It has taken eight years, but at last Crikey can publicly reveal one of the most sought after numbers in Victorian politics. Our excellent sources tell us that Bernie Ecclestone receives $18 million a year from us taxpayers for the right to run the annual grand prix in a public park.
Victorian taxpayers will be interested to know that many of their dollars have found their way to this haven on the other side of the world. For the Netherlands Antilles is the first port of call for the millions paid to Formula One boss, Bernie Ecclestone, for the rights to stage the Grand Prix at Albert Park.
The current figure is eighteen million Australian dollars but is paid in American dollars to an account in the Antilles. The figure escalates 10% annually. The charge is similar to those paid for other grand prix where the figures are not veiled in secrecy: Hungary (1997), South Korea (1998), and England (Brands Hatch, 2002).
But Ecclestone’s money trail does not stop in the Caribbean. The Economist (15/7/00) reported that the fee is likely to find its way to a Swiss bank account of an Ecclestone trust but then ends up in Jersey in the Channel Islands (and beyond British tax jurisdiction) with a company called SLEC Holdings. The Economist termed Ecclestone’s arrangements “an elaborate tax avoidance scheme.”
In paying the $18m., the Grand Prix Corporation purchases the trackside advertising rights which normally reside with Ecclestone. The corporation is free to on sell space to potential advertisers.
The contract also allows the Grand Prix Corporation to purchase the local television rights which it then sells to Kerry Packer’s Nine Network. At the race’s completion all footage reverts to the ownership of Ecclestone. The Corporation is required to provide Ecclestone and his retinue with extensive hospitality facilities. This is called “The Paddock Club” and is similar to arrangements made at other F1 venues. A half acre concrete floor is provided for a F1 mobile digital television studio.
The penalty for failure to have the circuit ready for the running of the race varies annually but is currently about $25m. This clause would have been in the mind of Melbourne’s power behind the GP, businessman Ron Walker, when the race was endangered by oil placed on the track by protestors a few years ago.
The cancellation clauses entirely favour Ecclestone. He may cancel the contract if the race is not run to his satisfaction. Interestingly, he may cancel the contract if its terms are released into the public domain. This fact was alluded to in the recent Audit Review of Government Contracts, basically a public relations exercise by the Bracks Government to signify its accountability and honesty. While the review panel examined the contract, it stated that “it has not been authorised to disclose its terms as to do so would conflict with the government’s wish to continue to stage the event.” (Vol. 2, p.202)
Both Ron Walker and Bernie Ecclestone have successfully arranged for the transference of a vast amount of taxpayers’ money to remain hidden from public gaze. This is unsurprising as they are men of great power and influence. But a number of eyes have seen the document and it was only a matter of time before its contents were revealed by individuals who could see no valid reason for secrecy.
Walker won’t be happy. He can, however, hardly complain. After all, he has done very nicely out the Grand Prix. He has formed a close business and personal relationship with Ecclestone. So close in fact that he has been a key player in Ecclestone’s Formula One financial dealings.
Last year Walker brokered a deal in which in which investment banker Hellman and Friedman sold its 37.5% stake in Ecclestone’s Formula One Administration for $2.4 billion. This was shortly after the bank bought that share for $1.2 billion.
Walker’s success fee can only be speculated upon (BRW suggested $100 million last year) but on current dealing trends it would amount to scores of millions of dollars. Matt Wade reported the affair in the Sydney Morning Herald (22/3/00) and quoted Mark Carnegie, the son of Walker’s former business partner Sir Roderick Carnegie and Hellman and Friedman’s man in Australia: “Mr. Walker did a very, very good job of bringing the parties together,” Carnegie junior said.
Another businessman who took part in the deal was Brian Powers, the managing director of Hellman and Friedman, formerly Kerry Packer’s Chief Executive at Consolidated Press and now Chairman of Fairfax. All very cosy. At least these operations were in the public domain and subject to some scrutiny. Victorians have never had the opportunity to survey the Grand Prix contract. Hopefully the release of the above information will open a floodgate or two.