The Formula One Group recently confirmed in a securities filing that the U.K. Serious Fraud Office is in its “pre-investigation” stage concerning fraud allegations made against it by a U.K. member of Parliament.
“As reported in certain media outlets, it is understood that a U.K. member of Parliament has written to the U.K.’s Serious Fraud Office to raise certain issues in relation to the 2013 Concorde Implementation Agreement made between Formula 1 and the governing body of world motorsport, the Federation Internationale de l’Automobile,” the securities filing stated.
The investigation concerns allegations made to the SFO by Damian Collins, a parliament member who chairs the Culture, Media and Sport Committee, following reports by British media outlets that a deal made between Formula One Group (the commercial rights holders of Formula 1) and the Federation Internationale de l’Automobile (FIA) potentially violated the U.K. Bribery Act. This deal is referred to as the Concorde Implementation Agreement.
What made the Concorde Implementation Agreement controversial is that it changed the rulemaking process governing F1 in a way that stripped the voting power the sport’s bottom four teams, while significantly increasing the voting power of both the Formula One Group and the FIA from 3.8% to 33%. The remaining six votes went to the top six teams.
For entering into the Concorde Implementation Agreement, the FIA was granted a £3.9 million (US$5 million) lump sum, as well as a 1% stake in Formula One for £358,800 (US$460,000). At the time the FIA signed the contract, private-equity firm CVC controlled Formula One, until mass media company Liberty Media acquired Delta Topco, the parent company of Formula 1, in January 2017 for £6.2 billion (US$8 billion) in January 2017. By approving Liberty’s takeover of Formula One, FIA made a £62 million (US$79.5 million) profit by cashing in its shares.
These underlying facts are what prompted Collins to raise his concerns about the deal. In a response letter to Collins, issued in May, SFO Director David Green responded that “the SFO’s Intelligence Unit is following this issue very closely and reviewing materials pursuant to allegations of bribery and corruption.”
The U.K. Criminal Justice Act gives the SFO powers to compel companies to hand over e-mails, bank records, and other relevant documents. The SFO’s Intelligence Unit then assesses the evidence before deciding whether to launch a formal investigation.
In a recent quarterly filing, Liberty Media confirmed the SFO’s investigation into the allegations. “The SFO indicated that the matter was currently in its pre-investigation stage and that, in order to consider whether the SFO should open an investigation, it would review relevant material to determine whether or not there are suspected offences that on reasonable grounds involve serious or complex fraud,” the securities filing stated.
FIA has vehemently denied any wrongdoing. In a statement, the governing body said, “there is no conflict of interest on the part of the FIA with regard to its approval of the change of control of the CRH, which has been approved by the World Motor Sport Council taking into consideration exclusively the terms of the existing agreements between the CRH and the FIA.”
“The FIA could only have withheld its consent in the event that the change of control would materially alter the ability of the CRH to fulfil its obligations; it is obvious that the taking of control of the Formula One Group by Liberty does not create such a risk, and nobody has ever suggested a different view in this respect.”
“The FIA would naturally be happy to demonstrate the absence of any conflict of interest to any competent authority that may so request.”