The former directors of Team New Zealand - Sir Tom Clark, Roger France, Richard Green, Jim Hoare and John Lusk - have finally given their version of the team's acrimonious split.
Below in their own words is their response to last week's claims by Russell Coutts and Brad Butterworth:
"In 1992, Sir Peter Blake believed New Zealand could win the America's Cup.
He and some friends put together Team NZ for the purpose of challenging in San Diego in 1995. He then secured sponsorship and, applying his already proven team principles, led Team NZ to win in San Diego. He secured further sponsorship and led Team NZ to win again in 2000, but his task was made far more difficult by certain actions of Russell Coutts and Brad Butterworth.
By misrepresenting the facts, Coutts and Butterworth in the Alinghi press release have tarnished what Sir Peter and Team NZ achieved and the enjoyment and pride that it brought to New Zealanders. They leave the former directors with no alternative but to set the record straight.
Coutts and Butterworth claim that they were effectively excluded from Team NZ, whereas they left as a matter of choice, even though they had signed up to a transition process, which at that stage was well advanced.
They announced their decision to quit Team NZ in May 2000, nearly two months before the completion of the agreed handover period (June 30, 2000).
They quit Team NZ even though they publicly announced on March 31, 2000, that an acceptable deal was in place. The terms of that deal in fact formed the basis for the successful creation of the current Team NZ syndicate under Ross Blackman, Tom Schnackenberg and Dean Barker.
The following deals with the principal issues arising from the Alinghi press release.
1. Was there disharmony between the old guard and Coutts and Butterworth?
Yes there was. It was primarily driven by Coutts and Butterworth not being prepared to accept Sir Peter's ultimate authority as the CEO of Team NZ.
Team NZ was a large and complex organisation not just a team of sailors. As CEO, Sir Peter was responsible to the board of directors and to the sponsors for all aspects of the defence to retain the cup. It was Sir Peter the sponsors had backed, because of his ability to manage large yachting campaigns - and deliver a successful outcome - not Coutts and Butterworth.
It was unacceptable to Sir Peter, to the persons referred to as the former trustees (who also constituted the board of directors of Team NZ Ltd) and to the sponsors, that Coutts and Butterworth would not accept Sir Peter as CEO.
A further major factor in the disharmony was the failure by Coutts and Butterworth to recognise that it was the sponsors who primarily funded the campaign. Those sponsors rightly expected members of Team NZ to comply with Team NZ's sponsorship obligations. There were several instances where Coutts and/or Butterworth deliberately did not do so. This was unacceptable to Sir Peter, for whom loyalty to his sponsors had always been fundamental.
In March 1998, Sir Peter wrote to Russell Coutts setting out the basis for Coutts' engagement by Team NZ and acknowledging his aspirations to control Team NZ. It provided for his attendance (and that of certain other senior Team NZ executives including sailing and design team members) at all board meetings. It provided for the involvement of Coutts in all decisions of importance affecting the conduct of any further defence. It also required Coutts to be involved in assisting in the promotion of the sponsors.
There had been several instances where Coutts deliberately wore Team Magic clothing (his match-racing brand) rather than sponsor-branded clothing when acting on behalf of Team NZ. The letter sought to prevent such occurrences.
2. Was there a process in place to achieve an effective handover to Coutts and Butterworth?
Yes there was. The letter from Sir Peter to Russell Coutts in March 1998 requested their attendance at board meetings and provided for their involvement in the decision making for any further defence. It outlined their rights to acquire the assets of Team NZ for the purposes of any further defence or challenge for the America's Cup.
In their own press release, Coutts and Butterworth acknowledge the personal undertakings made by Richard Green, Sir Peter Blake, and CEOs of some of the sponsors. These were contained in a written memorandum of understanding entered into in early September 1999 (the signatories to which included Coutts and Butterworth) to ensure a smooth transition of management to Russell Coutts, Brad Butterworth and Tom Schnackenberg if the cup was retained.
