Jump to content


Photo
- - - - -

Bernie and the law, round 2


  • Please log in to reply
45 replies to this topic

#1 LeClerc

LeClerc
  • Member

  • 24,563 posts
  • Joined: June 14

Posted 19 December 2014 - 19:13

Apparently our little friend is being confronted with a claim for 345,9 Million € by BayernLB (State bank of Bavaria).

 

Back to Munich, Bernie.

 

edit: link http://www.forbes.co...ating-to-crash/


Edited by LeClerc, 19 December 2014 - 19:14.


Advertisement

#2 Ross Stonefeld

Ross Stonefeld
  • Member

  • 70,106 posts
  • Joined: August 99

Posted 19 December 2014 - 19:31

*raises hand*

 

How the HELL do they have 4.1billion in debt. Or is that one of those always amusing financial tricks where you buy something really expensive with a loan, but use the thing you're buying as collateral.



#3 Lazy

Lazy
  • Member

  • 6,708 posts
  • Joined: June 10

Posted 19 December 2014 - 19:38

*raises hand*

 

How the HELL do they have 4.1billion in debt. Or is that one of those always amusing financial tricks where you buy something really expensive with a loan, but use the thing you're buying as collateral.

I think it's called "Let's syphon off all the cash to dodgy offshore companies, then, when everything goes tits up, the public bails us out and we've got all the loot stashed".



#4 BRG

BRG
  • Member

  • 25,883 posts
  • Joined: September 99

Posted 19 December 2014 - 20:38

Or is that one of those always amusing financial tricks where you buy something really expensive with a loan, but use the thing you're buying as collateral.

Isn't that called a mortgage?  

 

I guess Bernie , at 84 years of age, will be gone before all this legal stuff finally reaches its conclusion.  So he couldn't care less.  But CVC ought to be very, very worried.



#5 Amphicar

Amphicar
  • Member

  • 2,823 posts
  • Joined: December 10

Posted 19 December 2014 - 22:25

At least this time, if Bernie pays to make the case go away, no-one can complain!



#6 Risil

Risil
  • Administrator

  • 61,328 posts
  • Joined: February 07

Posted 19 December 2014 - 22:46

Isn't that called a mortgage?  

 

Usury! Burn him! :evil:



#7 Amphicar

Amphicar
  • Member

  • 2,823 posts
  • Joined: December 10

Posted 19 December 2014 - 23:18

Isn't that called a mortgage?  

 

Indeed - isn't it odd that obtaining money to buy a house via a loan secured on the property itself seems completely normal and desirable - but using exactly the same mechanism to borrow money to (say) buy a Premier League football club, seems deeply troubling. Yet it was, at root, irresponsible mortgage lending that brought the world financial system crashing down in 2008 not the leveraged buy-outs of a few high profile sports teams. Funny old world.



#8 Ross Stonefeld

Ross Stonefeld
  • Member

  • 70,106 posts
  • Joined: August 99

Posted 19 December 2014 - 23:26

Well you live in a house and pay the bank back. Though I guess buy-to-let would be similarish.

 

But I'm not sure people buying houses is quite in the same category as some of the buyout and private equity tricks.



#9 Petroltorque

Petroltorque
  • Member

  • 2,856 posts
  • Joined: March 10

Posted 20 December 2014 - 06:44

I would say it's more of a leveraged buyout. Where the value of the purchase is setup as collateral for other projects. If one can meet the interest payments you remain solvent. Much of that money being extracted from F1 is being used to repay their loans'
When Ecclestone chose to settle that case in Munich I thought that it would open the door for other plaintiffs. He might find himself vacating that seat of the F1 supervisory board again.

#10 Dipster

Dipster
  • Member

  • 572 posts
  • Joined: April 10

Posted 20 December 2014 - 13:36

Well you live in a house and pay the bank back. Though I guess buy-to-let would be similarish.

