Front Rudder – by Mark Reid

Front Rudder

Who, Why, What And When!

Wow! Going into Fourth of July weekend, what started as a series of story updates on the current state of the wide, wide world of sailing and yachting, of course knowing me, the America’s Cup has turned into a full-fledged scandal that threatens all aspects of the AC 36 scheduled to begin in January 2021 in Auckland, New Zealand.

A “who’s in, who is out, who’s getting in and who’s not,” has become a story of international intrigue that is starting to read like a Cold War thriller, or at least a “Spy vs. Spy” Mad Magazine parody.

In late June it was reported that Emirates Team New Zealand, the racing team for the Royal New Zealand Yacht Squadron who is the Defender/Trustee for the next America’s Cup, had outed a “contractor” for allegedly sharing insider information and classified documents.

The Royal New Zealand Yacht Squadron in Auckland. The RNZYS is the defender/trustee of the 36th America’s Cup. Photo courtesy of Carlo Borlenghi/ACE.

ETNZ CEO Grant Dalton, who just got their boat back on the water after an extended (fruitless) round trip to Europe is now having to deal with this growing scandal.

Apparently, the “contractor” had been in ETNZ’s facilities for more than several months and through the discovery of an illicit payment to a Hungarian bank, the team felt that the person or persons should be reported to authorities and terminated.

Given the state of sports right now in our COVID-19 world, we’re stuck watching NASCAR races seven days a week, golf or reading about all the other sports bickering about bubble startups to their season and money. Just think that just a few months ago Major League Baseball was going to start up in “safe” states like Arizona, Texas and Florida. Now those states are the leading hot spot areas in the country and there seems to be no coronavirus end in sight, mask or no mask!

Even New Zealand, who thought they had eradicated the virus by virtually locking down their country ended up with positive cases because of a “compassion clause,” which allowed two young ladies to attend a funeral and ended up generating a huge national controversy and debate involving lapses in proper testing and a lack of governmental control.

The beleaguered Grant Dalton of ETNZ/ACE. He is beginning to realize that wanting and having are to completely different things. Photo courtesy of Gilles Martin-Raget/ACEA.

America’s Cup teams like INEOS UK and American Magic were left wondering if their crews and support personnel were going to be let into the country, or whether the container ships would be sailing in circles even after they had both shipped their new boats down to New Zealand already. With no resolution to their fates at the time, they discovered that the Kiwis had let in the Avatar 2 crew to finish filming their movie, which also led to a national outcry, as if Prime Minister Jacinda Ardern didn’t have enough to deal with already!

Spying, scandal and controversy are nothing new in the America’s Cup. As recently as 2013 when the event was in San Francisco, OTUSA had to forfeit two races or points because of “Ruddergate,” when weighted resin bags were discovered in their ACWS AC45’s after the catamarans were turned over to the Red Bull Youth AC for competition. Several sailors were suspended, and even though OTUSA eventually prevailed to defend the Cup in a historic comeback, the victory was somewhat tainted by the controversy.

In 2007 after defending the America’s Cup in Valencia, the Swiss team Alinghi created a phantom yacht club, CNEV, in order to have more control over the rules and event which led to a court challenge by Larry Ellison. This challenge resulted in an America’s Cup raced in the middle of the winter, with Ellison’s team prevailing.

Artist rendering of the host facilities for next year’s America’s Cup. Four teams will most likely be moving into their compounds shortly. Illustration courtesy of ETNZ/ACE.

In 2003, One World had to forfeit points because of a design cheating scandal that upended a potentially exciting challenge from the Seattle Yacht Club. The team never really recovered, and was eventually eliminated in competition.

In 1887, the headline was, “America rules the waves, and waves the rules!” So, what goes around eventually comes around.

Certainly, spying in the America’s Cup is nothing new. Everyone was focused on Australia II in 1983 when the Aussies shrouded the infamous winged keel and prying eyes were everywhere. Then, just a few years later in 1992, it was common knowledge that both Raul Gardini and Bill Koch spent millions of dollars on spying efforts that finally led to some rule changes regarding espionage.

What makes this potentially scandalous situation unique is that, for all practical purposes is Grant Dalton not only runs the ETNZ team, but he has been running and raising money for the America’s Cup event as well.

