Fraud claims rock Am Cup

Hun­gar­ian bank ac­count pay­ment, $ 3m loan re­clas­si­fi­ca­tion raised in con­fi­den­tial let­ter

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

The con­fi­den­tial June 22 let­ter, 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 and Team NZ, are in breach of obli­ga­tions.

The let­ter — writ­ten by coun­cil CEO Stephen Town and Min­istry of Busi­ness, In­no­va­tion and Em­ploy­ment CEO Carolyn Tre­main and ad­dressed to Amer­ica’s Cup Event and Team New Zealand of­fi­cials — out­lines ‘se­ri­ous mat­ters’ raised by a fi­nan­cial in­ves­ti­ga­tion firm com­mis­sioned by the Crown to look into the fi­nan­cial man­age­ment of next year’s event in Auck­land. It says they are ‘ex­tremely con­cerned’ about how tax­payer money paid by MBIE has been used. Eco­nomic De­vel­op­ment Min­is­ter Phil Twyford’s of­fice has con­firmed he is aware of fraud al­le­ga­tions. Ear­lier this week, Team NZ de­nied any im­pro­pri­ety and de­scribed al­le­ga­tions as base­less.

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

The con­fi­den­tial June 22 let­ter, ob­tained by the Herald, re­veals al­le­ga­tions around the han­dling of pub­lic money; the op­er­a­tion of the Cup it­self and wor­ries about pub­lic safety; and it lifts the lid on of­fi­cials’ con­cerns that the event or­gan­is­ers, 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 and 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.

Eco­nomic De­vel­op­ment Min­is­ter Phil Twyford’s of­fice con­firmed to the

Herald last evening that the min­is­ter was aware of fraud al­le­ga­tions. Ear­lier this week, Team NZ de­nied any im­pro­pri­ety and de­scribed al­le­ga­tions as base­less.

The coun­cil and MBIE say in their let­ter 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 co-op­er­ate 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 claims that have been raised in the MBIE/ coun­cil 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 $3,000,000 loan to ETNZ [Team NZ] 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”.

On Mon­day night, Team NZ is­sued a press state­ment, say­ing “highly defam­a­tory and in­ac­cu­rate al­le­ga­tions re­gard­ing fi­nan­cial and struc­tural mat­ters” had been lev­elled against ACE, ETNZ and its per­son­nel. They said the claims were base­less.

At the same time, MBIE said it was work­ing with the coun­cil, ACE and Team NZ fol­low­ing the claims.

ACE and Team NZ are yet to re­spond to re­quests for com­ment in light of the spe­cific al­le­ga­tions out­lined in the MBIE/coun­cil let­ter ob­tained by the Herald.

A spokes­woman for Twyford con­firmed he had been made aware of fraud al­le­ga­tions in re­la­tion to Auck­land’s host­ing of the Amer­ica’s Cup. MBIE had been “reg­u­larly up­dat­ing him” on the mat­ter.

“He isn’t able to go into any specifics about this dis­pute be­cause there are con­trac­tual and commercial sen­si­tiv­i­ties.”

Asked if he had con­fi­dence that pub­lic money has been used ap­pro­pri­ately in re­la­tion to money paid to­wards the Amer­ica’s Cup, Twyford said that was the pur­pose of MBIE’s re­view.

He in­di­cated the Cup would go

ahead as planned. “MBIE has ad­vised to­day that Cup plan­ning is con­tin­u­ing along orig­i­nal time­lines.”

How­ever, one source told the Herald the “whistle­blow­ers have tapes” , say­ing the Gov­ern­ment and MBIE were wor­ried about the im­pact of the al­le­ga­tions on the Cup.

Pub­lic fund­ing

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

The coun­cil/MBIE let­ter says they — as “hosts” — “are ex­tremely con­cerned about the abil­ity of ACE (Amer­ica’s Cup Event Ltd) to de­liver safe and suc­cess­ful events”.

The Crown ap­pointed fi­nan­cial in­ves­ti­ga­tors Beat­tie Var­ley to have ac­cess to ACE and Team NZ per­son­nel and rel­e­vant records “in or­der to ver­ify that ACE and ETNZ have com­plied with their re­spec­tive obli­ga­tions”.

An in­terim re­port has been com­piled by Beat­tie Var­ley and Town and Tre­main’s let­ter says the mat­ters raised are “in­di­vid­u­ally and cu­mu­la­tively ma­te­rial ad­verse events in re­la­tion to the man­age­ment and de­liv­ery of the [Cup]”.

The coun­cil and the Gov­ern­ment have poured $250m into host­ing the 36th Amer­ica’s Cup — and the coun­cil is plan­ning to spend 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. On top of this, the coun­cil has been spend­ing about $100m to spruce up the wa­ter­front in time for the Cup and other events in 2021.

In their let­ter, Town and Tre­main said it was MBIE’s as­sess­ment that ACE was in breach of rules that it would use event in­vest­ment solely for costs of the man­age­ment and de­liv­ery of the events.

On-wa­ter safety con­cerns

The let­ter also raises op­er­a­tional and safety con­cerns around the Cup in­clud­ing po­lice and Har­bour­mas­ter con­cerns around the use of on-wa­ter mar­shals.

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.”

It also says an event in­vest­ment dash­board that was pre­sented on May 31 show­ing to­tal spend is “ma­te­ri­ally dif­fer­ent” to that pre­sented ear­lier.

The let­ter re­veals a sug­ges­tion “cer­tain per­son­nel” from ACE and Team NZ might no longer co­op­er­ate with the fi­nan­cial in­ves­ti­ga­tion. “It is crit­i­cal that ACE and ETNZ co-op­er­ate with Beat­tie Var­ley in a timely man­ner so that Beat­tie Var­ley can com­plete the process and is­sue its fi­nal re­port.”