 

But I'm not sure people buying houses is quite in the same category as some of the buyout and private equity tricks.

It depends how you buy the house. Not all buyers buy modest properties and use "classic" mortgages in the sense that they borrow in their name to buy a house registered in their name. There are other routes, normally for high end properties that can bring all manner of economies.



#11 ExFlagMan

ExFlagMan
  • Member

  • 5,725 posts
  • Joined: January 10

Posted 20 December 2014 - 18:05

How much of the 'mortgage loans' that led to the 2008 problems was actually acquired/used for buying houses?

#12 Amphicar

Amphicar
  • Member

  • 2,823 posts
  • Joined: December 10

Posted 20 December 2014 - 18:28

How much of the 'mortgage loans' that led to the 2008 problems was actually acquired/used for buying houses?

The majority - unfortunately a lot of money was lent to people who had no realistic prospect of keeping up the mortgage repayments and who subsequently defaulted. The repossession and auction fire-sale of those properties then added a further downward twist to the housing market. However, the real problem was that the banks who made the irresponsible loans tried to offset the risk via a variety of derivative financial products, which spread the toxic loans across the whole financial system.



#13 Dipster

Dipster
  • Member

  • 572 posts
  • Joined: April 10

Posted 21 December 2014 - 08:01

But an awful lot of Brits were simply speculating on property prices continuing to rise. I am a quite cautious person who only invests in what I can understand and see will most probably work out. But whilst working overseas I recall a young (32) single colleague amazing me by buying an enormous, expensive house that he neither needed nor could really afford. On a 50 year mortgage when his retirement age would be 60. His hefty payments were nearly all interest and he paid off hardly any capital. He was relying on massive increases in house prices in the coming months to make a hefty profit by selling then.

 

It was obvious that such madness was not sustainable and I told him so. Needless to say he thought I was mad. Perhaps I was, but I have never suffered a foreclosure or negative equity.  But it worked for many and encouraged many others, including greedy bankers, to get involved. Then it went pop......



#14 StudMuffin

StudMuffin
  • Member

  • 46 posts
  • Joined: November 14

Posted 21 December 2014 - 11:15

The big problem with the sub-prime mortgages, was that banks lent money to people with poor credit history, then charged huge amounts of interest on the loans, therefore making it much more likely for the loan to be defaulted.

These loans were then sold on as bonds, and instead of becoming a loan became more of a comodity, and the loans were being sold for much more than the original cost of the house even though house prices were falling. It whole thing was doomed to fail.

 

As for Bernie, He seems to keep dodging bullets, but I feel there's a ricochet coming to wipe him out soon.



#15 Ross Stonefeld

Ross Stonefeld
  • Member

  • 70,106 posts
  • Joined: August 99

Posted 21 December 2014 - 12:18

I dunno, he seems pretty bullet-proof. Unless he goes down for an 'actual' crime, none of these financial, uh, irregularities, seem to do anything. And you almost never get in trouble for them anyways. You just pay a fine. I mean jesus, a guy in the UK got banned from working in the City for fare dodging. :lol:

 

So I can only see him getting retired if CVC can't take it anymore. And as long as they're getting money do they care? Bernie's pretty adept at divide and rule which keeps the non-team profits high. And that's what they want. And while another CEO/executive/whatever would have been sacked a long time ago for various incidents/bad PR/etc the Bernie Threshold seems to be unlimited. Like a kind of reverse Gerald Ratner.



#16 Amphicar

Amphicar
  • Member

  • 2,823 posts
  • Joined: December 10

Posted 21 December 2014 - 12:21

"A reverse Gerald Ratner" - brilliant. Love it.



#17 Mohican

Mohican
  • Member

  • 1,965 posts
  • Joined: May 01

Posted 22 December 2014 - 06:44

CVC is a private equity fund manager.ndo not understand why they are not (more) worried about their professional reputation - who would want to invest with them after this ?