ETNZ’s sailing headquarters on the Auckland waterfront. Photo courtesy of ETNZ/ACE.

Normally the event wing of the America’s Cup and the sailing part of it are done under separate entities. In 2013, even though Oracle CEO Larry Ellison was technically paying the bills for everything, he eventually had Stephen Barclay in charge of the America’s Cup Event Authority (ACEA) and Russell Coutts running OTUSA.

In 2017 the lines were a little bit blurred in Bermuda as Coutts took over duties at the ACEA and Grant Simmer ran the racing end of the business at OTUSA. But really Coutts was in charge.

Unfortunately, the biggest obstacle for Dalton at this point is that he has been at the head of both ETNZ and the event authority, ACE.

So, here we go. Buckle up! As I have said countless times, the best America’s Cup action usually takes place off the water in the headlines, not on the racecourse. What started as a story on June 29th, quickly gathered steam in just a few short days. It began with a press release from ETNZ stating that, “Informants were outed by Emirates Team New Zealand.

“Six months ago, Emirates Team New Zealand and ACE (America’s Cup Event Ltd) became suspicious that we had informants in the event organization (ACE), and these suspicions were confirmed when we had confidential and sensitive information coming back to us from Europe very recently,” according to the release.

The seat of power in Wellington, New Zealand. The parliament building is nicknamed the “beehive.” Photo courtesy of City of Wellington/NZ Tourism.

“The motives of the informants who had access to the ETNZ base can only be guessed at, at this stage. In addition, these people have made highly defamatory and inaccurate allegations regarding financial and structural matters against ACE, ETNZ and their personnel. These allegations are entirely incorrect. As a result, the contract of the informants has been terminated.”

Then all heck broke loose in New Zealand when the NZ Herald and government officials started to weigh in.

ETNZ team manager and leader Grant Dalton said he was “flabbergasted” by the alleged leak of team secrets in an interview with Stuff, the influential Wellington, NZ based news site.

“That this has existed in our own organization under our watch, we find unbelievable. We still continue to struggle to believe it, but it’s happened,” Dalton told Stuff. “As a result, the contract has been terminated, and their motives can only be guessed at, at this stage.”

A lap of luxury at the New York Yacht Club’s Newport, RI home at Harbour Court. Photo courtesy of Carlo Borlenghi/ACE.

There had been suspicions for six months that there may be informants within the organization, and that the waterfront base “swept” electronically on two occasions.

“We performed penetration tests through our firewalls to check that people weren’t able to hack us, and both of those proved negative,” said Dalton.

All this was taking place just as ETNZ was getting back on the water with their AC75 Te-Aihe, which had been on a container ship for the last several months en route to Europe and then back after the ACWS scheduled for Italy and England were cancelled because of the coronavirus. In addition, the team was not able to practice due to quarantine procedures and phases in New Zealand.

MBIE, the Government’s lead agency in staging the 2021 36th America’s Cup issued a statement acknowledging it had been made aware of some claims relating to the organization of the event.

The ACC Class match up between 2017 and 2021. Graph courtesy of America’s Cup/ACE.

“This includes claims around structural and financial matters. We are working with America’s Cup Events (ACE) Ltd and Emirates Team New Zealand in relation to the claims made,” said Iain Cossar, General Manager of Tourism.

“As there are contractual agreements in place, we’re unable to go into further detail at this time due to commercial sensitivity, but we will provide a full update once more information is available,” Cossar said. “Although these allegations (made against Team NZ) are baseless, MBIE has no choice but to investigate despite our belief that the motives of the informants are extremely suspect.”

“We are working with MBIE to close out the remaining issues with them quickly,” said Dalton, adding that the “terminating of the contract would not set back preparations for the event. We have been planning for this for a while. We just didn’t know who and didn’t know when, but we knew it was going to happen.”

New Zealand is remembering the 3rd anniversary of their victory over the Americans in Bermuda with a great deal of pride and joy. Photo courtesy of Ricardo Pinto/ACEA.

According to NewsHub, the AC event managers that have been named as the contractors fired by ETNZ as “informants” are Tom Mayo and Grant Calder. They were brought in to help run the America’s Cup next year, until they were fired by Grant Dalton, after he said they leaked confidential information.

