The other side of the Team NZ split

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: