Team New Zealand is in dispute with the Government over a $3 million fee the team charged to design the foiling wings on the boats to be used in next year's regatta. Photo / Supplied
Team New Zealand boss Grant Dalton dismissed warnings that cost cutting on America's Cup Event staff could lead to injuries or deaths, saying only that there might be fewer "dunnies" around Auckland's waterfront for the event and that "we better hope there's not an earthquake".
In another email, he declines an invitation to a seminar to identify risks for next year's event, saying "I would rather staple my c*** to a burning building [than] attend a Health and Safety briefing — are you kidding me, that would be the most f****** boring arse covering load of mind numbing bullocks ever invented".
The Weekend Herald can also reveal that in June Auckland's Harbourmaster accused America's Cup Event of trying to renege on aspects of an agreement under which it was given $40 million of taxpayer money around on water safety management for the upcoming regatta and associated events.
The emails have been revealed while Team New Zealand is in dispute with the Ministry of Business, Innovation and Employment (MBIE) over a $3 million fee which the syndicate charged ACE, saying it was for designing the boats to be used in next year's regatta.
ACE was promised up to $40m of taxpayer cash to put on the America's Cup.
MBIE says a design fee was never envisioned in the host venue agreement (HVA) under which the Government agreed to provide the bulk of the funding for the event. It says the payment from ACE to Team New Zealand was not communicated to it or accurately described in budgets or spending updates.
"MBIE's position is that the hosts ought to have been consulted on such expenditure before it was charged to ACE," MBIE told Beattie Varley. The timing of mediation on the dispute is still to be determined.
Dalton told the Weekend Herald the material was provided by "disgruntled former contractors" who had embarked on a campaign to damage Team New Zealand. He said a probe by forensic accountants had cleared the syndicate of wrongdoing.
Tina Symmans, ACE's chair, said the company took health and safety seriously. "[It] is on the agenda as an extremely important topic of discussion at every board meeting."
While the final Beattie Varley report concluded it had not seen evidence that ACE or Team New Zealand misapplied the taxpayer money, it said the record keeping of both organisations meant the validity of the payments could not be objectively verified.
It also said management and governance of the organisations deserved criticism, in particular because so much taxpayer money was being spent.
After winning the 35th running of the America's Cup in Bermuda in 2017, a company run from within Emirates Team New Zealand's base — America's Cup Event — was promised $40m to run the America's Cup in 2021, as well as a series of lead-up events.
While Dalton is chief executive of both companies, under the terms of the agreement through which it was given the money, ACE and Team New Zealand have distinct purposes.
"ACE shall be responsible for all costs and expenses in relation to its delivery of the Events and [Team New Zealand] shall be solely responsible for conducting the sporting campaign for the Defence," the host venue agreement between Team New Zealand, Auckland and the Government, states.
Elsewhere, the agreement states that Team New Zealand established ACE "to undertake its event management responsibilities" in relation to the upcoming sailing competitions.
Governance experts have questioned the wisdom of the structure, with Dalton's dual roles creating possible incentives to focus on one role rather than the other. In interviews, even Dalton appears to have acknowledged the structure had its problems.
Emails show Dalton pressuring for aspects of the budget for next year's event to be cut back, as he questioned whether he would be able to get the amount of money budgeted from the challenger of record for next year's event.
"Obviously we need to get the budget down," Dalton wrote to staff of event management company Mayo & Calder, as well as several Team New Zealand staff and Tina Symmans, the chairwoman of ACE in April.
"My over riding opinion is that there is not enough 'multi tasking by employees' (ie there needs to be less people which has a positive budget impact)," Dalton wrote of the proposed costs, requesting a breakdown of staffing costs and details of expenses ranging from big screens to temporary toilets.
Michael Choy, a Mayo & Calder employee, sent back a lengthy response, explaining the costs and providing a series of quotes, some based on the company's handling of the Volvo Ocean Race stopovers in Auckland, which the company had handled.
The email concluded with a warning about the potential risks of cost-cutting.
"We all have a huge level of responsibility and tasks already — and to be frank when the event comes on, if we are all still juggling too much then something will go horribly wrong," Choy wrote.
"Our biggest concern is we will be working on a building/construction site for three weeks before and three weeks after the event and we have seen it before with time pressure and not enough qualified/skilled people and then injuries happen."
Choy wrote that the Government had "already sent a warning" via a report by PWC that ACE and the challenger of record (COR) for the event were under-resourced, "so they are off the hook".
"COR or ACE saving a few dollars here and there on staff is not worth the reality of what happens when someone gets hit/injured or killed on site," Choy concluded.
Dalton's response several hours later was blunt.
"I'll respond in due course but we are going to be spending less than this so maybe there will be a few less dunnies, we better hope NZ doesn't have an earthquake and God can create a few more hours in the day so we can work longer."