But they say they’re “whistleblowers,” who took their concerns to the Government over how public money was being misspent. The two were behind Auckland’s stopover of the 2018 Around-the-World Volvo Ocean Race (now known as the Ocean Race).

“They have managed the last two stopovers in Auckland, and stopovers in Australia and China,” reported Tom Ehman from Sailing Illustrated and former head of the event side of the America’s Cup when it was in San Diego. He also was with the GGYC and the ACEA in San Francisco in 2013. “They have an excellent reputation as an event delivery agency.”

The team got the job of running the event portion of the America’s Cup. That included the money the NZ Government put in. They worked in ETNZ’s Auckland Viaduct headquarters.

The Italian Prada Pirelli team take a flyer in practice. The team has renewed its on the water program after a 3-month layoff due to the Coronavirus. Photo courtesy of Studio Borlengi/Prada/Pirelli.

MBIE has announced it was suspending further payments to ACE “pending the outcome of the process” to investigate claims it had received. Some $29 million of $40 million has been paid to ACE under “milestone” payments relating to the race fee for the event.

The Government says it will not make further payments to America’s Cup organizers as it investigates claims over the spending of public money.

The announcement came shortly before the NZ Herald and Newstalk ZB were served an injunction in the High Court by America’s Cup Event Ltd (ACE) and Team NZ from publishing details of a report commissioned by the Crown into the spending of public money.

Herald and ZB owner NZME, which was not represented in court, will fight the injunction, on the grounds of public interest, given the level of public money involved.

A lawyer representing ETNZ and ACE advised NZME that the court Justice Christine Gordon had ruled, “This court orders that NZME Publishing Ltd. and any other persons served with this order are restrained from publishing the interim Beattie Varley report into America’s Cup Event Ltd. or any part of the contents of that report or any part of the recordings referred to in that report until further order of the court.”

As with the Italians, ETNZ has resumed its testing program on the future race-courses intended for the next America’s Cup. Photo courtesy of Emirates Team New Zealand.

New Zealand Prime Minister Jacinda Ardern, whose government has been very supportive of the America’s Cup sailing and event organizations did not want to “predetermine” work done by MBIE regarding its investigation into the America’s Cup saga.

She had seen a “range of different reports” and feedback but declined to address questions on the topic until after the investigation was completed.

When asked about her confidence in Grant Dalton she reiterated that, “this is a demonstration that the checks and balances are in place. The fact is there have been allegations and they are being investigated.”

Beleaguered New Zealand Prime Minister Jacinda Ardern has been beset by one set of challenges after another and handled them with a remarkable degree of leadership. Photo courtesy of Jacinda Ardern/Labor.

Not necessarily a vote of confidence.

“We need to let due process take place, and let MBIE carry out its audit, before providing answers,” said Ardern. “The Government was still committed to hosting a successful America’s Cup. We have commitments, and it is only right we continue to fulfill them. There are economic spinoffs from hosting the event itself, and in the future ensuring New Zealand is on the world stage.

“The investigation needs to be conducted independent of politicians,” she said.

When asked about what he was doing to find out what was going on with the America’s Cup investigation, National leader Todd Muller said that was for the Government to sort out.

“Of course, I’m concerned about it but that’s a question for the Government. They’re in charge of that commercial relationship. But they do need to get to the bottom of it and quickly because there’s a lot at stake.”

On the topic of Kiwis in quarantine, people who had been living in New Zealand but were now trapped overseas returning here, Ardern said the focus was on citizens and residents. There was limited space in quarantine.

“But those who have built their lives here and are caught offshore will be the next group,” said Ardern.

Ardern was also asked about a conversation paper released today, produced by former chief science advisor Sir Peter Gluckman, former prime minister Helen Clark and former Air New Zealand chief executive Rob Fyfe, which said an extended delay in opening the borders would cause huge damage to the country’s economy and social wellbeing, and it was now time change the goals.

“Of course, we all want our borders open, but only when it is safe to do so. Right now is not the right time,” Ardern said.

When asked about the need for more skilled migrants, Ardern said there was a need to increase skills and trades training in New Zealand.

The America’s Cup has always been known for its luxurious surroundings, such as the Prada Cup announcement at the Yacht Club Monaco in Monte Carlo. The difference between New Zealand and the other challengers is that the Kiwis rely on a substantial portion of their budget from the people of NZ and the Government. Photo courtesy of Carlo Borlenghi/ACE/Prada-Pirelli.

