Struggling to understand why Team New Zealand fell apart? Why emotions run strongly in New Zealand with the Blackheart campaign and Team New Zealand is branded 'loyal' by its marketeers?

On Friday 31 January Russell Coutts and Brad Butterworth issued their statement about the reason they quit Team New Zealand. After two glorious victories in 1995 and 2000 they had expected to be the heirs apparent, along with Tom Schnackenberg, to succeed Peter Blake.

Within six weeks of winning the Cup, they'd signed up with Ernesto Bertarelli's Alinghi team.

Two men were identified in Coutts' and Butterworth's statement as making it impossible to take over Team New Zealand; old trustees John Lusk and Richard Green.

Here follows the verbatim transcript of the only interview Richard Green has given on the whole saga. It deals not just with the statement but with other reasons thought to be behind the schism: that the old trustees had tried to sack Coutts before the last Cup was even sailed, that they were prepared to bring in Chris Dickson and Grant Dalton as replacements and that they let Coutts and the new trustee go off to negotiate new TV rights when a bargain had already been struck.

Joining Green is Ralph Norris, the chairman and chief executive of Air New Zealand, in whose office the interview was conducted.

As one of the new trustees, indeed one of three new faces Coutts and Butterworth asked to be trustees for the 2003 Cup, Norris portrays the rift as something surmountable. His outlook for Team New Zealand is up beat.

Green's answers are narrow, precise, a little testy even.

As a footnote, there is a short interview with Jim Farmer QC, the lawyer who advised Coutts and Butterworth during their negotiations with the old trustees. His is a rare, independent voice in the debate as to whether there was ever a viable succession policy.

Read and decide.

TJ TNZ's design team evolved under Tom Schnackenberg, likewise Russell Coutts groomed Dean Barker for the skipper's job in the sailing team, but in management there disharmony and eventual crisis. Why?

Norris Why I have spoken as I have is because of Brad's recollection of events in recent interviews. Brad made comments that they weren't wanted, that they prevented from taking over and so forth. I regard myself as having been in the Brad camp and the Russell camp. They asked me, along with Peter Menzies and John Risley to be founder member trustees.

As a result of that, they indicated to me that they had major concerns over relationships. The issue for me and the co-directors was how to execute a reasonably seamless transfer between the 2000 set of trustees and the trustees for 2003.

We had differences of opinion with the old trust, but when we actually worked our way through it there was a rational reason for the view being taking by the former trustees so we ended up with an agreement that, actually, Russell and Brad committed to. If you look at transcripts of interviews at the time, they said a deal had been done.

The process of negotiation really only came down to two issues: one was the assets of the former trust and loans that had been made by the previous sponsors. Russell had a view that there shouldn't be payment for any of the assets of the old trust.

The former trust had obligations towards its charitable requirements to make donations. Therefore the NZ$2million of donations meant that there were a significant amount of assets transfer across for which the succeeding trustees were to be responsible for. The amount of those donations were covered by the of NZL 38 and the lease of NZL 32.

The syndicate as such was not being asked to dig into its pocket to fund that $2million dollars because they were being paid for by assets of the old trust.

Myself, Peter Menzies and John Risley got involved at the invitation of Russell and Brad and the three of us stayed because we felt the deal was a reasonable deal.

As a chief of executive, not of this company then and not of a sponsor, I could see that sponsors who have made a commitment over and above their sponsorship because the government had failed to honour a commitment back in 1995 when the team made it to the final, but actually failed to come through with the cash, that the sponsors stepped up the mark to the mark and made a loan. Being responsible to their shareholders, those loans were rolled through to the next campaign. When we came to takeover, they had a view that was commercially appropriate; if they were going to be cut aside why would they not want those loans repaid if their position as sponsors was going to usurped.

They had made an investment over several campaigns and they had these liabilities sitting on their books so why would they forgive them if they were going to be usurped? From a commercial perspective, it made sense. The sponsorship arrangements were, if they were carried forward, that then they would look at forgiving those loans.

Peter Menzies and myself arranged interim funding for the 2003 defence so that would not have to make decisions on sponsors in haste so we could go out and look at our options, whether we could repay those loans, or get new sponsors for what we expected to be a significantly bigger sponsorship ask.

We had some guarantors for a significant overdraft and also had immediate funding from the government to work with Tourism New Zealand to use the America's Cup to promote the country.

That put us in a position where we able to negotiate with the sponsors from a position of relative equality.