The email was copied to both Symmans and Greg Horton, ACE's directors.
Another email from 2019 shows Dalton declining an offer to hear from experts about how to identify health and safety risks faced by ACE.
In April 2019, Symmans emailed Dalton about the possibility of attending a health and safety briefing run by a specialist consultancy at a meeting of the event steering group.
"This [is] a workshop to identify ACEs risks," Symmans wrote, adding that Horton "will be attending. [You] are also invited to attend."
Dalton replied minutes later, indicating he did not want to attend.
"I would rather staple my c*** to a burning building [than] attend a Health and Safety briefing - are you kidding me, that would be the most f***ing boring arse covering load of mind numbing bullocks ever invented."
Team New Zealand's handling of taxpayer money provided to run the America's Cup and a series of earlier regattas was the subject of an audit by the Government this year.
Having initially documented a series of serious concerns about health and safety, how taxpayer money was used and suggestions that records should be retrospectively amended, the MBIE now insists that the matter had been resolved aside from one issue which is the subject of mediation.
An MBIE official was unable to say when the mediation would begin.
The concerns were raised by Mayo & Calder, which turned whistleblower in 2019.
Dalton describes the group as "informants" and America's Cup Events is suing them for negligence, breach of the Fair Trading Act, breach of duties owed as an agent and breach of confidentiality.
Mayo and Calder meanwhile are counter-suing ACE for unlawful termination of agreement.
In late June, the Herald revealed that MBIE chief executive Carolyn Tremain and Stephen Town, the chief executive of Auckland Council at the time, had written to ACE detailing concerns in what appeared to be a warning that they may strip the rights to run the America's Cup from the organisation.
As well as referencing the concerns raised by Beattie Varley in an earlier report - the details of which are suppressed after ACE went to court to prevent the Herald from publishing them - Tremain and Town raised concerns about safety held by the Auckland Harbourmaster.
Today the Weekend Herald can reveal that Auckland Harbourmaster Andrew Hayton wrote to the chief executive of ATEED, Nick Hill on June 15, "to express my concerns with some of the on-water aspects" of the upcoming sailing events, including the America's Cup as well as the World Series and Prada Cup.
Hayton said a team of stakeholders, including ACE, police and the Royal New Zealand Yacht Squadron, had been working collaboratively to ensure the events were run "safely and successfully".
"Two weeks ago, [Team New Zealand] became involved prompting ACE to change direction," Hayton wrote.
"They claim that the number of marshalls that had been agreed upon was excessive and that they didn't see why they were responsible for provision of transit lanes around the course etc."
Hayton said ACE had suspended on-water aspects of the event, meaning a training programme for marshalls as well as Ports of Auckland's hydrographic survey of transit lanes had stalled.
"It has been pointed out at length to ACE, that the Host Venue Agreement clearly places the responsibility for the management of spectators and the movement of vessels to and from the race courses with them," Hayton wrote.
"As Harbourmaster, my concerns stem from the fact that ACE appear to be reneging on their HVA responsibilities, going back on the agreed plans and delaying the commencement of marshal training," he added.
"In order to have a safe and successful event that showcases New Zealand and Auckland in a favourable light it is imperative that the on-water aspects of the event are properly managed. At the moment I need to be convinced further that the revised proposal for the management of the spectator fleet by ACE is sufficiently robust to enable this to happen."
Hayton initially agreed to be interviewed, but then cancelled, saying he was "unavailable".
In a statement delivered through Auckland Transport, Hayton simply said his concerns had been addressed, without elaborating.
Economic Development Minister Phil Twyford has also declined repeated requests for interview, but in a statement suggested the event might not live up to what was originally hoped, something he blamed on Covid.
"The 36th America's Cup will be a significantly different event because of Covid-19 and that will undoubtedly change the value for money the taxpayer will receive."
Other emails obtained by the Weekend Herald show Dalton indicated cost savings within ACE could be used to boost Team New Zealand's chances of retaining the cup.
In June 2019, Greg Kemp, Team New Zealand's chief financial officer at the time, wrote to Dalton that "we are finally at the stage where we can clean up all the Intercompany costs between [Team New Zealand] and [ACE] ... However there seems to be some reluctance to accept as gospel, the figures I've calculated."
Kemp asked Dalton to confirm the treatment of certain costs, including charging half of Dalton's travel costs to ACE, was correct.
Dalton responded by questioning where the reluctance to accept the charges was coming from.
"Lets be clear, ACE now exists for two reasons, not just the obvious one (run the Cup). Because money is in very short supply, a $ saved by ACE is a $ able to be spent by ETNZ [Emirates Team New Zealand] to hold the Cup (if correctly coded across to ETNZ for services rendered). I think we all would rather a 'slightly' compromised Event (its wont be though) and hold the Cup rather than the other way around."