Fur­ther al­le­ga­tions

In their June 22 let­ter, Town and Tre­main say a le­gal let­ter has also been re­ceived from Min­terEl­lisonRud­dWatts “in the last few days”, and shared with Auck­land Coun­cil. The al­le­ga­tions in that let­ter, they said, had not been in­ves­ti­gated (as at June 22) but Beat­tie Var­ley had been asked to ex­tend their in­ves­ti­ga­tion. “Th­ese mat­ters may pro­vide the hosts with con­fir­ma­tion that there have been other breaches of the [host venue agree­ment].”

Town and Tre­main do not say who Min­terEl­lisonRud­dWatts are rep­re­sent­ing.

The hosts say the al­le­ga­tions and con­cerns are enough to is­sue an es­ca­la­tion no­tice and they sought a meet­ing with ACE and Team NZ on Mon­day. It is un­der­stood that meet­ing went ahead.

“The hosts con­sider that each of the [health and safety] con­cerns, re­port­ing of the event in­vest­ment [Beat­tie Var­ley] re­port mat­ters, Breach of War­ranty and Breach of Com­mit­ment are in­di­vid­u­ally and col­lec­tively ma­te­rial ad­verse events in re­la­tion to the man­age­ment and de­liv­ery of the events,” said Town and Tre­main in their let­ter.

The hosts say they are also con­cerned event can­cel­la­tion in­sur­ance has not been taken out and, as such, they were not obliged to pay the next pub­lic in­stal­ment of fund­ing.

MBIE, Phil Goff, Team NZ state­ments

Iain Cos­sar, gen­eral man­ager of tourism at MBIE, said yes­ter­day evening that the min­istry, along with Auck­land Coun­cil, “have been made aware of some claims re­lat­ing to the or­gan­i­sa­tion of the event”.

Cos­sar would not say what the claims in­volved be­yond be­ing “struc­tural and fi­nan­cial” mat­ters.

“The claims made re­quire care­ful and thor­ough con­sid­er­a­tion. We are work­ing with Amer­ica’s Cup Events (ACE) Ltd, and Emi­rates Team New Zealand in re­la­tion to the claims made.”

In a sim­i­lar state­ment on Mon­day night, Cos­sar said the or­gan­i­sa­tion and Auck­land Coun­cil, as co-hosts of the 36th Amer­ica’s Cup, had been made aware of some claims re­lat­ing to the or­gan­i­sa­tion of the event.

“We are work­ing with Amer­ica’s Cup Events (ACE) Ltd, and Emi­rates Team New Zealand in re­la­tion to the claims made,” he said.

“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.

“We are mo­ti­vated to make AC36 a suc­cess­ful event that high­lights the pin­na­cle of sail­ing and show­cases Auck­land and New Zealand to the world.”

In a state­ment yes­ter­day, Auck­land mayor Phil Goff said he was made aware of an in­ves­ti­ga­tion by the Gov­ern­ment into al­le­ga­tions re­lat­ing to struc­tural and fi­nan­cial mat­ters.

“Th­ese re­late to funds from Gov­ern­ment and they are un­der­tak­ing an in­ves­ti­ga­tion into th­ese al­le­ga­tions. Un­til the in­ves­ti­ga­tion is com­plete, it is not ap­pro­pri­ate for fur­ther com­ment at this point,” Goff said.

The mayor did not say if any­one from the coun­cil or Auck­land Tourism, Events and Eco­nomic De­vel­op­ment at­tended Mon­day’s meet­ing.

Town said he ended his term as chief ex­ec­u­tive of the coun­cil on Fri­day and had not been to any AC36 meet­ings this week.

“I’m sure you will un­der­stand that I can­not com­ment,” he said.

Team NZ, in an ear­lier state­ment on Mon­day evening, said the claims in­cluded al­le­ga­tions around struc­tural and fi­nan­cial mat­ters.

It said ETNZ had ended a con­tract and claimed “spies” were caught leak­ing con­fi­den­tial in­for­ma­tion and spread­ing “in­ac­cu­rate al­le­ga­tions”.

ETNZ bosses said the team and ACE be­came sus­pi­cious they had in­for­mants in the event or­gan­i­sa­tion about six months ago.

They said those sus­pi­cions were con­firmed when sen­si­tive in­for­ma­tion re­cently came back to the or­gan­i­sa­tions from Europe.

“The mo­tives of the in­for­mants who had ac­cess to the Emi­rates Team New Zealand base can only be guessed at, at this stage,” Team NZ bosses said in the state­ment.

“In ad­di­tion, th­ese peo­ple have made highly defam­a­tory and in­ac­cu­rate al­le­ga­tions re­gard­ing fi­nan­cial and struc­tural mat­ters against ACE, ETNZ and its per­son­nel.

“Al­though th­ese al­le­ga­tions are base­less, MBIE have 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.”

Team New Zealand boss Grant Dal­ton didn’t re­spond to the Herald yes­ter­day but told New­stalk ZB’s Mike Hosking: “The bot­tom line is it's solved, we've done it, we've sorted it. We've had noth­ing but help from the Gov­ern­ment. They've been bril­liant through this, through the process. We've just got to fin­ish that process off and get some new peo­ple and get on with it.”

Photo / Chris Newey

Photo / Getty Images

The Team New Zealand base in Auck­land Viaduct Har­bour.

Stephen Town

Phil Twyford

Carolyn Tre­main

Grant Dal­ton

Phil Goff

Iain Cos­sar

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