Are Larry Ellison and Ernesto Bertarelli Spoiling the America’s Cup?

As the legal shoving match of the America's Cup wears on, Ellison and Bertarelli may spoil it for the rest of us.

March 26, 2009


The first time they saw it last summer, pleasure boaters in Rosario Strait, near Washington’s San Juan Islands, must have been tempted to dial up Homeland Security. The hulking black trihull vessel, 90 feet long and 90 feet wide, was so large that its 16-story, carbon-fiber mast could be seen over the top of some of the smaller islands. When the winds finally came and the boat set sail, observers noted that the big trihull quickly turned 10 knots of wind into almost 20 knots of speed.

To boat people, it was at once gorgeous and scary: The thing looked like a relic from the movie “Waterworld”-or maybe even an invading craft dispatched by aliens. No one had seen anything like it. Not until it was in open water with the spinnaker billowing the name BMW Oracle was the mystery solved and word spread quickly around the boat’s temporary home base in Anacortes.

The yacht, a rumored $10 million flight of extreme fancy by Silicon Valley software mogul Larry Ellison, had a date with history. It was going to race to bring the America’s Cup back to America.


Or would it?

Back in 2003, Ellison and Ernesto Bertarelli, a Swiss heir to biotechnology billions and head of the Alinghi racing syndicate, were two big boys with large savings accounts-and, most observers say, egos to match-that still demonstrated the ability to play well with others.

Each man came to Auckland, New Zealand, that year with the same cheeky idea-get into the America’s Cup and snatch it, on the first try, right from under defending Team New Zealand’s nose. Joining them was American cell-phone mogul Craig McCaw and his OneWorld Challenge, rounding out the troika of relatively young billionaires willing to spare no expense to bring the Cup home.


The ultra-competitive Ellison took great glee in dispatching One-World, partially owned by Paul Allen, co-founder of Ellison’s hated business rival, Microsoft, in the challenger series. But the Oracle CEO, who often sails as a member of the afterguard in his own boat, then ran headfirst into someone a lot like himself-Bertarelli, an even more hands-on syndicate boss who had hired an international Dream Team crew. It included Cup-winning Kiwi helmsman Russell Coutts and tactician Brad Butterworth. Bertarelli’s Alinghi syndicate not only zipped past Ellison’s crew in the challenger series, but went on to sweep the Cup-defenders, whose much-ballyhooed, cutting edge boat literally fell apart in Auckland’s Hauraki Gulf.

In those days, Bertarelli was a poster boy for gracious winners. Promising to give the Cup exposure it had never seen, he sought out Ellison-clearly the wealthiest and most-determined challenger left standing-as a quasi-partner. As the winner, Alinghi had the right to choose the challenger of record, or the group with whom they would negotiate the protocols for the next Cup races on behalf of other challengers. Bertarelli chose the BMW Oracle syndicate and Ellison.

They not only got along, but the 2007 event, sailed for the first time in Europe, was hailed as one of the Cup’s great commercial and competitive successes. Valencia, Spain, the host port, bragged of an economic impact of 6 billion euros and 60,000 jobs. And the racing was the most exciting and competitive, ever. Alinghi, sailing without Coutts, who had left the syndicate in a squabble with Bertarelli, held off the Kiwis once again to retain the Cup-but barely.


In fact, some suspect the racing got a bit too competitive for Bertarelli, who by that time had already envisioned a years-long European sporting campaign and commercial enterprise-but it was all dependent on the Cup remaining in his grasp.

Two days after Bertarelli victoriously hoisted the famous trophy in Valencia, Alinghi named a new Challenger of Record that no one had ever heard of. That’s because Club Náutico Español de Vela, or CNEV, didn’t really exist before it was created by Alinghi and local Spanish sailing federation types-allegedly to cement Valencia’s spot as the next venue and Alinghi’s control of Cup rules.

In an event long known for deck-stacking, Ellison and other America’s Cup big shots called Alinghi’s proposed rules a deck-stacking of historic proportions.


“Anything anyone’s ever been accused of, let alone done, pales by comparison,” says Oracle spokesman Tom Ehman, a former Dennis Conner provocateur who is no stranger to Cup legal disputes.

Ellison’s group sued to ditch the rules and start over, asking to be named as the official Challenger of Record-the syndicate that negotiates the sailing rules on behalf of all challengers. The resulting legal imbroglio has put the entire contest on hold for two years.

The primary legal argument levied by attorneys for Ellison and his sponsoring Golden Gate Yacht Club held that Alinghi’s “sham” Challenger of Record had no officers, no building, no boats, no phone number or website, and, most important, no “annual regatta” for ocean-going boats. The latter condition is a clear requirement set forth in the Deed of Gift, the 1852 document establishing the rules for America’s Cup races. Cup historians say it was added to the deed in 1882 specifically to weed out inept challengers who lacked the experience or ability to stage a worthy Cup campaign.