#18 turssi

turssi
  • Member

  • 3,368 posts
  • Joined: October 10

Posted 22 December 2014 - 09:40

I would. The guys made over 500÷ with some silly sport.

#19 SophieB

SophieB
  • RC Forum Host

  • 24,465 posts
  • Joined: July 12

Posted 21 May 2015 - 14:10

Andrew Benson ‏@andrewbensonf1  17 mins17 minutes ago
Bernie Ecclestone faces a £1bn bill after UK tax collectors decide to tear up a previous settlement, Bloomberg report http://www.bloomberg.com/news/articles/2015-05-21/ecclestone-faces-1-billion-pound-u-k-tax-bill-over-family-trust 
 
From that link:

 

 HMRC wrote to Ecclestone in December saying he had withheld information that made a 2008 agreement over the trust’s status invalid, Judge Parker said.
“From HMRC’s perspective the settlement is void,” the tax agency’s lawyer Tom Weisselberg told the judge.
Ecclestone “merely wants HMRC to act in accordance with its obligations and the law,” his spokesman Richard Oldworth said.

 

 



Advertisement

#20 paultheoctopus44

paultheoctopus44
  • Member

  • 43 posts
  • Joined: December 14

Posted 21 May 2015 - 14:23

giphy.gif



#21 wrcva

wrcva
  • Member

  • 1,254 posts
  • Joined: January 10

Posted 21 May 2015 - 14:46

InsanityDefense.jpg



#22 Petroltorque

Petroltorque
  • Member

  • 2,856 posts
  • Joined: March 10

Posted 21 May 2015 - 15:17

If we back track a few posts. The difference between buying a house with a mortgage and the sub prime fiasco was that the people offered sub prime mortgages had no equity in the properties. It's quite clear that things are tightening up in investment banking. £3.2 billion in fines for fixing FOREX with criminal prosecutions to follow. I think time has run out for Ecclestone. HMRC now want their pound of flesh and should he offer the Guinness Defence he will be thrown off the F1 board. One could argue that the deals he cooked up with the teams was evidence enough of dementia.

#23 Fastcake

Fastcake
  • Member

  • 12,546 posts
  • Joined: April 10

Posted 21 May 2015 - 15:18

Poor Bernie.


Well he just might be if HMRC gets a full billion off him, but I think he's still got another billion that will keep him laughing until the end of his days. Tamara and Petra will still be getting new mansions for Christmas, so don't go worrying about them now.  ;)

#24 Nemo1965

Nemo1965
  • Member

  • 7,836 posts
  • Joined: October 12

Posted 21 May 2015 - 15:50

Andrew Benson ‏@andrewbensonf1  17 mins17 minutes ago
Bernie Ecclestone faces a £1bn bill after UK tax collectors decide to tear up a previous settlement, Bloomberg report http://www.bloomberg.com/news/articles/2015-05-21/ecclestone-faces-1-billion-pound-u-k-tax-bill-over-family-trust 
 
From that link:

 

Aha! I was wondering back then if, then when, this agreement - about which Bernie E. clearly perjured himself in Münich - would come back to bite him.



#25 BRG

BRG
  • Member

  • 25,883 posts
  • Joined: September 99

Posted 25 May 2015 - 19:41

From that link: Ecclestone “merely wants HMRC to act in accordance with its obligations.."

Be careful what you wish for, Bernie!  HMRC is obliged to gouge out of you every penny that you owe, and I hope that they do.



#26 pdac

pdac
  • Member

  • 17,074 posts
  • Joined: February 10

Posted 25 May 2015 - 20:46

The odd thing is that Bernie could probably just pay up and still have more money than he could spend in a hundred years



#27 Petroltorque

Petroltorque
  • Member

  • 2,856 posts
  • Joined: March 10

Posted 26 May 2015 - 14:27

He could indeed just pay up but the perception would remain that he is a corrupt individual. Why would any major organisation want such an individual as an executive on the board of directors?