The email suggests Dalton - rather than a director of ACE - was signing off on his own travel expenses.
Beattie Varley's report is heavily redacted in parts, including every reference to Dalton's name being suppressed.
In an opinion piece published by the Herald, former Team New Zealand director Jim Farmer QC wrote that the section on shared travel expenses was "so heavily redacted as to personnel and amounts, along with the lack of time-keeping, to make the lack of any apparent adverse findings by [Beattie Varley] difficult to assess".
However, the report does suggest the travel expenses were signed off by staff, without board consideration.
"We have seen nothing to suggest that travel expenses are reviewed or signed off by a director."
Over several weeks, Team New Zealand declined repeated requests from the Weekend Herald for comment or to be interviewed.
When the Weekend Herald approached a consultant involved in helping prepare ACE's financial records for board scrutiny - including documentation linked to the contested $3 million design fee - ACE responded by claiming this amounted to a breach of a High Court injunction.
In response to specific questions, Team New Zealand issued a statement.
"It is clear that these snippets have come directly or indirectly from Mayo & Calder who it is well known are disgruntled former contractors to ACE and were sacked for collecting confidential information and surreptitiously taping conversations over many months attempting to build a destructive narrative in an effort to inflict serious damage onto ACE & [Team New Zealand]," Dalton said.
"This resulted in a forensic audit being commissioned by MBIE to look at all allegations made by Mayo & Calder. As already widely reported, these allegations have been proven to be completely incorrect in the final Beattie Varley report where no financial impropriety or wrong doing was found."
The final report by Beattie Varley concluded it had not seen evidence that ACE or Team New Zealand had misapplied event investment, although it said its audit was not the place to resolve a dispute over the $3m fee.
The report said the failure of Team New Zealand "to maintain a contemporaneous and documented record that would allow objective verification warrants criticism at a governance and management level" especially given how much of ACE's funding comes from taxpayers.
Whistleblowers Mayo & Calder had claimed the $3m design fee started out as a loan from ACE to Team New Zealand.
Beattie Varley did not believe the allegation that the fee started as a loan "can be sustained". It has declined to be interviewed or answer questions on its report.
Symmans said ACE took health and safety seriously.
"The ACE board and management take health and safety extremely seriously. ACE is continuously assessing and planning all aspects of health and safety with the relevant regulatory agencies, health and safety advisors and it is on the agenda as an extremely important topic of discussion at every board meeting."
MBIE has said it has no reason to believe the concerns raised by Mayo & Calder were not made in good faith.
Mayo & Calder declined to comment.
Dalton's dual role leading both Team New Zealand and America's Cup Event has come under scrutiny, with the pressures of the two jobs potentially coming into conflict with one another.
Beattie Varley said both Team New Zealand and America's Cup Event deserved criticism.
Richard Westlake, managing director of corporate governance advisory Westlake Governance, said there were always challenges when someone had two jobs.
"It's the perverse incentives that you've got when you're running two organisations which have conflicting goals which I think is the challenge. Where's his head space? I would have personally thought that either is a fulltime job," Westlake said.
Westlake's comments were based purely on the Weekend Herald explanation of the governance structure of ACE and Team New Zealand, namely that Dalton headed both organisations, with separate boards, with one company (ACE) largely funded by the taxpayer).
Westlake was not aware of the details of the Weekend Herald's reporting and made no suggestion that Dalton or anyone else at Team New Zealand or ACE had done anything wrong.
Whenever someone had distinct two roles, it was possible the pressures could come into conflict.
"Do you love one and hate the other? Focus on one and neglect the other? Love the one that pays you best, or whatever? These are all the challenges when you have two jobs," Westlake said.
"Say Team New Zealand was running short, is there an incentive because you've got a big pot, with the same CEO, accountable for running both organisations? Perhaps with incentives to make sure he performs, is there an incentive on him to do things which he might not otherwise do?
"And I think there would be a potential problem, not suggesting he would do anything wrong, but there is potentially the opportunity and potentially the incentive," Westlake said.
Despite his concerns, Westlake said a structure like the one adopted by ACE and Team New Zealand could work in practice, if it had excellent governance
"You've got to make sure your controls are doubly strong, your oversight from your board is exceptionally alert, and the board who is providing that oversight is absolutely clear as to the source and application of funds, particularly that $40 million, which there should be an extra degree of accountability and scrutiny given where it comes from," he said.
"We're a very small community in New Zealand and strange governance structures have worked in the past. But I think you've got to have the credibility, especially when you're doing something as high profile as this. You've got to keep the credibility, and the only way I would see you doing that is having very clear financial accountability and an audit finance committee of boards of both [Team New Zealand and ACE] who stayed absolutely on top of it and were rigorous in ensuring compliance."
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