“The Government had been increasing support for businesses through training and apprenticeships to address this,” she said.

An advantage of New Zealand’s approach was that New Zealand did not need to enforce social distancing and could open up schools and hospitality. The downside was the borders needed to remain closed.

While all of this was going on, New Zealand’s Coalition Government was still responding to media and political pressure about an easing the expansion of immigration restrictions, similar to those applicable for the Avatar 2 movie crew.

One of the America’s Cup Challengers had an application ready to file with the Arbitration Panel over the closed border policy adopted by New Zealand in response to the COVID-19 virus. The situation became untenable when it became known via social media that 57 members of the crew of the blockbuster Avatar had arrived in Wellington at the end of May by a chartered Air New Zealand jet, which had flown from Los Angeles, California. The America’s Cup teams had lodged applications to enter New Zealand prior to the lockdown on March 25, but these had not been processed. When questions were asked following the Avatar crew approval, Economic Development Minister Hondd said, “like the Avatar crew, they will have to undergo quarantine for 14 days at their cost. It is assumed that the conditions will also apply to those attending the Youth America’s Cup and the America’s Cup as well.”

Several groups who are part of an America’s Cup regatta, such as media, TV production, sponsors, officials and fans are not covered by the latest announcement. It is expected that their situation will be resolved later in the year.

American Magic will bring a total of 102 workers, and 104 family members to New Zealand. INEOS Team UK will bring in a total of 86 workers, 128 family members and one nanny. Syndicates are expected to be in New Zealand for up to ten months. There has been no word yet from Prada Pirelli and Stars & Stripes, whose entire challenge has been on shaky ground for almost a year now.

The America’s Cup teams across all international syndicates are estimated to contribute over $100 million to the economy during their time in New Zealand.

“We are working on a longer-term border strategy, and we are exploring how we can create an isolation system that could support further opening of New Zealand’s borders, for example for current holders of temporary work visas and international students, while continuing to effectively manage health risks from overseas arrivals,” said Iain Lees-Galloway, representing the Government.

Prime Minister Ardern says it would be “dangerous” for New Zealand’s borders to be reopened as coronavirus continues to spread overseas. She confirmed that the border will stay shut at this time.

While all of this plays out, the Kiwi contractors at the center of ETNZ’s big spying scandal claim they’re whistleblowers, not spies. The contractors were hired to run next year’s America’s Cup event and they worked out of the team’s headquarters, until they were fired by Team NZ after months of concerns that confidential information was being leaked, this according to the media outlet, Newshub, which chose not to name them since they’re claiming to be whistleblowers.

INEOS Team UK returns to the water as well, led by Sir Ben Ainslie. The team is certainly more prepared than they were in 2017. Photo courtesy of INEOS Team UK.

The whole TV contracting and broadcast schedule has been a mess for quite a while to begin with as Prada, who is the Challenger of Record (CoR) has been late getting that part of the event organized. It allegedly took ETNZ and ACE taking them to the AC Arbitration Panel to get the issue resolved.

Timeline of Events:

• June 27, 2017 ETNZ wins the 35th America’s Cup in Bermuda

• March 26, 2018 Agreement reached to set up team bases on waterfront at Wynard Pier at a cost of $212 million dollars. The New Zealand government agrees to pay $114 million, including ETNZ’s $40 million dollar hosting fee. The Auckland City Council agrees to fund the $98 million dollar balance.

• December 4, 2018 The NZ Government agrees to an additional $14.5 million and Auckland another $15 million dollars. Separately Auckland is spending $100 million dollars on waterfront improvements that can be utilized for future events like defending the America’s Cup again or next year’s Ocean Race stopover.

• June 2020 The Auckland City Council earmarks another $20 million for the event. The NZ Government freezes support of the event until it completes its investigation of the situation. It has paid $29 million of the hosting fee’s original $40 million due.

• March 6, 2021 The finals for the 36th America’s Cup begins.

Apparently while all this transpires, and as we all have, Prada, as well as Italy have been hard-hit economically by the coronavirus. Therefore, they have been late to the table in many respects, as well as struggling with design and performance issues with their AC75 which has been beset by multiple problems on the water.

