by Terry Lovell
While in early May Christian Purslow and his colleagues were still struggling to get a draft prospectus together for the approval of the Stock Exchange, 450 miles away in Frankfurt a district court was about to add to their woes. Independent television producer Wolfgang Eisele, who eight months earlier had pleaded in vain with Ecclestone to allow him to continue to cover European Truck Racing, was having his day in court, the first of many.
His lawyer, Dr Wolfgang Deselaers, asked the court to rule that the central marketing by the FIA of the television rights to European Truck Racing was a violation of European competition law. The court agreed, and on 4 June it issued an interim judgement which returned the rights to the organisers of the series throughout Europe. It was a significant ruling that challenged the FIA’s claim to the television rights of the 18 other FIA international series and 17 FIA-authorised international series. (Mosley has subsequently insisted that the FIA had never claimed the television rights of the authorised series.) It threatened far-reaching implications for all sports in which pan-European or global television rights were controlled by one organisation. It also threatened Ecclestone’s flotation: if legal ownership of the television rights was in doubt, what was Formula One Holdings putting up for sale? The court’s decision plunged the flotation plans into even greater disarray. Salomon Brothers needed this legal broadside like Custer needed Indians.
Ecclestone and Mosley’s response was swift and harsh – if the FIA didn’t have the television rights to European Truck Racing, it would kill the series. A statement was authorised by Max Mosley announcing that the 1997 FIA European Truck Racing Cup would be cancelled. Two days later the response of the Frankfurt district court judges, following a complaint by Deselaers, was equally uncompromising: they warned that if the FIA proceeded to do so, its president, Max Mosley, would be liable to imprisonment and/or a maximum fine of 500,000 Deutschmarks. The FIA backed down, but with little grace. That same day Joachim Mann, sports director of the Allgemeiner Deutschland Automobil-Club, and president of the FIA’s Truck Racing Commission, sent a fax to truck-race organisers informing them of the court’s decision and that they were advised not to conclude contracts for television rights with Ecclestone’s International Sportsworld Communicators. Mosley interpreted Mann’s actions as deliberate interference in the issue of television rights; moreover, in running with the hares and running with the hounds, he had been ‘incredibly disloyal’. He was called to appear before the FIA’s World Motor Sport Council and invited to resign, which he did.
For Mann, who also had to resign his role as Formula One clerk of the course at the Nurburgring, it was an ignoble and humiliating end to more than 20 years of unstinting service to motor sport. (Mosley, incidentally, was not one to have the authority of the FIA easily challenged. At a more mundane level, when Britain’s Motoring News dared to criticise the FIA for unfairly imposing a 12-month ban on Toyota Team Europe for using illegal turbo charges in the World Rally Championship, he telephoned the editor to say that he was withdrawing the FIA’s co-operation with the paper until its standard of accuracy had improved.) The interim judgement, and media speculation about its implications for Formula One television rights, greatly irritated Ecclestone and Mosley.
Two days later Mosley issued a statement to clarify ‘a significant lack of understanding of television in motor sport’. The lengthy statement went on to warn that if the European Commission decided the central marketing of Formula One was illegal, it ‘would not change Formula One. The central marketing operation would simply move outside the European Union and continue as before. If the organisers in the European Union were then prevented from disposing of their rights to Formula One or were forced to allow all sorts of television producers to film at their event, the number of Formula One races in the European Union would decrease from the present ten to perhaps two or three, or even fewer. This would have a major effect on certain local economies, but would not damage Formula One itself, except in the short term. It must never be forgotten that of the FIA’s 113 countries, only 15 are in the European Union. The other 98 are unaffected by the European Union’s decisions. Of the global television audience for Formula One, less than 20 per cent is in the European Union. The relative importance of the European Union audience is forecast to decrease steadily as world audiences continue to grow.’
It was an aggressive exhibition of sabre-rattling that few outside of the FIA took seriously: to kill Formula One in Europe, where at that time seven of the 17 events on the Formula One calendar were staged, would have inflicted devastating damage in loss of prestige and sponsor interest. It would also be inconceivable that Ferrari, Mercedes-Benz and Peugeot would agree to a move that would bring an end to an Italian, German or French Grand Prix. Ecclestone himself later acknowledged its implausibility, when he said: ‘We would never move out of Europe … the cost of moving all the races out of Europe, with all the transport fees, would be enormous.’