TJ Was there a seamless succession policy? Was the old trust only interested in moving Blake into next phase of his career and winding up TNZ after the 2000 Cup?

Green Not true. That is simply not correct. Succession had been discussed at huge length between sponsors and Brad and Russell and Tom, between Peter and between the board. They knew all the details. All the obligations to the existing sponsors were spelt out in great detail to them. They knew and accepted that most of the work on the transfer would be done between the end of the Cup and June 2000 which was the original date of the hand over.

TJ Accepted? Coutts & Butterworth say there was only face to face meeting with the old trustees?

Green Not true. Just as Brad has said that we own Team New Zealand, that is simply wrong. I don't know if Brad didn't quite follow it or if he was being deliberately mischievous, but it is wrong.

Likewise it is not a blind trust. It is a bog standard New Zealand charitable trust. It is exists for charitable purposes. The trustee, which was the company we were directors of, chose it beneficiaries which were maritime related activities. A blind trust has no beneficiaries and is private; this is totally public and is under the control of the attorney general.

TJ Explain the relationships between the entities behind TNZ?

Green Team New Zealand Trustee Ltd is the company which is the corporate trustee of the Team New Zealand Trust. The Team New Zealand Trust owns shares in Team New Zealand. And those businesses are carried on for the purposes of a charitable trust. All assets owned by charitable trusts must go to charity. It was decided that given that this was particular point in New Zealand's holding of the Cup - we'd won and we'd defended it- it was appropriate that we make some distributions to the beneficiaries and that all the rest of the assets would be preserved for carrying on the defence of the Cup.

TJ Coutts and Butterworth say they were told that the assets were not to be sold. Hence their surprise at the disposal of NZL 38?

Green Again that is incorrect. At the end of the last campaign when, again there was a question over the funding of that campaign which gave rise to the sponsor loan, so-called- Brad was one of those who said we don't need 38 any more and if it helps raise funds, go to it.

TJ But if they'd subsequently wanted to use 32 and 38 for promotional regattas around New Zealand?

Green They had NZL 57 and NZL 60. NZL 32 was off to the museum.

Norris In fact we did use 32, at the 150th Anniversary regatta in Cowes. That was an understanding in the lease with the French.

TJ To confirm, the only binding stipulations on the new trust were?

Norris The carry over of the $5million debt and $2 million charitable payment were the only stand-out issues that were the major concerns Russell & Brad?

TJ What about new sponsorship agreements, were they at liberty to secure those?

Norris Yes. They left New Zealand in the later part of April (2000) to talk to Octagon in London and that was about looking at sponsorship. The existing sponsors obviously had first right of refusal but they were not going to put an amount on the table that was going to be acceptable to us. So there was the option of repaying the loans and going somewhere else. After Russell & Brad had gone, we had taken the view that we needed X-million of dollars up front and that's why to we took the view that we needed alternative funding that was not sponsor-related. That gave us the appropriate breathing space for what would be the appropriate sponsorship package.

TJ So the new trust has no burden of tax liability stemming from the old trust?

Norris Certainly we were not going to assume responsibility for liabilities that were outside of our responsibility. If there was an issue with regard to tax then it was handled by the trust and were found to have acted appropriately.

TJ Were Coutts & Butterworth ever given sight of the accounts or the roll-over contracts of the old trust? They say not.

Green Totally wrong. They took legal advice very early on, two years before the America's Cup, and their lawyer was given access on their behalf to all sponsorship agreements, all contracts, and they were taken through those agreements who explained to them what the obligations were.

TJ All relevant documentation?

RG Mmmn.

Norris We worked with Mike Smith, acting on behalf of the sponsors, to get and agreement and at the end of the week that they went off to Switzerland, Russell agreed that we had a deal. It was fair to say he was still Teeed-off about the sponsorship situation and the issue of the $2 million dollars but it was a perfectly acceptable, commercially appropriate, deal, My recommendation was that they go with the deal. Russell said yes he would. The next thing I heard from Russell was a phone call from Pebble Beach, saying 'this is probably the hardest phone call I've ever had to make but Brad and I going with the Swiss. How do you feel about it?' I said 'what?' And he said, 'well, the money's just too good'. I asked 'what about Tom?' and Russell said 'he's staying put but he's in Monaco'. I rang Tom and said 'what's this all about?'. He filled me in. I said what you are you going to do. He said 'I've been sitting on the end of my bed considering it. If I can't sail for Team New Zealand, Team New Zealand will not longer exist. But I can't sail for anyone else.' I said 'get your backside back here because three directors will support you.'