The leading newspaper New Zealand Herald published a front-page story quoting a confidential letter from the CEOs of Auckland Council and Ministry of Innovation Business and Employment.

American Magic gets a foil up in practice in Pensacola, Florida. Photo courtesy of Dylan Clarke/American Magic.

That letter, amongst other matters raised the issue of a $3 million payment to a European company. Later, Team New Zealand responded saying the payment had been the subject of a money transfer error or scam and had gone into a scammer’s bank account. The matter was immediately placed in the hands of the international police investigators.

Public money earmarked for the America’s Cup, a $3 million loan to Team New Zealand has been “reclassified”, and a payment was made to a “Hungarian bank account through fraud”, according to allegations outlined in an MBIE and Auckland Council letter.

American Magic finally arrives in Auckland, New Zealand. It will take several more weeks for the crew to arrive and quarantine, then prepare for practice out on the Hauraki Gulf. Photo courtesy of American Magic.

The confidential letter obtained by the NZ Herald reveals allegations around the handling of public money, the operation of the Cup itself and worries about public safety. It lifts the lid on officials’ concerns that the event organizers, America’s Cup Events (ACE) and Team NZ, are in breach of obligations.

The letter written by council chief executive Stephen Town and Ministry of Business, Innovation and Employment (MBIE) chief executive Carolyn Tremain sent to ACE and Team NZ, outlines “serious matters” raised by a financial investigation firm commissioned by the Crown to look into the financial management of next year’s America’s Cup in Auckland.

The council and MBIE say in their letter that they are “extremely concerned” about how taxpayer money paid by MBIE has been used. The letter also claims “certain personnel” from ACE and Team NZ have suggested they will no longer cooperate with the financial investigation firm, Beattie Varley.

The MBIE/COUNCIL letter says they are also “extremely concerned about the ability of ACE to deliver a safe and successful” Challenger series, and America’s Cup finals series. Among the concerns and allegations raised in the letter:

• 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 million loan to ETNZ, which was subsequently reclassified and the payment that was made to the Hungarian bank account through fraud.

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.

Emirates Team New Zealand has now officially responded to the allegations in the following news release to the media and government. It goes as follows:

“Whomever has leaked to the NZ Herald, MBIE and Auckland Council letter to ETNZ and ACE has conveniently not provided the reply provided by ETNZ and ACE last week.

“ETNZ and ACE categorically deny any wrongdoing and consider that they have already addressed the concerns of MBIE, the council and their advisor, Beattie Varley.

“For clarity, ETNZ and ACE set out below the relevant extracts from ETNZ’s and ACE’s joint letter to MBIE and Council last Friday.”

On Health and Safety

“We have already reiterated our commitment to health and safety. On the issue of the number of on-water safety boats, ACE has for some time had safety concerns about the inappropriate expectations for volunteer marshals to be expected to exercise enforcement duties on the water. In our view, and based on the extensive experience available to us (including the Regatta Director Iain Murray), merely having an increased number of boats staffed by volunteers (without legal enforcement authority) to a number in excess of the established international norm (for instance AC35 in Bermuda, the benchmark event under the HVA, Host Venue Agreement) does not alleviate this issue.

For the last two and a half years the concerns of ACE in relation to the dedicated on-water police resources have been raised at JCEG meetings, but a solution has been discussed last week in principle with the police commissioner under which there will be an increased police boat presence from that originally planned.

As a result of resolving the police issue together with the opportunity to further boost the number of support boats (by utilizing Coastguard boats with qualified personnel and medics on board) to assist with spectator management, we consider there is now an available solution which should satisfy the Harbormaster’s requirements. However, ACE is currently awaiting final confirmation of the number of available police boats before presenting this proposed solution to the Harbormaster.

ACE understands there was a regular on-water ops meeting involving the Harbormaster on Wednesday, which has in the past been attended by one of the [informants] on behalf of ACE but which no one attended. We are disappointed not to have been informed about this meeting so we could have had a representative attend.