Just when Purslow and his team were probably thinking that things couldn’t get any worse, they did. For while Ron Dennis, Frank Williams and Ken Tyrrell had agreed in May to sign the 1997 Concorde Agreement, the result of 22 drafts, they had yet to add their signatures – and refused to do so unless they had a stake in the flotation. A series of meetings was held in early June, which resulted in Ecclestone proposing either an increase in the teams’ shares of television revenue or a ten per cent shareholding in the new company. To the team bosses it wasn’t enough; they wanted both: a 20 per cent shareholding and an improved television rights cut. At a meeting on 6 June, Ecclestone stormed out, insisting the flotation would go ahead without them. Dennis, Williams and Tyrrell believed that they were now in the driving seat. It was thought that their delay in adding their signatures to the new agreement had been a deliberate ploy in order to apply maximum pressure on Ecclestone at a crucial stage of the flotation.
Ecclestone acknowledged that the latest dispute would hardly encourage the confidence of fund managers, but saw it all as a matter of perception. ‘We have seen many teams come and go. We’ve seen Lotus and Brabham disappear and others take their place. Everyone said Formula One was finished when Ayrton Senna died. Most of the teams are happy in any event, and I don’t foresee a problem.’ However, there were now noises of discontent coming from the teams who had already signed the redrafted Concorde Agreement. They hadn’t realised, they said, that, in doing so, they had waived their rights to any claim in the shareholding.
For the time being, Ecclestone remained adamant that there would be no free equity. ‘The teams can go to hell. Some of them think they have me by the balls but their hands aren’t big enough. Under no circumstances will they get any free equity or a position on the board. I don’t blame them for wanting it but Formula One is bigger than the teams and it could float without them.’ Whether it could or not, by now the question, at least for the time being, had become academic. The problems that Salomon Brothers had encountered had made a July launch an impossible deadline to meet. Ecclestone now billed it for September.
In addition to the intense hassle he was getting from Frankfurt and the teams, his relationship with Salomon Brothers was reaching a pretty low point. Soon after Ecclestone announced the postponement of the flotation, Max Mosley came up with another plan – that the FIA should float Formula One rather than Ecclestone. His reasoning was that the FIA could make a better claim to the title to the championship. It inaugurated the series in 1950, owned the trademarks and, with Ecclestone continuing to market the commercial interests, it would, thought Mosley, prove more attractive to investment institutions. And with Ecclestone one stage removed, it might stand a better chance of succeeding. Confidential talks were held with SBC Warburg, a member of the syndicate of investment banks selling the flotation. SBC agreed it made sense – but Ecclestone didn’t. He believed it conflicted with his claim to ownership of the television rights. It went no further. Around the same time, BZW, Barclays’ investment banking arm, proposed a deal to bring British Sky
Broadcasting (BSkyB), Rupert Murdoch’s satellite television channel, into Formula One by acquiring a stake in Formula One Holdings. Such was Ecclestone’s frustration at what was going on around him that he had seriously considered calling the float off. ‘All these people want to do is have bloody meetings with everybody,’ he said.
Investor interest had reached such a depressing level that it was generally considered unlikely that the flotation would even take place in September, if at all. In an effort to fire up a somewhat indifferent market, Salomon Brothers heroically suggested to Ecclestone that he went off on a three-month international marketing trip. But the ‘client from hell’, who cared nothing for his reputation, would have none of it. ‘I’ll be damned if I’m going to do their job for them when they are being paid to market the company. I’m busy running this year’s competition and after that I will be busy setting up next year’s. I’m in no hurry and it [the flotation] will happen when I’m ready.’ As anticipated, September came and went without the launch taking place. Ecclestone fixed another new date: early 1998. However, as he well knew, there were two serious impediments: the conflict with Brussels – and that included the sub-drama with Wolfgang Eisele – and the teams.