All the parties to the memorandum of understanding agreed to provide for the human and physical assets of Team NZ to be retained for any further defence. That retention was accepted as only being possible so far as was consistent with the existing financial and contractual commitments of Team NZ.
Under the memorandum of understanding a specific transition committee was established to deal with transition issues. The committee met within days of the memorandum of understanding being signed and that meeting was attended by Coutts and Butterworth as members of the committee.
The conclusion to the minutes of that meeting are significant. They state:
Conclusion
Attendees at the meeting agreed that the [transition committee] was a useful forum to share knowledge and experience for the benefit of achieving a smooth transition to a new regime for Team NZ, but because everything was subject to meeting the [mutual understanding] objectives and commitments the main work of the [transition committee] will be in the four-month period between the end of the event and June 30, 2000, when the present Team NZ structure is wound up. In the interim a key subcommittee had been established to assist [Russell, Brad and Tom] in the high priority area of protocol and a basis had been established to assist [Russell, Brad and Tom] with financial and budget issues.
For some time prior to the signing of the memorandum of understanding, Coutts and Butterworth, through their legal adviser, had been requesting the unconditional right to take over Team NZ at the conclusion of the 2000 defence. In the meantime they wanted to have sole responsibility for all matters that related to a subsequent defence. That was not possible for three reasons.
Sir Peter as CEO had the responsibility of successfully defending the cup. His authority and responsibility to do so could not be impaired in any way.
The sponsors had certain contractual rights in relation to any subsequent defence including the right of renewal, the right to require Team NZ to defend the cup again, if it were successful in 2000, and rights in relation to the appointment of the CEO.
The sponsors were not in a position to undertake firm obligations in relation to a subsequent defence until after the cup had been retained and they had the opportunity to consider the budgets and other critical issues in relation to that next campaign.
The board of Team NZ could not accept final decision-making in relation to any subsequent defence being given to individuals who might subsequently decide for their own reasons not to be part of Team NZ. The board was contractually responsible for that defence and therefore had to have control.
The memorandum of understanding went as far as members of the board and the sponsor CEOs who signed could go to give Coutts and Butterworth the comfort that they required. Some individual CEOs of the sponsors provided financial and budgetary advice to Coutts and Butterworth as part of the transitional arrangements.
It is simply not correct for Coutts and Butterworth to say that they tried hard for over two years to make it work and failed. They were asking for something that was not legally and practically possible. They achieved in the memorandum of understanding what was possible at that time. They subsequently accepted the terms of the handover agreement reached in March 2000. This has been confirmed both by Ralph Norris, and by Brad Butterworth in his statements to the media on March 31, 2000.
What they accepted before departing for Europe in early April 2000 essentially mirrored what had been outlined by Sir Peter in his letter to Russell Coutts in March 1998.
Coutts and Butterworth had a standing request to attend all board meetings. They were provided for the purposes of those meetings with the same financial information as the directors and representatives of the sponsors including budgets and cash-flow forecasts. Given the commercial sensitivity of the information, it was standard practice for all who attended board meetings to leave their papers in the boardroom for safekeeping, a not uncommon business practice.
Coutts and Butterworth were fully aware of the basis on which a handover of the assets of Team NZ would have to take place, as a result of their legal adviser having had access to all the main contracts, and from the subsequent and numerous discussions with Sir Peter and/or members of the board.
In May 1998, Russell Coutts was given a note by Sir Peter, which set out in detail, and with examples, ongoing obligations that would exist to the sponsors and the intention to pay $2 million to charity to meet the objectives of the Team NZ Charitable Trust. The position was further covered in a letter from Sir Peter to Russell Coutts in early June 1998.
In that letter, Sir Peter also emphasised how critical it was for Coutts to get alongside the sponsors to ensure that they remained sponsors for any subsequent defence. In addition to their existing contractual rights, which could not be altered, Sir Peter believed the sponsors would continue to provide the best foundation for Team NZ's future funding.