The Harbormaster’s letter says that ACE is “delaying the commencement of marshal training” and “reassuringly the marshal training program is due to start shortly,” which gives the impression (we would hope inadvertently) that the program has not yet commenced, which is totally incorrect. In fact, the RNZYS training program commenced in October last year, and continued for the balance of that year and the first few months of this year until it was suspended at the end of March due to the need to conduct the budget review referred to below in relation to 5.1(b) of your letter and the COVID-19 lockdown at the end of March. This is a comprehensive program approved by Maritime New Zealand and is more than 50% complete.

The program has now recommenced after the suspension, and the RNZYS has reaffirmed at a meeting with the Harbormaster on Wednesday that it is confident of being able to provide the required number of trained and certified volunteers ahead of the commencement of racing.

The significant on-water experience (both as competitors and race organizers) of ETNZ personnel has been utilized in planning on-water operations and the recent initiative regarding the change in composition of on-water boats has resulted from this advice. It is the view of ETNZ and ACE that there is a need to significantly raise the standard of course and spectator control above that of racing in the last Auckland Volvo Ocean Race stopover, organized by the [informants], which was observed to be substandard.

The organization and conduct of the racing and on-water operations will be the responsibility of the independent Regatta Director in full consultation with the Harbormaster and NZ police and, of course, subject to their legal authority. After an initially appointed Regatta Director proved unsatisfactory during the early planning stages, ACE has been fortunate to secure the services of Iain Murray, who was the Regatta Director for both AC34 in San Francisco, and AC35 in Bermuda. Iain is internationally respected as the leading official in the world for this role and is well acquainted with the Waitemata Harbor, having frequently raced here as a competitive sailor.

In addition, Richard Slater is contracted as the Chief Umpire, a role he undertook in Bermuda working alongside Iain Murray. With these two experienced and independent officials in their respective roles and leading their teams, ACE is well-placed to deliver a safe and world class event on the water.

We consider that your concerns in relation to the delivery of the on-water aspects of the event are misplaced.

Please be specific about what the Hosts’ H&S concerns are in relation to the on-land aspects of the Events so we can also address these concerns.”

On the Event Investment Dashboard

“Prior to May 2020, every Event Investment dashboard presented to the Event Steering Group was prepared by the [informants] under the direction of the [informant]. Due to a lack of confidence by the board and CEO regarding the financial management and budgeting of the [informants] and after Board members raised concerns with the quality and accuracy of financial information they were producing, in March this year the CEO of ACE directed that the ETNZ CFO, Shane McAlister (who joined ETNZ in September 2019) become involved in the financials of ACE and he was tasked with rebuilding the ACE financial budget. It was during this process when he was asked to send the Event Dashboard to the MBIE auditors, that he discovered it could not be reconciled with ACE’s general ledger. It became obvious to him that the dashboard had been prepared by the informants with hard coding and no reconciliations. Mr. McAlister identified the inaccuracies in the previous Event Investment Dashboards, and directed that they be corrected. He is satisfied that the dashboard May 31, 2020 now accurately reconciles with ACE’s financial records.”

On The $3 Million Purported Loan

“The $3 million has been shown on each Event Investment Dashboard (Project Management) for more than a year without any previous query from the Hosts, even though those dashboards have been presented and discussed at each ESG Meeting. There has been no attempt to conceal this aspect. Rather it has been clear and known to the MBIE Council and the [informants] the whole time.

The [informants] have previously been very clear with ACE that they considered it legitimate and provided examples such as F1 racing where the same approach has been taking on common design elements.

It is a valid charge in relation to the management and delivery of the Events for the significant time spent by ETNZ team members for event related matters. When analyzed, that time is in fact in excess of NZ’s $6 million has not been fully charged (and will not be fully charged) in order not to have a detrimental effect on ACE’s budget. Further details of the time spent by ETNZ team members on event related matters will be provided in due course.

It is acknowledged that the $3 million was assessed for work after the work was completed. But it had never been classified as a “loan”, and we would appreciate being provided with any documentation you hold from the whistleblower or the [informants] that categorizes it as a loan.

The money in question was actually paid directly by MBIE to ETNZ, and never even flowed through ACE’s bank account.

We believe that the reference to a “loan” that has been raised is a reference to a totally unrelated discussion between [name redacted] and [name redacted], where the prospect of an inter-company loan from ACE to ETNZ, to alleviate cash flow that were raised by [name redacted].

