As an investigation continues into bombshell financial allegations around next year's America's Cup, one of New Zealand's most successful events promoters has called for greater oversight of how public monies provided to major events are managed.
The Herald has revealed that both Team New Zealand and organisers America's Cup Events (ECE) were at the centre of an inquiry, commissioned by the Crown, overspending of public money.
Allegations include a "reclassified" $3 million loan and claims of fraud involved a Hungarian bank account.
The claims were made in a confidential letter, dated June 22, written by the Ministry of Business, Innovation and Employment (MBIE) and the Auckland Council. It also lifted the lid on officials' concerns that Team NZ and ACE were in breach of obligations. On-water safety concerns were also mentioned.
This afternoon the Grant Dalton-led Team NZ hit back at concerns, saying both them and ACE "categorically deny any wrongdoing", and added they had "already addressed the concerns" of MBIE, Council and their advisor Beattie Varley.
To date the Government and Auckland Council have poured $250m into the event; including payments to cup holders Team NZ and for infrastructure to ensure smooth running of the 2021 event.
Not all that money agreed upon has been paid as yet, with the MBIE-council letter making a thinly-veiled threat to withhold the next "instalment" of taxpayer funding.
The council and MBIE were also concerned there has been no event cancellation insurance taken out. "As such... MBIE is not obliged to pay the next payment instalment."
A further potential payment of $20m could come from Auckland Council's Covid-19 "emergency budget" for events including promotion, activities around cup bases on the waterfront, traffic management and public transport.
Given the large sums of taxpayer and ratepayer money involved, Duco Events director David Higgins said the allegations highlighted the need for full transparency from those who benefit from the sizeable contribution of public monies.
Team NZ hits back at claims of financial mismanagement
America's Cup cash, safety saga: Govt threat to withhold public money
That included the consideration of a local or central government representative to attend board meetings discussing use of funds.
"One hundred per cent. If you have an unprecedented in New Zealand history investment in the hundreds of millions of public money, there should absolutely be [independent oversight]," Higgins told the Herald .
"I am not saying [the America's Cup funding] is a bad thing. If it creates a whole yachting and boating industry for a generation, creates jobs, and a lot of those sailors and teams are paying big taxes back in [to the economy].
"But what I would say is there should be thorough oversight and representation and reporting against criteria and analysis, and it should all be transparent. That is a no-brainer when such large sums of money are involved."
In 2013, Higgins and Duco Events penned a five-year, $9m sponsorship deal with Auckland Tourism Events and Economic Development [ATEED] to host the Auckland NRL Nines.
It was one of ATEED's biggest investments from its Major Events Fund since the 2011 Rugby World Cup.
Higgins described the scrutiny which Duco had to go through to access funds through the process was "rigorous".
"[And] I was quite impressed by that approach. When it is public money, that is how it should be," he said.
While Duco's payment was dwarfed by the $250m in public funds provided for the America's Cup, Higgins said he had to provide a "full and comprehensive cash flow", which also included best, medium and worst case scenarios, a full operational plan, occupational health and safety plans, traffic management plans, and detailed information on staffing and resourcing.
"And we weren't allowed to draw down any funding until that plan was fully written and submitted, but also not before it was signed off after thorough process," he said.
"Then that triggered us to be able to draw down some of the sponsorship."
Higgins said many events – including sporting and cultural – would go ahead without valuable contributions from both central and local governments.
"And case in point was the NRL Auckland Nines," he said.
"There are many others. And the America's Cup certainly wouldn't be happening without the funding."
But those receiving funds had to be open to scrutiny over how the money was used.
A spokesperson for Economic Development Minister Phil Twyford initially referred questions over what checks and balances were in place for Government funds provided to America's Cup activities to MBIE as it was an operational matter.
Twyford later said in a stand-up at Parliament: "There's a contractual dispute. MBIE are dealing with it and I'm not going to comment on it."
He said MBIE was getting to the bottom of whether any public money had been misspent, and he didn't believe there would be any delays to the event.
Asked whether Team NZ could be trusted, he said there were claims and "MBIE are trying to get to the bottom of it".
MBIE general manager tourism, Iain Cossar, said there was little he could share while the claims were being looked into.
"This process is ongoing and there are contractual agreements in place," he said.
"As to not undermine the current process, to protect commercial sensitivity and to protect the integrity of the ongoing investigation, we are unable to go into further detail at this time. We will provide an update when more information is available."
In 2014, it was revealed by the then National Government's Economic Development Minister Steven Joyce that Team NZ did not have to outline how they were spending an interim $5m payment to keep the syndicate together after that year's dramatic cup loss in San Francisco.
Despite the multi-million package, Joyce said he had not sighted audited accounts from the syndicate. He also added that had not been requested prior to the emergency funding being provided.
The National Government had earlier provided $36m to the unsuccessful challenge.
The allegations and concerns raised in the MBIE-council letter include:
• "ACE has used part of the Event Investment for costs that have arisen but which are not in relation to the management and delivery of the Events";
• "This includes the $3,000,000 loan to ETNZ which was subsequently reclassified and the payment that was made to the Hungarian bank account through fraud";
• "Lack of record-keeping and unwillingness to provide the information that has been requested";
• "Material relationships with third parties that are not documented and which can be terminated ... upon 30 days' notice";
• "Poor governance including suggestions that records should be retrospectively amended".
In a reply to the MBIE-council letter – released by Team NZ today - the cup holders said they and ACE had done no wrong.
The response confirmed that $3 million was paid to Team NZ - but the team did not consider this a loan, but payment for work that the team had done.
It also said the team was scammed and paid money into a Hungarian bank account. The scam was reported to police.
Team NZ's letter also addressed concerns and claims that some of their staff were not co-operating with Beattie Varley, a firm of forensic accountants examining the Cup's funding.
"A wealth of information has been provided to Beattie Varley, at times under difficult circumstances due to the Covid-19 lockdown," it says.
"Much of the information now being requested involves confidential contracts and material which should be reviewed on-site at our base."
Dalton had earlier told Newstalk ZB's Mike Hosking when quizzed about the allegations that he looked "forward to knocking them off one by one . . . a lot of them have already [been] knocked off".
Higgins said if it was proven there was no truth to the allegations, the America's Cup's reputation was still likely to take a hit.
'It is not a good look, really."
But he added of Team NZ's boss: "Grant Dalton, is extraordinary what he has achieved. He would be the best commercial sponsorship raiser that New Zealand has ever seen . . . no one comes close."
Big dollar boating
Of the $250 million of public money so far contributed to the America's Cup, $136.5m is from the Government.
That sum includes a host fee of $40m.
The most recent sizeable Government funding was a cheque for $22.5m in December 2018. At the time of the payment, then Economic Development Minister David Parker, said the 2021 event would not go ahead without it.
"Although we understand some people's scepticism given that it is a subsidy for a sport that not everyone has top of the pops, we thought on balance that the economic case justified the investment," Parker added.
The additional funds were for key infrastructure after higher than expected costs for wave breaks and dredging work.
"This investment will ensure we deliver a great regatta in 2021, and negotiating to remove the tank farm off Wynyard Point will help revitalise the waterfront," Parker said at the time.
Auckland Council has provided $113m for the event. It has also been spending a further $100m sprucing up the waterfront.
There are no further requests from Team New Zealand or ACE for further Government funding.
But a further $20m payment could be provided in Auckland Council's post Covid-19 "emergency budget" for events including promotion, activities around cup bases on the waterfront, traffic management and public transport.
The economic benefits from hosting the event have been listed as being between $500m to $1 billion.