It is also significant that even in the proposals put forward by Coutts' legal adviser for a binding agreement to take over Team NZ, it was accepted that liabilities, including the possibility of tax obligations (although it was thought there would not be any), would have to be met from Team NZ assets.
There is simply no basis for any claim that Coutts and Butterworth:
did not know precisely what rights the existing sponsors had;
did not know that if those sponsors did not continue, loans of some $5 million would need to be addressed;
and did not know that all liabilities of Team NZ (including any liabilities for taxation), would have to be met.
3. Why didn't the handover to Coutts and Butterworth take place earlier?
Because Sir Peter Blake, in his capacity as CEO of Team NZ, was fully accountable to the board of Team NZ and to the sponsors for a successful defence in 2000 and, for the three reasons outlined earlier, it would have been impossible and unacceptable to him and to his board to have delegated any of his overall responsibility in any way until the defence had been successfully achieved.
Moreover, Sir Peter was adamant that until that time, the team's focus was to be 100 per cent on winning on the water and no one, particularly the sailing team of which Coutts and Butterworth were key members, was to be distracted by the handover issues.
Just before a meeting of the transition committee in December 1999, Sir Peter emphasised to all parties that it was important that, other than finalising the protocol, people should not become distracted from the main task of defending the cup by focusing on the handover. The finer details could be dealt with once the cup was won. That approach had been accepted by all at the earlier transition committee meeting in September.
From late 1999, the former trustees were aware that Coutts and Butterworth had secured the agreement of Ralph Norris, Peter Menzies and John Risley to act as the new trustees. Ralph Norris and Peter Menzies were known to the former trustees and there was every confidence that they would provide excellent assistance and oversight that Coutts and Butterworth would need to manage the next defence.
With their involvement, the former trustees were confident that the handover would eventually proceed as envisaged in the memorandum of understanding.
4. Could the damage which Team NZ suffered have been avoided if Coutts and Butterworth had behaved differently?
Yes. The fact is that Coutts and Butterworth publicly confirmed they had an acceptable deal with the former trustees and sponsors on March 31, 2000.
It should have been a straightforward matter to secure Team NZ's personnel and the well-being of the team over the next week. Instead, Coutts and Butterworth promptly departed for Europe. On April 17 they reneged on the deal negotiated between their directors, the former directors and the sponsors, which they had already accepted. Subsequently they agreed to sail for Ernesto Bertarelli.
Team members were waiting for a clear signal from Coutts and Butterworth as to whether those members had a job and on what basis. They did not get it, and Coutts and Butterworth went off to Europe to negotiate television funding. Nothing was heard from them other than occasional email exhortations to the team to stick together.
Had Coutts and Butterworth properly prioritised their management responsibilities and promptly set about securing the team and its well-being, many of the subsequent personnel losses to other competing syndicates might have been avoided. The existing sponsors were prepared to provide interim funding to cover salaries.
Moreover, formal discussions for the handover commenced on March 15 (less than two weeks after the final race of the 2000 match) when the former board tabled what needed to be done to effect the handover. The handover arrangements tabled were entirely consistent with all the previous discussions, correspondence and understandings between the parties.
5. Was the basis of the handover fair?
Yes. The basis negotiated for the handover was eminently fair to both parties. This was explicitly recognised and accepted by the new board and Ross Blackman (the new CEO), who were more than happy to undertake responsibility for the 2003 defence on that basis.
The former board handed over to the new board and management team an organisation which owned, among other things, the two fastest America's Cup boats in the world (NZL57 and NZL60), a huge array of support equipment and facilities at the Halsey St sailing base and the Roy Mason storage facility, computers, computer programs, performance information and one of New Zealand's finest, if not its finest, brands.
The former board requested only that the new board and management team assume responsibility for repayment of the $5.4 million owing to the sponsors and agree to donations of $2 million being made to charities for whose benefit the assets were ultimately held. No further payments had to be made to anybody.
None of the former directors/trustees, or senior executives in the management, sailing or design teams received any payment or financial benefits as a result of the handover.