#28 OO7

OO7
  • Member

  • 23,378 posts
  • Joined: November 04

Posted 26 May 2015 - 14:33

The worst that will happen is Bernie paying out a large sum of money.  He still won't go hungry.



#29 superq7

superq7
  • Member

  • 47 posts
  • Joined: October 13

Posted 26 May 2015 - 15:07

Be careful what you wish for, Bernie!  HMRC is obliged to gouge out of you every penny that you owe, and I hope that they do.

 

I couldn't agree more, excellent post BRG  :up:



#30 jjcale

jjcale
  • Member

  • 16,192 posts
  • Joined: October 09

Posted 30 May 2015 - 20:40

I wonder how many of Bernie's legal issues would get quietly resolved if the Russian race disappeared from the calendar....



#31 BRG

BRG
  • Member

  • 25,883 posts
  • Joined: September 99

Posted 31 May 2015 - 18:56

None?   He was a corrupt little weasel long before the Russian race came along and most of his issues date from back then.



#32 Guizotia

Guizotia
  • Member

  • 1,633 posts
  • Joined: March 09

Posted 31 May 2015 - 19:47

*raises hand*

How the HELL do they have 4.1billion in debt. Or is that one of those always amusing financial tricks where you buy something really expensive with a loan, but use the thing you're buying as collateral.

Read my post here (in this post I quoted my own earlier post and added some extra info):

http://forums.autosp...-etc/?p=6884911

To give the short story:

"A leveraged buyout is a purchase of a company using debt. It works like this - imagine you are an investor and you want to buy a company. Instead of paying for the company with cash, you (and other investors you gather together) loan yourself money. You use this loan money to pay for the company but (the key point is) you then make the company liable for the loan repayments.

This is a very neat trick. What you have done in effect is get the company to buy itself, out of it's own future earnings.

And why would we want to do this? Because now the company is lumped with big, unavoidable debt repayments. What that does is force the transfer of cash out of the company to be the highest priority for the people running it. If they don't make those payments, the company goes under.

That's basically what CVC did with Formula One a few years ago."

The post I linked to gives the story of why this method was developed.

Edited by Guizotia, 31 May 2015 - 19:53.


#33 BRG

BRG
  • Member

  • 25,883 posts
  • Joined: September 99

Posted 03 June 2015 - 11:58

So Splat Batter is gone.  It is now a straight fight between F1 and the Olympics as to which is the most corrupt sporting body.

 

Wonder if Bernie had a moment of thoughtfulness when he heard the news?  Probably not...



#34 Disgrace

Disgrace
  • Member

  • 31,165 posts
  • Joined: January 10

Posted 03 June 2015 - 12:00

FIFA is no longer corrupt? That's news to me.



#35 FullThrottleF1

FullThrottleF1
  • Member

  • 3,449 posts
  • Joined: October 13

Posted 03 June 2015 - 12:09

FIFA is no longer corrupt? That's news to me.

 

Thats like saying you've killed a cancerous body by destroying a couple of cells.



#36 jjcale

jjcale
  • Member

  • 16,192 posts
  • Joined: October 09

Posted 03 June 2015 - 16:07

None?   He was a corrupt little weasel long before the Russian race came along and most of his issues date from back then.

 

 
Uh huh ... Just like folks have been after Blatter for years and now that the Yanks have done in less than a month what the Europeans could not do in more than a decade, the holding of the WC in Russia in 2018 is now under review with the UK being seen as a likely new host ... they say.
 
Im guessing the UK tax bill is probably negotiable if Russia is dropped from the Calendar .... the other one no, that has been rumbling on for a very long time and that's a private matter about which the folks involved have very strong views... which is not at all the case with the tax matter.


#37 opplock

opplock
  • Member

  • 944 posts
  • Joined: January 10

Posted 03 June 2015 - 18:03

"Im guessing the UK tax bill is probably negotiable if Russia is dropped from the Calendar"

 

 

 

No chance. I'm a UK taxpayer and will be delighted if HMRC can extract hundreds of millions from BCE. George Osborne, I am sure, doesn't give a damn about the Russian GP and does need the money.  



