By Bill Koch
Skipper of America3
Winner of the America’s Cup
Take a deep breath New Zealand, and enjoy the glory that comes with having defended the America’s Cup. Consider it a job well done. But before everyone gets carried away with all of the accolades, it’s time to address some thorny questions.
Because if these questions persist, then Auckland runs the risk that the America’s Cup, an event that is dear to me, could turn into the next international sports scandal.
In yachting circles, questions continue to be raised by challengers, sponsors and the press about a small group of individuals who form "the brain trust" behind Team New Zealand. And all of the questions involve money and fundraising.
Some of the confusion starts with Team New Zealand’s own media guide, where the team advertises itself as a charitable trust. Public corporate records, however, show what appears to be a for-profit company with the name "Trustee" grandly inserted in its name. The guide also leads the public to believe that Peter Blake, Alan Sefton, and Scott Chapman form some kind of brain trust behind TNZ. In the media guide, Blake lists himself as chief executive, while Sefton and Chapman claim to be executive directors. Yet none of these people appear in the public corporate records.
From what I can gather, Team New Zealand corporation (TNZC) has two entities: the sailing side and the commercial side. The sailing side is also called Team New Zealand (TNZ). It is Russell Coutts, Brad Butterworth, and Tom Schnackenberg, to name a few. The commercial side is AC 2000. It appears to be comprised of Peter Blake, Alan Sefton, Scott Chapman and Tony Thomas among others.
AC 2000 seems even more of a mystery. There are no corporate papers identifying any of the officers. When my staff called over to AC 2000 looking for the titles of the officers, they were told none existed. "We don’t believe in titles," the receptionist said.
Based on the team’s literature, we know it was AC 2000 that secured the sponsors, or "family of five" - Lotto, Television One, Steinlager, Toyota and Telecom New Zealand — that appear on Black Magic.
Sources say TNZ only communicated with AC 2000 in writing. When the sailing side needed funds, they made a formal request to AC 2000.
In a brief interview Sefton said the Royal New Zealand Yacht Squadron did not have the resources to stage a regatta. The brain trust created AC 2000 to help pay for the races. By all estimates, they did a super job. Much of the money for the regatta came from sponsors like Telecom NZ, Compaq, Fuji/Xerox, Air New Zealand, Ericsson and Omega. Sources close to the regatta suggest each sponsor contributed $3 million (NZ). AC 2000 also sold media rights and red socks, licensed the name and image of America’s Cup as well as their own logo, took in challenger fees and sold official flags which allowed a few boats to follow the racing yachts. They could account for another $11 million (NZ). That means AC 2000 might have taken in close to $26 million (NZ). Seems like good business.
Sources close to the regatta say AC 2000’s expenses were in the neighborhood of a $1 million (NZ). One thing appears to be certain, AC 2000 had little expenses. Louis Vuitton paid for the media center and a good portion of the challenger series. That cost around $20 million (NZ). Ticket sales and sponsors funded the America’s Cup Ball. AC 2000, which is managing the event, borrowed boats from the America’s Cup Challenger Association (ACCA) for the press, the race committee and umpires. ACCA also loaned the marks and telemetry equipment needed for television coverage. "They [AC 2000] have paid cash for the services of the measurement committee, they paid cash for the services of the jury and the umpires, including housing and per diems, lunches and fuel for the boats on the race course. The regatta expenses are quite, quite small," said one high-ranking ACCA official who estimated the total costs would be less than $250,000 (NZ). If all this is true, it would mean AC 2000 make $25 million in profit.
If TNZC is a business, then TNZC has done an excellent job in making such a large profit. There is nothing wrong with making a profit. The profit motive is what drives the most successful economies is the world. As most profitable businesses do, it should reinvest a portion of the profits in the business and pay the rest out as dividends to its shareholders.
If TNZC is a charitable trust, it should use its profits for charitable purposes, as does for example, Auckland’s ASB Charitable Trust. Every year, ASB Charitable Trust uses the dividends they earn form ASB’s profits to support charitable causes around New Zealand. At the end of the fiscal year, their books are opened and widely published. Anyone can see how much money ASB Charitable Trust raised and where it was spent.
There is nothing wrong with making money off the America’s Cup. Nor is there anything wrong with bending the rules in favor of the defender. Both are long established traditions of the Cup. TNZC has been superb at both, far outdoing the New York Yacht Club. What is very offensive, however, is Peter Blake’s hypocritical claims that he would run the fairest and cleanest Cup regatta ever. He has done just the opposite; he has not clarified whether TNZC is a for-profit organization or a charitable trust. He has refused to answer questions pertaining to finances, even declaring at a press conference in front of the world’s media that TNZC’s finances "were no one’s business". When asked hard questions, the brains trust has claimed that the press has not been supportive. They hide behind the flag. Deep secrecy and mystery is fertilizer for rumors and speculation about motives. An Auckland magazine reported recently that there was an ugly waterfront rumor that Blake and Sefton were sending sponsors’ money abroad rather than diverting it into TNZ funds.
Blake can put an end to all this immediately by opening up the books and answering questions about TNZC’s finances in an up-front, honest way. This would show he has nothing to hide, he can start by answering the following dozen simple questions:
Simple, clear facts will clean up a lot of questions. All Blake has to do is to be open and honest, or as we in the USA would say, be "up-front". Sean Reeves, the lawyer for TNZC has said he believes it is impossible "to be up-front in the America’s Cup." I strongly disagree. In 1992 when I defended the Cup, I released to the public a detailed analysis of America 3’s income and expenses, even though I had no obligations to do so and was subject to much criticism. Dennis Connor clearly and openly states his objective to profit from the Cup. Prada revealed its budget, as did AmericaOne. What does Peter Blake and company have to hide? Have they made money off the backs of the working sailor and the New Zealand people? Since money has come from the government and sponsorship from publicly-funded organizations (TVNZ and Lotto), the public has a right to know how their money was spent.
Russell Coutts, Brad Butterworth and the rest of the crew aboard Black Magic were straight forward in their purpose: to win the America’s Cup. They performed brilliantly. It would be a pity of Blake and company’s obsession with hiding the facts overshadowed this great achievement by refusing to open the books and answer straight forward questions.
Bill Koch can be reached at WIK@oxbow.com
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