The moneys owing to Team NZ's four major cash sponsors had to be repaid unless those sponsors agreed otherwise. The loans had arisen in terms of the original agreement with the primary sponsors as a result of Team NZ being unable to secure from other sources all the funds it needed to finance its expenditure.
The primary sponsors, who in any event held binding legal go again rights, effectively became lenders of last resort, bridging the shortfall on the understanding that they would be repaid their loans. This was a perfectly reasonable request, given that they had already met all of their financial obligations in contributing a major share of Team NZ's budget over two campaigns. Indeed, without this support Team NZ would not have been able to mount the defence needed to do the job.
In the final analysis, the sponsors agreed that their loans would not have to be repaid if they continued their sponsorship in the subsequent 2003 defence. Those loans have been written off.
In relation to the donations to charity, great care was taken to ensure that it did not place any unreasonable strain on Team NZ's finances. The donations were made by Team NZ from the proceeds of sale of NZL38 (the second and by then outdated boat in the successful San Diego campaign) which, it had been indicated, was not needed for the next defence, and a lease of NZL32 (also carried forward from San Diego) to the French syndicate. Accordingly, the donations were made from the sale/lease of surplus assets. NZL32 was subsequently donated to the Museum of New Zealand.
Coutts and Butterworth also assert that there was a new requirement that they accept any potential tax liability of Team NZ. In fact, this obligation was accepted by them from a very early stage, recognising that once the former directors transferred the assets to the new directors without such an undertaking they would have no legal rights to look to the assets of the trust if any tax problem arose.
In fact, and possibly as a result of the public furore around the terms of the handover in March 2000, Team NZ was subject to an investigation by the Inland Revenue Department in April and May 2000, which necessitated a delay in the formal transfer to the new board. The outcome of that investigation was confirmation from the IRD of the charitable status of the trust, that Team NZ's affairs were completely in order, that there had been full compliance with all relevant legislation and there was no tax to pay.
Undoubtedly, the terms of the handover were fair to the ongoing Team NZ organisation, which was clearly recognised and accepted by the new board and management team, even if it was not by Coutts and Butterworth. Certainly it was an infinitely preferable deal to that taken on by Sir Peter Blake, his management team and the former board back in 1993 when they set out to challenge for the America's Cup in a foreign country with no assets, no sponsors, no infrastructure and no team.
In summary, Coutts and Butterworth had the relevant information. A procedure for their succession was put in place. They were intimately involved in the drafting of the protocol for the 2003 defence. They received financial, commercial and budgetary support from inside Team NZ and from some sponsor CEOs.
If it was too hard for them, they should have known that well before the match of the 2000 defence. They could have announced their intention not to be involved in the future at that point. That would have enabled an orderly transition to what is the present Team NZ led by Tom Schnackenberg and Dean Barker.
It is very sad that in order to justify their change of heart to New Zealanders, they seek to misrepresent the facts and malign directly or by implication Sir Peter Blake, the former board and management of Team NZ and its major sponsors and those such as Ralph Norris and Peter Menzies who had accepted their request to help them to establish the future dynasty which Coutts had publicly announced his desire to create.
Finally, there have been from time to time suggestions that the former directors/trustees of Team NZ and/or Sir Peter Blake and other senior executives personally enriched themselves at the expense of Team NZ.
The former directors categorically refute any such suggestions. The former directors spent countless hours from 1993 to 2000 acting as directors of Team NZ Ltd and the other Team NZ companies. The former directors received no reward or remuneration whatsoever for providing those services. They considered it a privilege to be associated with such a magnificent organisation. The former directors can also confirm that no person within the Team NZ organisation, including Sir Peter Blake and all other senior executives, was engaged on terms which were out of line with the market."
(signed)
Sir Tom Clark
Roger France
Richard Green
Jim Hoare
John Lusk
(the former directors of Team NZ)
nzherald.co.nz/americascup
Racing schedule, results and standings
The other side of the Team NZ split
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