However, that proposal never came to anything, as it was not needed and was never implemented. If you have documentation or evidence to the contrary, we would be grateful if you would provide that to us.

In short, this loan discussion is unrelated to the ETNZ charges for the Event work done by its staff on the creation of the concept and design for the new class of the yacht to be used in the Events (a radical new foiling monohull concept) and the Class Rule itself.

The payment in this regard is permitted by clause 6 of the HVA, and we would appreciate your clarification on Monday as to whether you disagree with that position and why, or whether your concern is to substantiate the accuracy of the $3 million amount.”

On the Hungarian Bank Account Fraud

“The email scam which resulted in the payment to a fraudulent Hungarian bank account was immediately disclosed by [name redacted]to MBIE [name redacted] after its discovery and an assurance was given that ACE still had sufficient funds for the delivery of the Events, and that it would not be seeking any further financial assistance from the Hosts.

The scammed funds simply needed to be replaced by other revenue at ACE.

The fraud/theft was reported to the NZ Police, who alerted the relevant international authorities with all appropriate steps being instigated through Kiwibank and Bell Gully, solicitors, in an attempt to recover the funds. The email scam is addressed further below.”

On the Lack of Record Keeping and Unwillingness to Provide Information

“A wealth of information has been provided to Beattie Varley, at times under difficult circumstances due to the COVID-19 lockdown.

“Much of the information now being requested involves confidential contracts and material, which should be reviewed on site at our base.”

On Any Breach of the HVA

“We have fully disclosed the nature of our operation, and how we operate dynamically to Beattie Varley. We are not like a standard corporate, and the nature of our operations means that we need to remain flexible and to adjust quickly to sometimes quickly changing circumstances.

We do not accept that the matters raised in the Beattie Varley Report are individually or cumulatively material adverse events in relation to the management and delivery of the Events.

However, as advised, we remain willing to continue to cooperate with Beattie Varley and to answer their queries, and to work with MBIE to reach a solution to deal with the concerns expressed (including through this letter).”

Our Concluding Comments to MBIE and Council

“In summary, when the full circumstances are understood we believe that the concerns of the Hosts can be satisfied and ACE/ETNZ are not in breach of their obligations under the Host Venue Agreement.”

Dalton’s Side

At press deadline Dalton offered his own explanation in addition to the team’s:

“This week has seen a highly orchestrated attack on our integrity and credibility by people with questionable motives. We want to reassure all of our supporters, our sponsors, and partners that there has been no misappropriation of public money, and we are working with MBIE to clear all allegations.

Peeling back all of the layers of what is going on here, it is a textbook case of ‘Intentional reputational damage 101’. It is a deliberate, sinister, and highly orchestrated attack which includes anonymous tip-offs, recordings and document leaks. ‘Informants’ orchestrate unfair accusations, bypassing normal processes, and going straight to external authorities. The authorities quite correctly look into the claims.

Once that process begins the claims are leaked to media to create a kangaroo court trial, by specific media, before the target has had a chance to clear themselves through proper process. And even when the claims are proven inaccurate or wrong the reputational damage is done.

All this at a time when every hour counts as we try to focus on delivering a great event and Defending the America’s Cup. The timing has been very well considered to take our attention off these vital objectives.

A huge irony is that one of the points we have been criticized for in the interim report is that we have not been forthcoming in providing highly confidential and commercial information. The reason we did not want to provide elements of this information was because we held serious concern about the lack of confidentiality in the process. Clearly, we were quite right about that.

The reason we have been seriously concerned about the media reporting on the initial, incomplete and now “leaked” report is because it will give competitive advantage to our on-water Challengers during this and subsequent campaigns, we have had to take all actions available to protect that information and our competitive position.

Everyone is asking what are their motives? We are getting increasingly clear views on this, but we won’t stoop to their level today, our focus needs to be elsewhere right now.

I want to emphasize, as we have all week, that any outcomes from MBIE’s investigation can and will be worked through to ensure we deliver a great event and a successful campaign. We will work with the Government and project partners to ensure this.
As a team, all we want to do is defend this America’s Cup successfully in March 2021 and showcase to the world what an amazing country we have through a successfully run and broadcast event.”