#38 Gemini

Gemini
  • Member

  • 3,808 posts
  • Joined: December 99

Posted 03 June 2015 - 18:33

Read my post here (in this post I quoted my own earlier post and added some extra info):

http://forums.autosp...-etc/?p=6884911

To give the short story:

"A leveraged buyout is a purchase of a company using debt. It works like this - imagine you are an investor and you want to buy a company. Instead of paying for the company with cash, you (and other investors you gather together) loan yourself money. You use this loan money to pay for the company but (the key point is) you then make the company liable for the loan repayments.

This is a very neat trick. What you have done in effect is get the company to buy itself, out of it's own future earnings.

And why would we want to do this? Because now the company is lumped with big, unavoidable debt repayments. What that does is force the transfer of cash out of the company to be the highest priority for the people running it. If they don't make those payments, the company goes under.

That's basically what CVC did with Formula One a few years ago."

The post I linked to gives the story of why this method was developed.

 

 

Yes, but still... 4 billion? I don't remember that they paid anything closed to that. It's either CVC borrowed at some exotic interest rate, or that they actually used F1 as a collateral to borrow even more money that leverage buyout itsself,  for other purposes: eithert new acquisitions or dividend payouts from other entities they owe or to buy their own 'shares' back from the investors than co-own this particular CVC private equity fund.



#39 Risil

Risil
  • Administrator

  • 61,328 posts
  • Joined: February 07

Posted 03 June 2015 - 20:57

Thats like saying you've killed a cancerous body by destroying a couple of cells.

 

Nonsense! It's like saying you've killed a zombie by cutting off its head. :p


Edited by Risil, 03 June 2015 - 20:57.


Advertisement

#40 jjcale

jjcale
  • Member

  • 16,192 posts
  • Joined: October 09

Posted 04 June 2015 - 08:57

"Im guessing the UK tax bill is probably negotiable if Russia is dropped from the Calendar"

 

 

 

No chance. I'm a UK taxpayer and will be delighted if HMRC can extract hundreds of millions from BCE. George Osborne, I am sure, doesn't give a damn about the Russian GP and does need the money.  

 

And when exactly did HMRC start to ask for your view on who it goes after or how it deals with cases??

 

Edit: did George Osborne not need the money when he gave away at least £1.5bn to the first round of investors when the Post Office was sold.... Or what about Goldman Sach's tax deal... or Starbuck's.

 

Which of the above should be blamed on Mr Osborne and which ones should be blamed on your advice?  ;)


Edited by jjcale, 04 June 2015 - 09:03.


#41 Guizotia

Guizotia
  • Member

  • 1,633 posts
  • Joined: March 09

Posted 04 June 2015 - 09:09

Yes, but still... 4 billion? I don't remember that they paid anything closed to that. It's either CVC borrowed at some exotic interest rate, or that they actually used F1 as a collateral to borrow even more money that leverage buyout itsself, for other purposes: eithert new acquisitions or dividend payouts from other entities they owe or to buy their own 'shares' back from the investors than co-own this particular CVC private equity fund.


You're right they seem to have paid £1.1 billion, say $2 billion for arguments sake.

But don't think of this like a bank loan, the interest is part of the method of forcing the cash extraction. You don't just want the business to pay for its own purchase, you want them to pay as much more than that as they can sustainably afford to get the maximum cash out of the business. The interest rate (the loan structure) is the method of achieving that.

#42 Guizotia

Guizotia
  • Member

  • 1,633 posts
  • Joined: March 09

Posted 04 June 2015 - 09:37

What I mean is, it isn't that CVC borrow money from a bank and use it to buy the F1 company.  It's more like CVC lend the F1 company the money to buy it, and it then owes them the repayments.  



