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Home / Sport / Sailing / America's Cup

The America's Cup controversy explained: What we know and why we should care

NZ Herald
1 Jul, 2020 07:00 AM6 mins to read

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Photos / Getty (inset); Dean Purcell

Photos / Getty (inset); Dean Purcell

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Team New Zealand and America's Cup organisers are at the centre of an inquiry commissioned by the Crown over the spending of public money, including allegations of a "reclassified" $3 million loan and claims of fraud involving a Hungarian bank account.

A confidential June 22 letter written by MBIE and the Auckland Council obtained by the Herald reveals allegations around the handling of public money; the operation of the Cup itself and worries about public safety; and lifts the lid on officials' concerns that the event organisers, America's Cup Events (ACE) and Team NZ, are in breach of obligations.

After almost 48 hours of claims and counter-claims, here's what we know - and the key questions still unanswered.

So what's all the fuss about?

Concerns over the financial management of the America's Cup are so serious that the Crown made a thinly veiled threat to withhold the next tranche of taxpayer funding, according to the letter.

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MBIE and Auckland Council say a financial dashboard that was presented in May showing public spend is "materially different" from that presented earlier in the year.

Team NZ boss Grant Dalton said today that the organisation had been defrauded by scammers, with money being paid into a Hungarian bank account. He denied there had been any $3m loan to Team NZ.

General view of Sky City tower. Photo / Photosport
General view of Sky City tower. Photo / Photosport

What should we make of all that?

Team New Zealand hit back with a statement later this afternoon: "ETNZ and ACE categorically deny any wrongdoing and consider that they have already addressed the concerns of MBIE and [Auckland] Council, and their advisor Beattie Varley."

They maintain the claims are baseless and they are fully co-operating with an MBIE investigation. Dalton insists they were victims of a Hungarian scam and that there was no misuse of public money.

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The police have confirmed they were alerted to the scam in December and that they are investigating with the help of European authorities.

And what about the safety concerns?

The confidential letter raised operational and safety concerns around the Cup, including police and harbourmaster concerns around the use of on-water marshals.

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It says a suggestion by ACE to renegotiate the on-water crowd management plan to provide for fewer marshal boats "is not acceptable and if this is undertaken, the Harbourmaster might not issue the relevant permits for the Events".

"The delivery of a safe and successful event requires proper management of all on-water aspects and a revised plan with fewer marshal boats and stake boats would mean that there is a serious risk to the health and safety of members of the public."

Dalton told Newstalk ZB's Mike Hosking today that these issues were "possibly the most important thing" and that he got involved in the on-water issues a couple months ago.

"It didn't feel right. What I found was 45 chase boats. Some of which would be anchored, a lot which would be moving around in the crowd, manned by well-meaning volunteers with clipboards and fluoro-jackets. I think that's a hazard in itself.

"We suggested back that it should be significantly less volunteer chase-boat numbers ... that it should be boosted by people in authority - police - on the water. We saw that as a better combination."

Team New Zealand AC 75 foiling mono hull 'Te Aihe' sailing in Auckland Harbour. Photo / Photosport
Team New Zealand AC 75 foiling mono hull 'Te Aihe' sailing in Auckland Harbour. Photo / Photosport

Is the America's Cup in danger of being canned?

In an interview with Italian publication La Stampa, Dalton said the event was not at all in doubt: "No, not in any shape or form. The Cup right now may be the only secure sporting event in the entire world."

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Prime Minister Jacinda Ardern has already said she is unconcerned that the saga will affect the country's hosting of the event, a sentiment shared by Economic Development Minister Phil Twyford.

The findings of the MBIE investigation could change things, though.

Why does it matter?

It concerns public money and it's a big deal for New Zealand. The Government has put significant investment into hosting the event and anticipates a major boost to the Auckland and New Zealand economy next year. However, the returns are likely to be dampened significantly due to the pandemic.

National pride is at stake too and not to mention the actual America's Cup is on the line, with Team NZ being the holders.

Prime Minister Jacinda Ardern at last year's unveiling of Team New Zealand's first AC75 monohull 'Te Aihe'. Photo / Photosport
Prime Minister Jacinda Ardern at last year's unveiling of Team New Zealand's first AC75 monohull 'Te Aihe'. Photo / Photosport

Speaking of which, how much money are we talking about here?

The Government and Auckland council have poured $250m into hosting the America's Cup – and the council is planning on spending a further $20m to support the regatta and other events next year.

The council's share of the $250m is $113m. The Government is spending $136.5m, including a host fee of $40m.

Despite the controversy and the MBIE investigation, Twyford - who is also the Minister for the Cup - this afternoon said funding for the event would not be frozen.

"We haven't considered that yet. I'm happy to get advice from MBIE on that. At the moment, their priority is to find out exactly what's going on so we can get back to organising the America's Cup over summer," Twyford said.

How exactly is the America's Cup run?

Team NZ hosts the event. America's Cup Events (ACE) runs it. The Government funds it.

ACE is a subsidiary of 2021 hosts Team New Zealand, set up in 2018 to run the on-water racing, cup village, security and broadcasting for the 36th defence of the Auld Mug.

The America's Cup kicks off with the challengers' Prada Cup in January and February, with the Cup final regatta in March.

The challenger of record is Italian team Luna Rossa. The other two challengers are New York Yacht Club's American Magic and Ineos Team UK.

So what happens now?

While Team NZ have acknowledged certain facts contained in the MBIE and council letter, including the payment of $3m, they insist the team has "already addressed the concerns of MBIE and the council, and their advisor Beattie Varley".

Team New Zealand say they will fully cooperate with the investigation and will clear up their financial situation, as well as safety concerns outlined in the letter.

How the whole situation impacts sponsors and stakeholders remains to be seen.

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