Defiant On Its Way To New Zealand

Defiant, the AC75 racing yacht built for NYYC’s American Magic team departed their winter base at the port of Pensacola on Coronavirus Eve in March for Auckland, New Zealand.

“It’s hard to overstate the positive impact Pensacola has had on our team, and we are massively grateful to Mayor Grover Robinson and his staff, Port Director Amy Miller and her staff, Commodore Nicole Ferry, the entire membership of the Pensacola Yacht Club and our wide network of suppliers, supporters, fans and well-wishers in the area,” said Terry Hutchinson, skipper and executive director of American Magic. “We feel pretty strongly that Pensacola will continue to rise as a sailing venue in the U.S., thanks to some awesome natural features such as the consistent weather and a welcoming community. Pensacola really took care of our team at every stage. While it’s sad for us to leave, we’re excited for what lies ahead of us in New Zealand. Our future is there.”

The team’s forthcoming second AC75, whose name has yet to be revealed, will break this trend. When completed later this year, the racing yacht will be transported directly to Auckland from Bristol prior to its christening and launch. In the meantime, American Magic intends to sail Defiant on Auckland’s Waitemata Harbor and Hauraki Gulf while operating from a new base on Wynyard Wharf.

As with all major sports worldwide, the COVID-19 pandemic has significantly impacted the 36th America’s Cup cycle and each of the teams involved. After the cancellation of the two ACWS events in Europe, American Magic was unable to sail on Pensacola Bay past early March. The team ceased on-the-water operations to protect the health of team personnel, their families and the surrounding community in Pensacola. Fortunately, the team was able to make progress in areas such as design, production, maintenance, logistics and others while carefully adhering to state, federal and CDC health guidelines in its areas of operation.

While it remains to be seen when New Zealand will open its doors to foreign America’s Cup personnel, Hutchinson said that shipping Defiant to Auckland was the only choice for the team once all logistical factors were considered.

“We can’t stay in Pensacola due to the approach of hurricane season. From June 1 onwards, the team is uninsurable in the panhandle of Florida,” said Hutchinson. “Shipping now, and getting to Auckland in June will allow us to resume training on schedule.

“We fully understand and respect the caution and care that the government in New Zealand is showing in response to COVID-19. When we are allowed to enter New Zealand, American Magic will of course adhere to all quarantine and heath protocols and do whatever it takes to be responsible members of the community. Nothing is more important.”

Hutchinson said that the team has also noted positive developments in recent days, with key individuals and projects that benefit New Zealand and its economy being granted entry.

“This gives us a lot of hope that our plans to arrive in early to mid-June may be able to proceed,” said Hutchinson. “We were proud to be the first team to challenge for the Cup when Challenger entries opened, and we will be proud to be the first Challenger to arrive in Auckland.”

The Bristol, Rhode Island built foiling monohull will be the first Challenger yacht to arrive at the venue of three upcoming regattas: ACWS Auckland (Dec 17-20, 2020), The Prada Cup (The Challenger finals, Jan 15-Feb 22, 2021), and the 36th America’s Cup (March 6-21, 2021). The U.S. team also expects to take delivery of their second AC75 in Auckland sometime during the fall of 2020.

Once in New Zealand, American Magic’s focus will be in three primary areas. First, the team will work to complete the New Zealand entry and quarantine process for team personnel and their families, which was made possible after the team received border exemptions from the Ministry of Business, Innovation and Employment (MBIE) on June 12th. Second, the AC75, chase boat fleet and the team base will be assembled and activated in Auckland. Third, American Magic’s production team in Bristol will put the finishing touches on the second AC75 and prepare it for air transport from Rhode Island to New Zealand.

“I could not be prouder of how our 145-person team has handled this shipping process, and everything else the pandemic has thrown at us,” said Hutchinson. “Our shore and operations team pivoted incredibly well as events happened, and as the focus changed basically overnight from getting us to Europe to getting us to Auckland. Our production guys have been able to safely keep the ‘Boat 2’ build process going, and it looks incredible.

“Now we just need to pass our remaining team members through quarantine, keep everyone healthy and safe, and get back to business on the water!” said Hutchinson.

Thanks to NZ Herald, Stuff, Sailing Illustrated, BusinessDesk and the American Magic media team for their contributions to this article.

So that’s all this month. I’m sure much will change by next report, so stay tuned here and write me at