Mosley attempted to assist in the former by writing to the European Commission for Competition seeking a ‘comfort letter’ from its Commissioner, Karel van Miert, to the effect that his department had no concerns about the management of Formula One, something, he later claimed, he had been endeavouring to obtain from van Miert for three years, ever since he had become aware of a potential conflict. Mosley, who requested the letter within two weeks, spelt out once again the consequences to Europe if it was refused. One option, he said, would be to ‘re-locate both the FIA and Mr Ecclestone’s company outside of the EU and severely limit the number of F1 races in Europe’. Van Miert, clearly resenting Mosley’s threatening tone, replied that ‘threats against me will not prevent an assessment of all the relevant issues in the proper manner’.
Happily for Ecclestone, the conflict with the teams finally proved somewhat easier to resolve. In October, a month after the second postponement, he returned to the negotiating table with a compromise. He offered the teams a ten per cent equity in trust, with the right to dividends but not share ownership, and a 50 per cent cut of the television income. He also agreed that the teams could have a presence on the board, although, to ensure no one team was more powerful than another, it would be rotated annually. The offer was also contingent upon the teams committing themselves to the Concorde Agreement for ten years, rather than five, a lengthy contractual arrangement to help woo the fund managers, but which would also arouse the concerns of van Miert.
The teams’ ten per cent was due to come out of Ecclestone’s shareholding in Formula One Holdings, reducing it to 30 per cent, with 50 per cent on offer to the public and ten per cent to the FIA. ‘The teams have stopped squeezing my balls and all the commercial aspects have been resolved,’ said Ecclestone optimistically. The Concorde Agreement, after more than 50 drafts, was finally signed by all the teams – McLaren, Williams, Tyrrell, Ferrari, Prost, Jordan, Sauber, Benetton, Minardi, Arrows and Stewart – in May 1998 in the presence of Prince Albert of Monaco at the principality’s Grand Prix. At least one problem was out of the way.
There still remained the gadfly Eisele, an irritant that Ecclestone attempted to dispose of in a manner not unsurprising in someone who believes that the solution to every problem can be found in his wallet. His plan was to buy Eisele off, although, more subtly at first, through a business partnership. The ground was laid by Eisele’s fellow countryman, Hans Gunther Schmidt, the boss of the former Formula One team ATS, and a friend of Ecclestone. It led to a meeting at Speyer, near Hockenheim, in mid-July 1997 – two months after Eisele had lodged his complaint to the European Commission – at which Ecclestone proposed a three-way partnership between the two men and Christian Vogt, Ecclestone’s former employee, who had played a central role in setting up exclusive Formula One contracts with independent television companies in the late eighties.
They would take equal stakes, proposed Ecclestone, in a deal being negotiated with the French television station Canal+, to produce an international pay-for-view channel called MotorMania, which would cover every form of motor sport. Canal+ would be putting up 50 per cent of the funding capital, explained Ecclestone. The rest would be covered between the three of them. It was a golden opportunity for Eisele, whose once thriving business was now barely covering the cost of the office rent. But there was a condition attached to the partnership. Eisele would have to withdraw his legal actions and the complaint to Brussels. It was a condition he was not prepared to accept and the meeting came to an early end.
Undaunted, a month later Ecclestone invited Eisele to another meeting. This time, said Eisele, a payment of $5 million was discussed. This meeting was held at the Olden, a 15-bedroom hotel built in 1899 in the main street of the fashionable Swiss ski resort of Gstaad, which Ecclestone had bought two months earlier for £4 million and on which he reportedly planned to spend a further £17 million on expansion and refurbishment. Gstaad became a popular retreat for Ecclestone’s associates. On the day of his meeting with Ecclestone, Eisele saw that Marco Piccinini, the FIA’s deputy president of motor sport, a former boss of the Ferrari race team and now a non-executive director of Ecclestone’s company, Formula One Holdings, was among those enjoying its comforts. Also at the hotel – not far from Ecclestone’s luxurious chalet situated near the five-star turreted Palace hotel, the fabulously expensive eyrie of the world’s beautiful people – was Vogt.