TJ Before that happened, what about when Coutts and John Risley visited ESPN to talk about media rights but found those rights already sold unbeknownst to them by the old trustees? Did that not undermine their position?

Green ESPN had follow on rights from the last campaign. What's unusual about that?

TJ What was unusual was that one of the new trustees and one of the new managers had not been informed before they'd gone to negotiate in good faith?

Norris When was this?

Green They had first right of refusal.

TJ So they were not undermined by this?

Green That's a total overstatement. The reality is that America's Cup media rights usually cost money rather than raise money.

TJ What about Coutts' chance meeting with Douglas Myers at Queenstown where Myers suggested Coutts might look elsewhere if he didn't like the arrangements for TNZ 2003?

Green I know ... I wasn't present. When was this allegedly? I would have thought at the end the day that was the position that was reached. If you don't like it you shouldn't be there.

Norris That's why we were looking other options. At that point we weren't committed to going with the Family of Five. We were looking at alternatives.

Green You have to look at this with the background. Peter (Blake) had a track record of looking after sponsors tremendously well, far more than he should have done on many occasions. He had a situation within Team New Zealand where certain people, Russell & Brad, were not giving sponsors what they wanted. In fact in many instances there were deliberately putting on non-sponsor logo-ed clothing and the sponsors did not appreciated that. Russell and Brad were told very early on the piece that were certain sponsors had been supportive for so long, that they had rights of first-refusal on certain terms, and in this case because of the loan, they had the right to be repaid. And a way for that to be done to sell assets. Now Russell and Brad were told, at least as early as September '99 about this. What it boils down to is this: Russell and Brad did not believe that sponsors were entitled to what sponsors are generally entitled to. As far as we were concerned, as signatories to those contracts, there was no way out of those obligations.

Norris I feel a lot of the problems were due to mis-communication with Richard. Russell and Brad had certainly given me the view that they felt were getting the rough end of the stick. Sitting back and looking at it, I came to the conclusion that it was a case of misinformation and miscommunication rather than anyone trying to mislead anybody. The relationship had been strained with Peter, the Alan Seftons of this world, so that some of these things had been blown out of all proportion.

I haven't gone and castigated Russell or Brad. They've gone out and done what they wanted to. The fact remains that Team New Zealand 2003 has created an innovative pair of yachts, has got together a strong sailing team and it has been well funded. It's not had the funding that some of the others have had which had meant we've had to think a bit more before spending the dollars. The three directors chosen by Russell and Brad, together with the new management team, have picked up the ball and will make a very credible showing. That indicates to me that there really wasn't an obstacle if Russell and Brad had wanted to do it.

TJ So the inescapable conclusion is that the transition was derailed by personnel factors? Why did Douglas Myers (Steinlager boss, and leading Family of Five sponsor) suggest what he did? Why did John Lusk say that Chris Dickson or Grant Dalton were being considered as alternative leaders?

Norris The situation was well on the way to being resolved. There was a lot of frustration. I think people said things on both sides. But fundamentally, I don't there any obstacles in the end.

TJ So John Lusk's comment about Dickson and Dalton is true or false?

Green When was this?

Norris I can answer that. I think the comment was made to (TNZ crew member) Tony Rae. I spoke to John after the event and he was pretty embarrassed about having said it. It was one of those things. There was a lot of intensity in the negotiations. At the end of the day, it comes down to this: Russell and Brad thought there was a bloody conspiracy!

TJ Yet before the last Cup was sailed, didn't John Lusk talk to Blake about sacking Coutts?

Green I don't know what you've been told. But if you believe no succession was planned for that, it is just incoherent. They knew it had been planned for. That document says so. (Produces the 'Mutual Understanding' document dated 8 September 1999)

TJ But it's only an outline of intent? It's not detail and binding deal?

Green So that can be discounted can it?

TJ No. Yet if problems were surmountable as you suggest, then why would TNZ have unraveled in the way it did? Having lost so many already to OneWorld and Oracle, surely you would have fought to keep as many senior people, especially those who were going to head the team?

Green At the end of the day, you have to appreciate how these people behaved. They refused to recognise Peter as chief executive of the organisation and threatened to take over the defence of the last Cup.

TJ Yet was not Peter already looking to the future and was happy that the design and sailing operations were being run by Coutts, Butterworth and Schnackenberg?

Green I'd disagree with that. He had a task to do which he wanted to achieve, and to meet his obligations. Any suggestion that Peter was not interested in successfully defending the Cup does event warrant thinking about.

