Germany, settlements of these magnitudes are common in other parts of the word, including the United States and United Kingdom.

Former French presidential hopeful and IMF chief, Dominique Strauss Kahn, had settled a civil action lawsuit against a hotel maid in New York in 2012. She claimed she was sexually assaulted by Mr. Strauss-Kahn and accepted the settlement over an undisclosed sum.

In 2012, British oil company BP reached an agreement in one of the largest class-action settlements in United States. BP paid more than €6 billion to resolve thousands of claims of economic loss after the prolonged leak from the Deepwater Horizon oil rig in the Gulf of Mexico.

In the United Kingdom, media mogul Rupert Murdoch paid more than €1.2 million to several potential plaintiffs, including soccer football executive Gordon Taylor, in an out-of-court settlement to cover up his newspaper’s phone hacking.

In Germany, such out-of-court settlements are not unusual either, said Jochen Pörtge, a lawyer  at the firm Clifford Chance in Frankfurt. “One must not underestimate the sums that are paid prior to when the case goes to court,” he said. “There may be payments before the official fine is made public during the investigation process that never went public.”

The Formula One chief's settlement has set off a debate in Germany about the fairness of linking possible jail time to personal income.

One of the highest profile cases before Mr. Ecclestone was the one that involved former Deutsche Bank chief executive Josef Ackermann. He was accused of embezzlement in the merger between Britain’s Vodafone and German telecommunications company Mannesmann in 2000. Mr. Ackermann was a member of the supervisory board Mannesmann at the time. He ended up settling for €3.2 million.

“It is certainly conceivable that the Ecclestone case will now set a precedent for other cases where individuals of that net worth are sued in Germany,” said Andreas Heuer, a professor for legal studies at the Institute of Criminal Law Studies at the University of Kiel.

Legal experts say that legal settlements like that in the Ecclestone case are not designed to give a break to criminals, but to deliver justice.

“When deciding on the fine for Ecclestone”, Mr. Pörtge said, “the court will have asked themselves: What will hurt Ecclestone?”

 

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