America's Cup: America's Cup Class Rule agreed to be a legitimate event cost

Emirates Team New Zealand's base in Auckland's Viaduct Harbour © Richard Gladwell

The long standing and at time bitter public wrangle over the AC75 class rule cost has been resolved, and America's Cup Event Ltd and its CEO and Directors, Grant Dalton, Tina Symmans and Greg Horton have been exonerated.

A media release issued Tuesday afternoon confirms the Ministry of Business, Innovation and Economic Development (MBIE), Emirates Team New Zealand (ETNZ) and America's Cup Event Ltd (ACE) have met today in a mediation setting to resolve issues regarding whether the creation of the Class Rule for the America’s Cup was an Event Cost under the Host Venue Agreement.

We regret the manner in which this issue has played out in the public arena and the detrimental reputational impact of the process on ETNZ and ACE, its directors and the teams.

The parties have all agreed that there was reasonable basis for the differing views held to date. The contractual dispute arose during the course of an independent audit initiated by MBIE as a result of allegations of financial impropriety and misappropriation of funds, which were subsequently investigated and found to be wrong.

In the course of the mediation regarding the dispute, ETNZ and ACE have provided MBIE with information and independent advice that supports their view. MBIE, ETNZ and ACE have now agreed that there was a reasonable and legitimate basis for ETNZ and ACE to consider that the Class Rule costs were within the scope of Event Costs in the Host Venue Agreement. MBIE accepts that expenditure incurred to date under the HVA has been incurred in good faith.

MBIE is satisfied that event investment in relation to the Crown’s contribution has been or will be properly incurred by ACE.

In light of the above, the dispute has now been resolved.

We look forward to a successful America’s Cup, the statement said in conclusion.

Legal action taken by ETNZ and ACE in regard to actions, comments and allegations made by various parties, in regard to the matter are confirmed to be continuing.

On November 11, 2020 the Directors of ETNZ and ACE released several documents and letters several documents and letters into the public domain accompanied by a statement.

"In the face of further defamatory and baseless allegations again being levelled at ETNZ/ACE and its Directors we feel that we must now set the record straight having tried to respect a due process in this saga all year.

"We have wanted to avoid such a public condemnation of MBIE but given their moves to conceal their totally inappropriate behaviour through this protracted contractual process, we now feel obliged to release a suite of letters addressed to MBIE and Ministers which call MBIE to account for their actions.

"These letters paint quite a different story than that currently being presented.

"As we state in these letters we would welcome the intervention of the Ombudsman or Public Services Commission to look at MBIE’s actions through this protracted process."

Emirates Team NZ and ACE were exonerated by an MBIE commissioned audit. ETNZ and ACE were also successful in obtaining firstly an ex parte Injunction preventing the publication of leaked and confidential content by news media. The Injunction was later confirmed after a High Court Hearing. The Audit Report was released publicly with redactions as to competitive and confidential information.

The audit conducted by specialist forensic accounting firm Beattie Varley, whose principals are all former Serious Fraud Office employees with 10-15 years experience in that role, said in its summary conclusion. "We have not seen any evidence that ACE/ETNZ misapplied the Event [NZ40million] Investment."

The matter of the charging of $3million as part of the AC75 Class Rule development by ETNZ to ACE and against the Hosting Fee, was a dispute that should have been resolved by mediation as prescribed by the Host Venue Agreement, rather than being acted out in public.

The terms of the mediation was believed to have been extended to include MBIE's role in the affair, however the statement is not explicit in that regard.