Bertarelli Speaks

/SW/ senior editor Stuart Streuli met with Alinghi syndicate head Ernesto Bertarelli to discuss Larry Ellison, Russell Coutts, and the legal brouhaha surrounding the 33rd America's Cup. "First Beat" from our October 9, 2007, /SW eNewsletter/

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Rick Maiman/ Alinghi

Having spent the last few months wading through this brewing America's Cup legal battle between BMW Oracle's Larry Ellison and Alinghi's Ernesto Bertarelli, I get the sense you could lock these two billionaires in the kitchen with a loaf of bread and they wouldn't be able to agree on how to make toast. Where the fault lies in this inability to agree on the smallest thing probably depends on whom you believe more as a person. In my case, it often depends on whom you spoke with last. So after spending an hour last Thursday at the New York YC's Manhattan clubhouse speaking with Ernesto Bertarelli (ably supported by helmsman Ed Baird, chief counsel Hamish Ross, and Vice Commodore of the SNG, Fred Meyer) I have a pretty thorough understanding of Alinghi's point of view of this schism. Sure, it makes sense. Though I also know that if I spent some time on the phone with Ellison or skipper Russell Coutts or perhaps jack-of-all-trades and blogger extraordinaire Tom Ehman, I'd probably find myself nodding in agreement as they made some of their key points. And I have a few more follow-up questions for Mr. Bertarelli. And so forth.If I know anything, it's that the Cup, because of its lack of any kind of impartial governing body, grows these sort of disputes the way my damp, rotting garage grows spider webs. No matter how much time I spend vacuuming up the spiders and their handiwork, after a few months, they're all back again. The same applies to the Cup. Whatever the success of the last Cup, when the protocol process starts again, everyone tries to spin the rules in their favor. At least Bertarelli was honest enough to admit the difficult conflict of interest that exists for the defender, something that has been absent from previous Q&As, where America's Cup Management (ACM) has often been presented as working in the best interests of everyone involved.It was quite an interesting conversation. Bertarelli started off slowly, but quickly gathered steam. He wasn't shy about using the second person to refer to BMW Oracle and Ellison. [Note to BMW Oracle: Please don't shoot the messenger.] He feels he's behind in the PR game, a victim of a coordinated ambush by his American adversaries, and he's not shy about using the press to make up for lost time. Fortunately, I'm not above being used.So grab your saltshaker and wade in. Because of the length of this interview, we're going to present it in a few parts. Let's start with the current news. ACM sent out a release on Oct. 3 saying that they may have to move the Cup back a year? How likely is this?At this stage, it's quite likely because we have broken the momentum we had with the 32nd America's Cup, which was a real success. Our ambition was to keep everyone engaged, the public, of course, the sponsors, the partners, the teams, and use the momentum we had acquired to move into the 33rd by basically introducing two new things. That's maybe where we lost some people and maybe that's where we could've been a little bit more clever in communicating what our intention was. Basically the ambition, the vision, is--and I think everybody agrees that it's time to do it--to move to a modern J Class type of boat for the next Cup. But at the same time when you think of a modern J Class, you obviously realize that's going to be more expensive than the existing [class] so you've got to do things to reduce the cost. I think the best way to do it is to make the cycle shorter, because you have more frequent revenue streams and you spend less for every America's Cup. The other thing that is costing us a lot of money is two-boat testing, so reduce two-boat testing, going to only one boat. But if you go to only one boat, then the defender has got to participate in the racing otherwise he has no way to test his own boat. We could've said [the challengers] can build only one boat and we go and do two-boat testing, but that would've been really unfair. There are a lot of things that you need to understand in the vision of introducing the modern J Class that you need to do so that it doesn't become something so monstrous, so expensive that only Larry Ellison can afford it. That's what we're trying to do, move quickly, gain from the momentum, maintain the revenue generated in four years and try to turn it into a two-year cycle, reduce the costs by having only one team that sails at any given time--one team within each team--not allow two-boat testing, reduce the design time so we don't allow people to design for too long. That's basically what we attempted to do, but with the lawsuit hanging over our head and the uncertainty of when it's going finish and what the outcome will be, all that is kind of lost in the process. The press release specifically cited the litigation involving Larry Ellison's BMW Oracle Team and the Golden Gate YC. Given that the suit is against SNG and Alinghi, not ACM, how does it affect preparations for 2009?The lawsuit basically says one thing, it says the Spanish [Challenger of Record Desafio Español and Club Nautico Español de Vela] are not for real, the Spanish is not a valid challenger. If the Spanish team is not a valid challenge, the whole concept of the 33rd America's Cup falls apart. For 150 years, the concept [of the America's Cup] is challenger, defender, mutual consent, a protocol, let's go racing. Then later in the history they introduced additional challengers to join in. But the essential element is two teams meet and agree to go racing. If a judge in New York says one of the parties is not there, we have to start over.Were you involved with making this decision?It's not a decision; it's a fact that everybody talks about, deals with on a daily basis. It's not ACM, it's not Alinghi, it's Team Origin, the Germans, the Spanish. Everybody is out there trying to settle partnerships with sailors, but also sponsors, and we can't. How can I sell a sponsorship to UBS if I don't know if it's going to be done under the current protocol or something else. Am I selling a 90-foot monohull or multihull? We just said what everyone knows and doesn't have the courage to admit. I'm backing, like I did last time, the initial cash flow to get the things going before anyone raises the money through other means. We can't take the money of the city-fee agreement; we can't take the money of Valencia for hosting a Cup that might never happen there.Somebody had to say, "Look guys, the