TJ He was chief executive then, not head?

Green Not true. He was chief executive. It doesn't matter what you call him, he was the top. He was employed by the board. Brad and Russell would have liked it to be that way which was the start of their own aspirations. They personally wanted this last time which could not be accepted because of obligations to our sponsors. The only reasons we had sponsors was because of Peter Blake. When you get people like Coutts & Butterworth really suggesting that they should be the people, and that Peter was getting way too much credence, that did not fit with what the organisation was. The board had an obligation both to existing defence and to the future. One of the possibilities, which ironically came to fruition, was that Brad and Russell might not have been there next time, so the organisation had to assume responsibility for the next time over a whole range of possible assumptions. Commercially they had, legally they had and their obligations as trustees meant they had too. So where it is inconsistent with a succession?

TJ Why would John Lusk ask Blake to remove Coutts?

Green I'm...not aware... of that...comment. I was aware of tensions before the last Cup, because of the way they were behaving.

TJ Yet there was more than a simple dynamic at play in terms of relations breaking down?

Norris There's obviously personality issues that I'm not privy too. But the case book of 1995 has been replicated in 2003. You'll find that team very cohesive. They met all their targets and objectives. It is based on what was an attempt at a succession. There may have been some hiccups. Two of three senior people who were part of that process went somewhere else. One stayed. The mission, to a large extent, has been achieved.

TJ Did the new trustees say to the old trustees in May 2000, after Coutts and Butterworth announced their departure, let's wipe the slate clean, or reasonably clean?

Norris Yes, we wanted a clean succession and we have that arrangement now and yes, there were a lot of issues that had to be resolved and when we heard that Russell and Brad were leaving we wanted a lot of Is dotted and Ts crossed. Also we had to make sure the Yacht Squadron were happy with the situation and that we were able to put this together without Russell and Brad.

TJ It was more fundamental than this though: major issues dealt with against a deadline, if not an ultimatum?

Norris I made a statement at the start of the meeting saying this is where we at, you could postpone the meeting, but if we're to reach a decision, let's reach it.

TJ So if the new trustees were have such a robust negotiation with the old, how can the transition be portrayed as seamless? Did not Coutts and Butterworth's departure unshackle the new trustees from many of the obligations?

Green I don't believe it came down to that. The two only fundamental issues were the degree of funding going to come out of NZL 38 and NZL 32 and sponsorship obligations.

TJ So what other about sponsorship deals. Like Line 7 as opposed to bigger deals outside the country? Were Coutts and Butterworth going to be obliged to honour deals made by the old trustees rather than chase greater sums in the world market?

Norris There's no doubt that there was a case of 'are there other options?'. The ante had been lifted considerably. The budget Russell and Brad put was a significant advance over that over the previous defence.

TJ Explain the reasoning for using Norway as a conduit for TNZ's funds in the last Cup?

Green Quite simply because it allowed money flows to be made more easily and we had contractual obligations offshore. It has a very favourable tax treatment.

TJ How this does sit with an organisation in receipt of public money? Might this not seem odd? It's a perception question?

Green Not at all. It's ordinary business that if someone is going to receive royalties or income flows then they can put a structure in place which means that governments in other parts of the world don't clip the ticket. It's industry norm. Common or garden. The reality is simply that no matter whatever cast Russell and Brad put on things, they were told well in advance what the arrangements were. They were told they were the obvious people to take over. They were they if everybody met their commitments and they met theirs to Team New Zealand then this is what would happen. These would be the term on which it would, and on which it did happen.

They say something different. What the sponsors say, what (new trustee) Peter Menzies says, what Ralph is saying, is consistent with that. They (Coutts & Butterworth) are trying to re-write history to try to make it appear that they were forced out and didn't leave in the way they did. I don't know if it was the money, if it was too hard or if they wanted to do it the way (Ernesto) Bertarelli wanted to. There would not have been any issue if they had said prior the Cup, we're not going to be here, we've had our challenge, we don't like the way we know we have to do it for all the existing sponsors, we don't want to have obligations to them, we want to have one big private sponsor. If they had said that, I don't think you'd have had any of this issue at all.

Why it caused an issue is because they said would stay, announced a 25 year dynasty, told their team members not to sign with other teams, and then, having proceeded with the very deal they'd know about before the Cup, they decided to go. It's as simple as that. You can't re-write that.

TJ Surely the history of strained relations suggested the problem was complex, not simple?

