An audit of Team NZ and America’s Cup Events – companies both run by Grant Dalton – has found no evidence of financial wrongdoing. Still, Dalton emerges from the matter far from spotless, writes Pattrick Smellie of BusinessDesk.

Grant Dalton has a strange take on the meaning of “vindication”. That’s what he says the summary report from forensic accountants Beattie Varley for the Ministry of Business, Innovation and Employment does after investigating a whistleblower complaint lodged by Mayo & Calder, the events management company that had been managing America’s Cup Events (ACE) Ltd.

Dalton told TVNZ the report, released on Wednesday, was a “vindication” and that his contentions had “all been proven”: that there was “no improprietry” (sic), “there was nothing wrong” and “it was a stitch-up”.

The negotiated joint statement from MBIE, Auckland Council and the hydra that is the America’s Cup organisation certainly states that “there has been no financial impropriety of any nature”.

However, what the Beattie Varley report does find is far from satisfactory.

In essence, it shows that ACE, whose chief executive is Dalton, was being sloppily run, took a high-handed attitude to being investigated, is now in mediation with MBIE on whether some of its spending was wrongly funded by the taxpayer, and that it failed to “maintain true and accurate records” as required by its government contracts.

ACE is the company in charge of delivering the America’s Cup regatta and two associated pre-events, and is getting $40 million of direct government funding to do so. It is one of two closely connected entities of which Grant Dalton is the chief executive.

He is also chief executive of Emirates Team New Zealand (ETNZ), the builder of the boat and manager of the team that will defend the America’s Cup, which will be contested in March next year after the series of build-up regattas. Both companies are housed in the same offices on Auckland’s Viaduct Harbour.

The Companies Office records of the boards of both companies show numerous instances in which a shareholder or director of one has resigned to become a director of the other. Some of the biggest names in NZ corporate life are among them.

While there is no suggestion or finding from the investigation that the potential for conflicts of interest created by Dalton’s two-hats arrangements have not been managed, the potential for trouble is obvious.

Good practice governance would avoid such room for ambiguity in arrangements that allow one chief executive to run two separate companies with a common stake in the same event, but with separate sources of funding, some of it from the taxpayer, overseen by directors who have also worn different hats across both organisations.

The heavyweight boards of both entities should exercise great care to ensure that lines are not blurred and that processes are strong.

For that reason, it is very concerning to read in the limited summary released yesterday of the Beattie Varley final report that:

• When approached for information on the whistleblowers’ concerns on June 9, America’s Cup Events said it had provided “considerable information” already and “was returning to its full programme, requiring its full attention”. In other words: ACE told the investigators to ‘naff off’;
• This refusal to cooperate “effectively meant we could not pursue documents that we still required” and couldn’t “seek explanations from ACE/ETNZ personnel based on a developed view of all relevant documentary material”;
• This also “impacted on an opportunity to assess the information received from the whistleblower against information from ACE”. The delivery on June 20 of a damaging interim report, leaked to the NZ Herald, appears to have changed ACE’s tune. It acknowledged its approach had been “unhelpful” and that “more fulsome disclosures would have helped to address the concerns we raised.” That interim report is still suppressed by the High Court and the final report has not been released, although news organisations are pursuing them under the Official Information Act. It will be many weeks before they receive either a refusal or, very likely, redacted versions;
• The final report, completed on August 14, identifies an ongoing dispute between MBIE and ACE as to whether $3 million spent on ‘AC36 Event & Class Design’ is actually something that taxpayer money should have funded rather than the Emirates Team NZ bucket of private money. MBIE does not think so, America’s Cup Events does and the issue is the subject of mediation;
• There was confusion and poor record-keeping where one organisation was doing the other’s work, with reimbursement to follow.

This last issue was serious enough to warrant stern, if carefully couched, words from Beattie Varley.

“The failure to maintain a contemporaneous and documented record that would allow objective verification warrants criticism at a governance and management level,” it said of a situation in which the key manager of both entities was, and remains, Dalton.

“It attracts increased criticism given ACE’s event costs are funded to a significant extent by the taxpayer.”

This is not what a vindication reads like – at all.

While MBIE agrees there is “no wrong-doing” involved, just a difference of opinion on the limits of the government’s funding agreement, the report and accompanying joint statement represent a legally vetted and negotiated concession that Dalton, ETNZ and ACE would not have made lightly.

There were other areas of concern that Beattie Varley identified. Most importantly, the interim report found “there were material relationships in place with third parties that were not documented, or which operated verbally, or were still under negotiation.”

Amazingly, “an agreement with a media and TV production service provider … did not prescribe the services to be provided.”

Given that television coverage is the only material international value left in return for the taxpayer’s investment in the 2021 America’s Cup, you would think such arrangements would be subject to the greatest care and probity.

Beattie Varley notes that appendices to its unreleased full report deal with the “extensive information (provided) relating to these agreements”. Its brief was “to establish support for payments made to third parties” and “we have been able to satisfy ourselves on that aspect,” the summary report says.

It does not find that “ETNZ’s failure maintain a system allowing objective verification of time-recharged (and ACE’s acceptance of that failure when it paid ETNZ) necessarily prevents the Crown from meeting its obligations under the Public Finance Act but we refer the matter back to MBIE for consideration”.

But nor does it find that it necessarily does allow those obligations to be met.

And then there is the much-vaunted $3 million scam payment to a Hungarian bank account.

While this got the most attention, it is something of a red herring in that it was a straightforward fraud that no one close to the Cup benefited from and left egg on everybody’s faces: Dalton, America’s Cup Events, and Mayo & Calder combined.

However, it was a big element in the feud that broke into the open between Dalton and Mayo & Calder, who were contracted to ACE for event management services, now taken in-house.

Grant Dalton is a very wealthy man, and good on him for that. He has leveraged a lifetime of competing hard and often winning in some of the world’s wealthiest sporting events to enjoy a lifestyle that has helped fund NZ properties with rateable values of more than $18 million, according to CoreLogic’s Property Guru records.

Almost half of that is the $8.8 million RV on a clifftop house in Parnell overlooking the Cup race course on the Waitemata Harbour.

People who know ‘Dalts’ say he is a take-no-prisoners character. You are either for him or against him. His natural competitive aggression is an explanation for his success.

However, it’s reasonable to question whether those are the preferred character traits for the head of two organisations at once, one of which uses taxpayer funds. Should the two have different CEOs for accountability and transparency reasons?

The evidence of the Beattie Varley report is that the operations of America’s Cup Events and Emirates Team NZ are too fungible.

Money has been tipped from one to the other and back again with the best of intentions, but with inadequate documentation. Challenges to that approach have been resisted.

Vindication would have been a slam-dunk “nothing to see here”. That is not what Beattie Varley has delivered and the ongoing issues that have still to be settled are not either.

The history of The America’s Cup may be replete with over-sized egos and buckets of money, but if you’re going to use our money to do it, Grant, we’re entitled to ask for a proper receipt.

This is not vindication. It raises far more questions than answers, which the full release of the Beattie Varley reports would perhaps help to answer.

This article originally appeared on BusinessDesk. Their team publishes quality independent news, analysis and commentary on business, the economy and politics every day. Find out more.