Cup's over, now legal fun begins

By BERNARD ORSMAN

Next Tuesday, retired High Court judge Sir Ian Barker will mediate in a multimillion-dollar catering row at the America's Cup village.

On one side of the table will be Corporate Host, a medium-sized catering firm that pioneered hospitality packages from car boots at Eden Park and won the hospitality and catering contract at the Cup village.

On the other side will be America's Cup Village Ltd, the company that spent $85.7 million of public money to build the yachting facilities and manage the village.

The Herald understands ACVL fired the first shot to recover unpaid bills from Corporate Host, which countered with a lawsuit for between $3 million and $4 million for breaches of contract.

The lawsuit is one of three legal disputes the Cup village company is embroiled in as it prepares to publish a final set of accounts for its shareholder, Infrastructure Auckland.

Another case involves former commercial project manager Steve Hanford who is after $150,000 from ACVL in the Employment Court for wrongful dismissal. ACVL has lodged a separate $2.4 million case against Mr Hanford for his handling of the village pavilion.

ACVL is also in legal discussions with Strategic Media in a dispute over the amount of sponsorship money Strategic Media raised for the village.

The Herald yesterday revealed that American Express paid just $200,000 towards the $2.8 million yacht club and nothing for naming rights valued at $2.2 million.

The deal was described by one source as like a game of poker where American Express called ACVL's bluff and won.

Rob Sutherland, ACVL chief executive at the time, thought the deal being steered through by ACVL chairman Lindsay Fergusson was commercial suicide and he resigned in protest. Mr Sutherland received a $320,000 settlement after leaving his job in May last year.

The Herald has learned that, on top of a potential $5 million loss from the American Express deal (ACVL is trying to stem the loss by selling the yacht club that sits empty in the Viaduct Basin), the company has lost $2.3 million on the village pavilion, set up in the old City Markets building, and at least $300,000 on a lease on the Winstone Building.

In order to prevent companies in competition with sponsors emblazoning their logos on the City Markets building just outside the village boundary - a practice known as ambush marketing - ACVL paid $2.1 million for a one-year lease on the building.

The building also served as somewhere to put small retailers and a food hall when Auckland City Council refused permission for kiosks along the public walkways around the basin.

Mr Hanford was given the job of ensuring the City Markets building broke even and with Mr Sutherland they planned to open a local franchise of the Hard Rock Cafe - including a restaurant, live entertainment and the sale of merchandise - for a period of six months.

About $100,000 was spent preparing 1400 sq m of space for the Hard Rock Cafe and a further $200,000 was set aside from the entertainment budget to provide live music for what would have been a big coup and huge drawcard for young people.

The Hard Rock Cafe was to have paid $100,000 key money and a percentage of its takings to ACVL. But after Mr Sutherland departed, his successor, Ian Collinson, pulled the plug, apparently over outstanding differences with the Australian franchise holders and because the village company wanted to steer clear of risks.

In its place, ACVL spent about $700,000 setting up a 1980s-style nightclub - thin corrugated iron, polystyrene skyline cutouts, rock'n'roll cover bands, and nothing like the DJ-based electronic music that attracts young inner-city crowds.

Problems with obtaining a liquor licence - nearby private bar owners opposed public money being spent on the "booze barn" - delayed the Music Factory opening until the end of January, and it bombed after seven weeks.

ACVL also lost a pile of public money on the Winstone Building behind Market Square. As part of the original American Express negotiations, ACVL had to provide a "Koru Club" lounge for American Express in addition to the yacht club.

After a row with Louis Vuitton - the sponsor for the America's Cup challenger series - over space at the Maritime Museum, ACVL secured a lease on space in the Winstone Building for about $450,000.

Later negotiations between ACVL and American Express resulted in the "Koru Club" lounge being traded away and the space in the Winstone Building remained empty.

A lesser botch-up occurred with the Navigators Club on the eastern viaduct, which had seating for 200 guests for another village sponsor, Air New Zealand.

The club had to delay opening its doors for several weeks after a liquor licence problem.

The Navigators Club and $800,000 which Corporate Host paid for fitting out the $2.8 million yacht club are part of its case against ACVL.

Both ACVL (set up as a local authority trading enterprise - LATE - and exempt from official information legislation) and Infrastructure Auckland have been loath to tell the public anything about the commercial blunders at the Cup village.

ACVL chairman Peter Kiely has referred questions to Infrastructure Auckland, whose chief executive, Richard Maher, has cited confidentiality agreements with private firms and LATE legislation for not providing detailed answers.

Nor has Mr Maher felt any moral obligation to clarify how a group of businessmen blew millions of dollars: "How does that help the public?"

Mr Fergusson said "this idea the Cup village ran in secrecy was absolute unadulterated rubbish. The company at all times complied with the requirement of the Local Government Act as a LATE, published its accounts properly, audited, and on time. That is what it is required to do."

The lack of accountability has infuriated Auckland City councillor Jon Olsen, who believes ACVL and Infrastructure Auckland are neglecting their public duty and trying to cover up their mistakes.

Mr Fergusson said he looked forward to Mr Olsen and the council running a successful event next time "where it is conducted in a bloody fish bowl. I would like to see how many sponsors they get."

Auckland City, which is getting drawn into a lead role to run the next Cup event, has already prepared a draft budget that predicts a shortfall of $15.4 million on expenditure of $34.4 million.

ACVL's final accounts are expected to show costs for "running the event and public participation" at about $12 million, or about $3 million above the figure it gave in February when the company blamed a lack of public spending for its woes.

Mr Sutherland estimates the final cost to the ratepayers of Auckland will be as high as $40 million, based on a much lower valuation for the seven Cup bases owned by ACVL.

The company has put a $48 million valuation on the bases. Mr Sutherland says the figures he has seen are half that.

"But even if it cost $40 million, we got more than four million visitors, we can use the investment again and again and we have cleaned up the waterfront. It has been a fantastic payback."

The last word goes to Craig Little, chairman of the now-defunct Auckland Regional Services Trust (now Infrastructure Auckland) in a response to "cynics in the news media" in 1996.

That was when the trust was looking at spending $34 million of ratepayers' money and $10 million of taxpayers' money on the Cup village: "We plan to take no risks with public money."

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