#43 Gridfire

Gridfire
  • Member

  • 887 posts
  • Joined: April 10

Posted 04 June 2015 - 11:11

Unrelated to the subject, but related to the topic title... I wonder if the FIFA/Blatter inquiry will have any impact on Bernie's activities? In the last decade we've had regular races in the middle of deserts with no spectators due entirely to the movement of large amounts of money, which kinda reminds me of Qatar 'winning' the bid to host the 2022 Football World Cup despite it being too hot to actually play football in Qatar.



#44 Petroltorque

Petroltorque
  • Member

  • 2,856 posts
  • Joined: March 10

Posted 04 June 2015 - 12:58

I don't think Ecclestone carried his suspect deals using US banks. If he did he should be worried. Unlike the EU Commission the US Department of justice is not restricted by territorial boundaries.

#45 FredF1

FredF1
  • Member

  • 2,284 posts
  • Joined: April 00

Posted 04 June 2015 - 16:12

Unrelated to the subject, but related to the topic title... I wonder if the FIFA/Blatter inquiry will have any impact on Bernie's activities? In the last decade we've had regular races in the middle of deserts with no spectators due entirely to the movement of large amounts of money, which kinda reminds me of Qatar 'winning' the bid to host the 2022 Football World Cup despite it being too hot to actually play football in Qatar.

 

I don't think Bernie's got much to worry about. Soccer might have a reputation, deserved or not, of being a popular sport that lots of its fans would consider to be a fair competition. F1 doesn't even appear in the same book, let alone page as, outside of F1 circles, nobody really considers it a sport at all let alone one aspiring to anything like fairness. Circuits/countries looking for an F1 race are like rich  old men paying much younger women to be their escorts - it's risible and gets them laughed at behind their backs but, it's their money and their vanity at stake and nobody else's so what can you do?



#46 New Britain

New Britain
  • Member

  • 7,687 posts
  • Joined: September 09

Posted 04 June 2015 - 17:36

Read my post here (in this post I quoted my own earlier post and added some extra info):

http://forums.autosp...-etc/?p=6884911

To give the short story:

"A leveraged buyout is a purchase of a company using debt. It works like this - imagine you are an investor and you want to buy a company. Instead of paying for the company with cash, you (and other investors you gather together) loan yourself money. You use this loan money to pay for the company but (the key point is) you then make the company liable for the loan repayments.

This is a very neat trick. What you have done in effect is get the company to buy itself, out of it's own future earnings.

And why would we want to do this? Because now the company is lumped with big, unavoidable debt repayments. What that does is force the transfer of cash out of the company to be the highest priority for the people running it. If they don't make those payments, the company goes under.

That's basically what CVC did with Formula One a few years ago."

The post I linked to gives the story of why this method was developed.

 

Sorry, but that is not how a leveraged buy-out works.

 

The point in a leveraged buy-out is that you borrow money from other people in order to use as little as possible of your own money when paying for the company. That way, you retain as much of your money as possible in order to invest in other leveraged buy-outs (or whatever). You do not "loan yourself money", as that would tie up more of your capital.

 

There is a balance to be struck, as the outside parties lending you the money will want you to keep some skin in the game, which gives them protection. Also, your expected debt service payments should not exceed the expected cash generated by the business. Both of these factors however help to determine how much you should borrow from outside parties, not whether you should borrow from outside parties.

 

The structure that you describe - borrowing money from oneself - is sometimes used to shift tax liability from a high-tax jurisdiction to a low-tax jurisdiction, which depending on the details could be legal tax avoidance or illegal tax evasion. That sort of scheme is not, however, essential to a leveraged buy-out.

 

I don't know the exact numbers, but the amount of money paid for companies controlled by CVC will be many times as much as CVC themselves (that is to say, their private equity investors) actually have. The great majority of the money that they have used to buy the companies that they control is borrowed from bank consortia and raised in debt flotations; it has not come from CVC.