Cup has been compromised." All this nonsense has compromised the momentum and the feasibility. We were maybe too ambitious. I'm not saying we're not at fault. We were maybe too ambitious to think we could move swiftly, rapidly, effectively into the 33rd America's Cup with new boats, new class, and so on. A lot of people believe us, a lot of people trust us; we have five teams and more joining. One team saw it differently and brought it to justice. Justice Cahn, I think his name is, he's going to decide the fate of this. I can try as much as I can, but there are things I can't control. I can't control the outcome of a court case in New York, I can't control the will of the leaders of BMW Oracle, they are their own men; they make their own decisions. I can only go about managing a process that has worked for 150 years, which worked very successfully in the 32nd America's Cup. But there are things I can't do.In 2003, you and Larry Ellison seemed to be of a like mind of the future of the Cup. Now you're on opposite sides of a testy court battle. When did your paths diverge? Were they ever as parallel as we thought?That's not the case. We have to take the responsibility to organize the event, which is a responsibility that we only have. If Valencia were a failure, nobody would have said it's Larry Ellison's fault. Everybody would've said it's Mr. Bertarelli's fault. Actually Russell Coutts, who now wants to be the big friend of the Spanish, said for years that Portugal would be a better place to go sailing. Ultimately, that responsibility of organizing an event will always rest with the defender. When you count the bodies at the end of the day, the count of whether you made a good event or a bad event lies with the defender. I think what Larry Ellison continues to be most interested in is how he can win the America's Cup. He's failed terribly, quite embarrassingly last time and the time before, and he's now hired what he thinks is the right man for the job and he's trusting that man and the approach is a very aggressive approach which is ultimately focused on how can they win.The problem we have is that, sure we need to defend, that means we also want to win, there's no question. But we also have to organize the event. We're in a difficult position, we're in the position of the event organizer and the defender, which is awkward by definition. If you organize an event you have an advantage. [The New York YC] to begin with, will never argue that. But it's in the makeup of the America's Cup. So it's very easy for someone who doesn't have that task, who's not the trustee of the America's Cup, to throw stones. "You organize the event that way because it's in your advantage. You do this because…" Well, I got to do something. It's not like you, you don't have to do anything, you can only throw the stone and wait for things to happen and then decide if you want to participate or not. I have to deliver, I have to give certain certainties to the constituencies of the America's Cup so that they can build their teams. [On Oct. 3] the message was I'm worried because I don't think I can provide those certainties. I have to say it because that's what everybody knows. I don't know if we're in time, budget cycles are closed now. At the time when I was running a major corporation, the budget was closed at the end of September. You don't introduce a new sponsorship in a corporation in November. So if we have to move to the next year's cycle, that means we're going to live without resources for half of the time of the next edition, it's just physically not possible.A few weeks ago, you announced you'd made some concessions, tweaks to the protocol if you will, in hopes of ending this stalemate. What sort of response did you get from Oracle Racing and the GGYC?Absolutely. Two things to this. The last time when we had BMW Oracle at the Challenger of Record we did 11 amendments. [Alinghi counsel Hamish Ross adds: "Plus a major rewrite"][Ross] rewrote with Tom Ehman from BMW Oracle in November 2003, which was 6 months after the last America's Cup. But it was OK because they were sitting at the table. Now because it's the Spanish, it's not OK anymore. Well guess what, one time it was the Scots, the other time it was the English, the other time it was the Australians. The America's Cup is not only about BMW Oracle and Larry Ellison. I understand you want to win it. The other thing is that as a result of these amendments, which we did in consultation with the other competitors, we felt that we had addressed most of the issues they had and the issues that other people had. I can't just think of BMW Oracle because they're screaming harder than everybody, the English had issues, the arbitration panel had issues, everybody has issues. We installed a process to deal with these issues and I was hopeful that the changes we made were going to get somewhere. I actually spoke to Larry Ellison on [Sept 27] and I was very optimistic because he mentioned that indeed he felt the opportunities were significant and it was OK. But then he said, "Now Russell tells me we should be looking at the class rule because the class rule is very complex." I said, "Larry, it's not true. Trust me, I've never lied to you." Actually he said, "Yeah, I know, you've never lied to me."The class rule is a box rule, it's like the TP 52 rule. It's a very straightforward class rule. It's meant for close racing. It's going to be exciting because it's going to be the size of the J Class, but it's not a formula that is quite difficult to put your mind around, it's a box rule. "Oh OK, let me check." So I said, great we're getting somewhere.Then I speak to Brad who was in France for the Voiles de Saint Tropez, I said, "So did you speak to Russell, are we moving forward." He said, "No the last time I had him on the phone, he's even more determined than ever.""I said it's not possible, I just spoke to his boss."He said, "No, no, Russell told me he's more determined than ever that the lawsuit is the way he wants to go."I had contradicting information, so I picked up the phone on Monday night and that's when I learned Larry had changed his mind as a result of speaking with Russell. That the protocol was not as good as he told me he thought it was, the class rule he wanted to change it. I said, "Does it mean there's no chance to settle this thing." He said, "No, there's no chance."So here I am, having to accept the fate that I can't stop this. I know that every time I move, they're going to get something out of it and strengthen the fact that if they hold they get more. It's like in a hostage situation. If you can get the car, ask for the plane. If you get the plane, you ask for two planes. Why stop while it's coming?