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The confidential June 22 letter, obtained by The New Zealand Herald yesterday, reveals allegations about 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 event organisers America’s Cup Events (Ace) and Emirates Team New Zealand (ETNZ) 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 ETNZ - 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 last night the minister was aware of fraud allegations.
Earlier this week, ETNZ denied any impropriety.
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 ETNZ have suggested they will no longer co-operate with 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 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 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, ETNZ issued a media statement, saying ‘‘highly defamatory and inaccurate allegations regarding financial and structural matters’’ had been levelled against Ace, ETNZ and its personnel.
It said ETNZ had ended a contract and claimed ‘‘spies’’ were caught leaking confidential information and spreading ‘‘inaccurate allegations’’.
They said the claims were baseless.
At the same time, MBIE said it was working with the council, Ace and ETNZ following the claims.
Ace and ETNZ are yet to respond to requests for comment in light of the specific allegations outlined in the MBIE-council letter obtained by The New Zealand Herald.
A spokeswoman for Mr Twyford confirmed he had been made aware of fraud allegations concerning 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 relationto money paid towards the America’s Cup, Mr Twyford said thatwas the purpose of MBIE’s review.
He indicated the cup would go ahead as planned.
However, one source told The New Zealand Herald the ‘‘whistle-blowers have tapes’’, saying the Government and MBIE were worried about the impact of the allegations on the cup.
The America’s Cup begins with the challengers’ Prada Cup in January and February, followed by the cup final regatta in March.
The council-MBIE letter says they - as ‘‘hosts’’ - ‘‘areextremely concerned about the ability ofAce to deliver safe and successful events’’.
The Crown appointed financial investigator Beattie Varley to have access to Ace and ETNZ personnel and relevant records ‘‘in order to verify that Ace and ETNZ have complied with theirrespective 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 $250 million into hosting the 36th America’s Cup - and the council is planning to spend a further $20 million to support the regatta and other events next year.
The council’s share of the $250 million is $113 million.
The Government is spending $136.5 million, including a host fee of $40 million.
On top of this, the council has been spending about $100 million to spruce up the waterfront in time for the cup and other events in 2021 .
In their June 22 letter, Mr Town and Ms Tremain say a legal letter has also been received from MinterEllison-RuddWatts ‘‘in the last few days’’, and shared with the Auckland Council.
The allegations in that letter, they said, had not been investigated (as at June 22) but that Beattie Varley had been asked to extend its investigation.
‘‘These matters may provide the hosts with confirmation that there have been other breaches of the [host venue agreement].’’
Mr Town and Ms Tremain do not say who MinterEllisonRuddWatts is representing.
The hosts say the allegations and concerns are enough to issue an escalation notice and they sought a meeting with Ace and ETNZ on Monday.
It is understood that meeting went ahead.
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.
Mr Town said he ended his term as chief executive at council on Friday and had not been to any cup meetings this week.
‘‘I’m sure you will understand that I cannot comment,’’ he said.
ETNZ chief executive GrantDalton did not respond to The New Zealand Herald yesterday but told Newstalk ZB: ‘‘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.”