That the sum of $5 million was on the table is not in dispute, but whether Ecclestone offered it or Eisele demanded it, and in return for what, remains uncertain. Ecclestone claimed it was the price Eisele wanted in return for withdrawing his European Commission complaint and court actions. As a down payment, he said, he transferred $500,000 to Eisele’s bank account. ‘He told me he wanted a few quid for just trust, so asked if I would send half a million dollars on account. We were going to sort the details out later. I would give him another $2 million and the balance of $2.5 million when the Commission gave us the clearance, which he said he could engineer for us. Then he gave me his bank account number and we just transferred the money to him.’
Eisele denied that he had requested a payment of $5 million as an out-of-court settlement, adding that their discussions went no further after Ecclestone imposed an unacceptable condition. ‘In withdrawing my complaint to the Commission, he also wanted me to give him [the names of] all my informants and paperwork [in support of the complaint], which I refused. He also wanted me to influence my lawyer to lose the court cases, which again I refused.’ Eisele admitted that he did receive $500,000 from Ecclestone, which, he claimed, was for agreeing to withdraw the part of his complaint critical of Ecclestone’s various conflicting roles within the FIA. It was not, he said, an upfront payment for any further co-operation. ‘I did not ask for $500,000. He just did it. He said he wanted to send me a clear signal. “Please give me your bank account [details],” he said. They were his words. Before I did it, I spoke to my lawyer. He [Ecclestone] just wanted to buy me off.’ Four days later, said Eisele, the money was in his account. Ecclestone later attempted to recover the money through a court in Heidelberg but was unsuccessful, said Eisele, due to lack of documentary evidence. It was an odd statement to make because documentary evidence does exist, and it suggests that it was Eisele who had made the running. In a letter to Ecclestone dated 27 May 1998 he confirmed his proposal for a ‘settlement agreement’, which had been verbally made in January. It stated that in return for his company withdrawing its complaints against the FIA and Ecclestone’s companies – International Sportsworld Communicators and Formula One Administration – to the European Commission, and its legal actions in courts in Cologne and Frankfurt, Eisele would receive, in addition to the $500,000 already paid, a payment of $2 million once all actions had been withdrawn, a further $500,000 fr
om International Sportsworld Communicators, and a final payment of $2 million from Ecclestone on the flotation of Formula One Holdings.
Ecclestone’s lawyers were unhappy with the sum requested by Eisele. In a confidential memo to Ecclestone dated 5 November 1999 a payment of $5 million was deemed ‘disproportionate to any damages he could have suffered … wielding the threat that the interests of the Formula One Group [a reference to the proposed flotation] could be seriously damaged without his cooperation.’ Ecclestone denied that he had made any suggestion to Eisele that he should ‘influence’ his lawyer to lose the legal actions – ‘that is rubbish; all Eisele had to do was drop them’ – but conceded that he had wanted the names of the parties who had supported or assisted him. For Ecclestone suspected, while Mosley at that time was convinced, that Mercedes-Benz, the principal participant in the truck series, wanted to see Eisele win the day to maintain the status quo. ‘It was all part of a huge movement to have a go at us,’ said Mosley. His concerns were hardened by a meeting called by Eisele and held in a Frankfurt hotel on 23 March 1997, which, along with representatives from two other motor sports, was attended by Wolfgang Deselaers and a representative from Mercedes. A main item on the agenda was a discussion on ‘solidarity process’.
That July Mercedes acted as an intermediary, unsuccessfully as it turned out, to bring Eisele and Ecclestone together to discuss their differences. Ecclestone became so concerned that the car manufacturer appeared to be backing Eisele that he approached Jürgen E. Schrempp, the chairman of DaimlerChrysler, the parent company of Mercedes-Benz. ‘I have a close friendship with the number-one guy there. I asked him face to face, and he denied that Mercedes was involved. I would have been super upset [if they had been].’ Ecclestone accepted Schrempp’s denial but Mosley remains doubtful to this day. ‘There were all sorts of reasons for believing that they had been quietly making trouble. It is a big company and [people] lower [than Schrempp] have a lot of power.’