Green The terms that were agreed on the 31st March we exactly the terms they were told they would takeover on. They had accepted the deal. The told New Zealanders 'we are in'. It's consistent with having decided on something, they had second thoughts about it. You can't cast the responsibility on others for what happened; that's what's going on here.

Norris I did my best for Russell and Brad. We've lived through the process. There obviously was a certain amount of animosity. But we reached a deal. Russell and Brad had actually committed to it. It was a matter of public record. There was a new budget put in place and a new budget and there was no way we were not going to carry about our obligations. And they have met extremely well and we've supported Tom to the hilt.

TJ Was an objective of the last trust to give a payout to a small number of individuals?

Green Why do you say that? That is not correct. Everybody was paid like in any organisation and it was approved by the board of directors. I don't keep those figures in my head. To say something like Blake took a large sum of money is absolutely untrue. Fundamentally we had a board of directors, and sponsors who money it was and who had to be content too that the money they were investing was being spent wisely. And fundamentally we were not ripping them of. Peter got a mere bagatelle compared with what Russell's allegedly getting. I suspect our wage bill for five years is less than what Bertarelli is paying in three years and that's just for the two of them.

TJ Yet many people would find it laudable to give Blake a decent payout for 20 years of wonderful service to New Zealand yachting? In reality, he'd missed out on the income that many prominent sailors who followed in his wake accrued.

Green I agree. That's why I find allegations that he was putting hands in the till just wrong. Bill Koch (1992 America's Cup winner) was spreading allegations around during the last Cup and those were incredibly hurtful to his Peter, his board, his sponsors and they were incorrect.

Norris I'm aware of the numbers and our budget is significantly greater for three years than their's was for five years.

TJ So no sum great than NZ$1 million was paid to any individual?

Green I'm not giving any figures.

JIM FARMER

TJ Richard Green says you were shown all the paper-work to facilitate the handover from the old to the new?

JF What I was shown, but was not allowed to keep, were copies of was the trust deed and contracts with sponsors, some other contracts. But I was not shown any financial information or given any accounts.

TJ Coutts and Butterworth says there was only one proper face to face meeting. Green says otherwise?

JF That was a meeting in Russell McVeagh's office (leading Auckland law firm) where I was allowed to read through that material. The meeting that Russell Coutts is referring to was also in Russell McVeagh's office. As I remember attending were Peter Blake, Richard Green, John Lusk, Russell, Brad and Tom Schnackenberg. That was the only meeting I specifically remember where everyone was at. Of course, Peter Blake was talking to Russell regularly and I was talking to Richard Green and John Lusk quite regularly too.

In my view the talks did not make much progress at all. Initially they did and I was hopeful, even without the financial information, of getting a good understanding of TNZ's structure.

TJ What were you trying achieve?

JF My brief was to get only a very vague understanding that Russell, Brad & Tom would succeed as the TNZ management into some form of written, legal commitment, not necessarily a detailed contract, but something that was legally binding. I never managed to achieve that.

The position that was ultimately taken by Peter Blake and the trustees, and I think the sponsors, was that Russell, Brad & Tom had in effect to prove themselves in winning the Cup, at which point there would be a serious negotiation.

I tried very hard to get beyond that. It was not what they regarded as sufficient and I really got nowhere.

The furthest we got was a document signed by Russell, Brad, Tom, the sponsors and the trustees which was not in any sense a legal document but an understanding that if things went well, there would be negotiation after the Cup. I advised them at the time that it could not be considered in any way a legally binding document, but it was the best they were ever able to achieve.

TJ Were there other blockages?

JF The other sticking point was that Russell, Brad & Tom would be able to appoint their own trustees and simply takeover the existing structure.

Russell Green in particular was adamant that that would not happen, that the existing trust had to be wound up, that the assets would be sold to the new structure and that existing loans to the existing sponsors, totalling $5.6 million dollars, would have to be repaid.

Now I regard myself as reasonably informed on tax matters and I did not understand why the existing trust had to be wound-up. I felt that Richard Green would have been able to explain to me why this had to be and what the solution was but this was never, ever explained to me despite some letters I wrote.

TJ So were Coutts, Butterworth and Schnackenberg going to be able to reasonably free hands in creating a defence of their choosing?

JF It meant they were going to start life in the invidious position of starting life without any existing sponsors, debts of who knows what and also the existing sponsors saying with have a contractual right of first refusal. All round it was a totally unsatisfactory situation from a legal point of view.

Tim Jeffery, 6 February 2003