Fast Cars and Dodgy Taxes: Bernie Ecclestone in Jail?

Former Formula-1 boss Bernie Ecclestone leaves court in Southwark in central London on April19,2023.

Former Formula-1 supremo Bernie Ecclestone is facing allegations of fraud related to an alleged undisclosed £400 million ($477 million,473 million euros) in foreign assets before the British government. (Photo: Daniel Leal/AFP via Getty Images)

"I want to become a father at90, and I don't need Viagra."

This quote belongs to British billionaire Bernie Ecclestone, the iconic former boss of the motorsport empire "Formula 1." It's a strange way to start an article about international taxation, but Ecclestone is an unusual businessman. The phrase "salt of the earth" was coined specifically for people like him.

Few of us could do what Ecclestone did.

Born the son of a working-class fisherman, he overcame the journey from high school graduate to a globe-trotting dealmaker who befriends celebrities and heads of foreign states.

His story is one of rising from poverty to immense wealth. According to Forbes, his net worth is 2.5 billion pounds. He lives in Gstaad, Switzerland.

Ecclestone had a magnificent career that could have earned someone a knighthood, if not for his occasionally indecent actions. He was accused of bribery by state prosecutors in Bavaria. Or when he was arrested for trying to board a plane with a gun. Or when he praised foreign dictators with questionable human rights records.

To be honest, if your business model involves holding car races in exotic locations - sometimes requiring the closure of city centers to clear the roads - then cozying up to authoritarian governments is an integral part of your job. A high tolerance for "sportswashing" is a requirement for it to work.

Perhaps these critics did not notice what Ecclestone has long been doing with Formula 1. He was ahead of them by decades.

Part of Ecclestone's vision was that the "Grand Prix" race should not be limited to traditional European venues. This included familiar tracks in places like Monaco, Monza (Italy), Nürburgring (Germany), or Silverstone (United Kingdom). He actively promoted the sport in previously unexplored markets, especially in Asia and the Middle East.

In 2017, during the last season controlled by Ecclestone, the race calendar featured stops in Australia, Azerbaijan, Bahrain, Brazil, Canada, China, Japan, Malaysia, Mexico, Russia, Singapore, the United Arab Emirates, and the USA. Only seven out of 20 races took place in Europe, highlighting how the sport became global under his leadership.

Ecclestone also elevated the status of the brand. This is not an event for regular guys with regular salaries. It is intentional. "Formula 1" will never be confused with "NASCAR" and its cultural associations. Regular guys don't race Ferraris. Exclusivity is a characteristic of the brand that Ecclestone worked hard on.

Once, a journalist asked Ecclestone why he wasn't making efforts to attract the younger generation to Formula 1. He dismissively replied that they can't afford a Rolex. Rolex is a commercial partner of Formula 1 and the official timekeeper at its events.

Another official sponsor is UBS, the largest private wealth manager in the world. "These kids don't care about banking," Ecclestone said. "They don't have enough money to put it in a damn bank anyway." Spoken by a man who knows his clients.

The latest chapter in the story of Ecclestone unfolded on October 12, when he appeared before the Southwark Crown Court in London on tax charges.

He was previously accused of criminal tax fraud related to the improper accounting of two offshore funds. These were established in Singapore and were linked to the local branch of the Swiss bank Julius Baer.

Ecclestone is not the kind of person who would give up without a fight, so it was surprising when he informed Judge Sir Simon Bryan that he was changing his plea to guilty.

He was sentenced to 17 months in prison, all of which will be suspended due to his advanced age and fragile health. His lawyers argued that sending Ecclestone to prison would be traumatic for his young son Ace. Ecclestone turns 93 this month (the reference to Viagra was not entirely unfounded).

In addition to the suspended sentence, Ecclestone has agreed to a civil settlement of £652 million. This amount includes owed taxes, a fine of £330 million, and accrued interest. He will also have to pay prosecution costs of £74,000. The settlement covers the tax years from 1994 to 2022.

A few things stand out in the way the case is being handled. This is probably the largest tax penalty ever imposed by the Tax Authority and customs. If there is a larger one, I don't remember it.

The amount of the fine is significant compared to the estimated value of the undeclared assets (£400 million). It's a high price, but it helped Ecclestone avoid prison. The criminal case against him was set to begin on November 15.

I'm not sure what to think about the fact that his age and health became factors in the court's decision to grant a suspended sentence. How fragile can he be, judging by his comments about having "lots of sex" with his 46-year-old Brazilian wife, Fabiana Flosi? He hopes that Ace will soon have younger siblings to play with.

Flosi is the third wife. The second wife, Slavika Radic, was a model from Yugoslavia (don't act surprised), and she is 28 years younger than Ecclestone.

Ecclestone has a son who is growing up with three half-sisters, the oldest of whom (from Ecclestone's first marriage) is now 67 years old. Ecclestone has a grandson who is 40 years older than his son, which might be some kind of family record. How does this family not have their own reality show?

The origins of the UK tax authorities' inquiry into Ecclestone's tax issues can be traced back to his legal troubles in Bavaria ten years ago. In his defense in the German criminal case regarding bribery, it was stated that banker Gribkovsky threatened to expose scandalous information about Ecclestone's finances.

It is believed that the source of the funds allegedly used for the bribe was an offshore family trust controlled by one of Ecclestone's ex-wives, and he effectively controlled the trust's assets but never disclosed them to the UK tax authorities. Ecclestone stated that the accusation is false, but the tax and customs authorities began an investigation against him in March 2012.

The court documents explain that the initial investigation was conducted in accordance with Practice Rule No. 8 (COP8), which applies when the taxpayer's income or profit is believed by the tax authority to exceed what was disclosed in the tax returns. The investigation under COP8 indicates a possible violation that is not related to fraudulent behavior.

However, in the summer of 2013, the investigation into Ecclestone's tax affairs was reclassified under Practice Code No. 9 (COP9), which pertains to cases where the tax authority and customs believe that a possible violation is based on fraudulent actions.

In September 2013, Ecclestone admitted in a letter to the Tax Authority and Customs that he had intentionally created a tax loss through fraudulent actions. The incident concerned the tax year 2007-2008 and his interest in a piece of local property known as the Cox Lane estate. He stated that he had no other tax errors that needed to be rectified. The Tax Authority and Customs were not satisfied with his response, and the investigation under COP9 continued.

Here we know the exact moment when Ecclesiastes...