Oracle won a preliminary court decision in November 2007, and was named as the new Challenger of Record. Alinghi appealed, calling the yacht-club issue a “technicality,” and in July 2008 succeeded in having the initial ruling overturned.

But Ellison no longer stands alone on U.S. shores. In the weeks before the final court appeal, the New York Yacht Club, whose founding members first won what later became known as the America’s Cup from the British in 1851 and later wrote the Deed of Gift to foster “friendly competition” between nations, filed an amicus curiae brief supporting Ellison’s claims.

In its brief, the NYYC notes that it attempted to mediate the Ellison-Bertarelli dispute, but now believes the only way to maintain the integrity of the event is to uphold Ellison’s motion. Joining the club with supporting briefs were the San Diego Yacht Club and former Cup-winning skipper Bill Koch.

This is why today, the giant catamaran waits at a dock in San Diego while a panel of six New York judges determine its destiny. If the Golden Gate Yacht Club, for which Ellison has sailed in two prior, unsuccessful Cup campaigns, prevails in court, the Oracle software mogul will be in a position he has long sought: the driver’s seat in the pursuit of sailing’s greatest trophy.

Ellison would have the option of meeting with the current Cup holder, Bertarelli, to negotiate a protocol, or set of rules, to stage a Cup regatta the way it has been run since 1970-with multiple challengers conducting a sail-off in traditional monohull boats. The survivor would face Alinghi in a best-of-nine America’s Cup final, likely at the same venue as the 2007 Cup in Valencia, Spain. That outcome, Ellison insists, has always been the intention of the American syndicate.

But failing mutual agreement-and between these two camps, mutual anything is a rare commodity-Ellison could insist on the only remedy set forth in the America’s Cup Deed of Gift: A best-of-three, one-on-one grudge match, with competitors bringing to the table the biggest, baddest boats that imagination and money can muster. To prepare for that eventuality, Alinghi is also building a supermulti-hull, details unknown.

Some people in the global sailing community would love to see the two race for sailing’s oldest and grandest prize. But others, especially those who profit from the extensive and lengthy high-tech buildup to a multi-challenger Cup, yearn for a return to the old format, says Craig Leweck, editor of the popular electronic sailing newsletter “Scuttlebutt.”

“I think outsiders would like to see anything right now, be it the big boats or the multi-team event,” Leweck says. “Ultimately though, getting back to the standard of the 32nd event is preferred.”

Alinghi disputes Ellison’s characterization of many of the rule changes and defends them as necessary to streamline and modernize Cup contests, bringing the event more in line with major world sporting events such as soccer’s World Cup, or the Olympics.

After a rocky start with the protocol, 17 syndicates-including all of those competing in 2007-are collaborating on the next Cup, says Alinghi spokesman Paco Latorre, adding that major revisions to the original protocol have been made, with the agreement of all participants.

“It has become the most open and democratic process in Cup history,” Latore says. “The only thing that has not changed is Oracle’s position.” Alinghi’s PR strategy has been to consistently attempt to isolate Ellison as the sole problem child-the demon seed in the AC class.

“One team doesn’t like the process…and has kept captive the whole community under the ransom of their legal strategy,” Latorre says. “Oracle’s position is ‘My way or no way,’ and their strategy seems to be to reach the final of the America’s Cup-something they haven’t achieved yet on the water-through the U.S. courts. You can’t always be in the driver’s seat.”

Bertarelli has tried to argue that possessing absolute authority doesn’t translate to wielding it. He asks competitors, in essence, to trust him: Sign up, come race, and you’ll see. But Ellison didn’t get to be a billionaire businessman by making sucker bets, or by spending more than $200 million on a sailboat campaign designed to ensure a second-place finish at best.

“Larry doesn’t trust him,” Ehman says of Bertarelli, “because he says one thing and does something else.”

It’s mutual.

“There’s no trust here; no trust between the two groups at all,” Alinghi’s Butterworth told the New York Times.

Ellison continues to insist that the unprecedented, fundamental inequities in the Alinghi protocol have never been addressed. And he keeps asking: Why the need to change a structure that all sides agreed worked perfectly in 2007?

“It’s not that simple,” Latorre says. Because of Bertarelli’s desire to cut costs by limiting syndicates to one boat each, rather than two, the entire document needed to be revised, he insists. Oracle could have been part of that process, but chose instead to lean on Ellison’s “apparent infinite resources” for a legal fight.

Much has happened off the race course as the court process drags on. Alinghi has done its own bet-hedging, preparing for what it says will be an America’s Cup 33, in Valencia in summer 2010, with everyone agreeing on Alinghi rules, and traditional boats. Ellison has prepared to do battle either way. He has built and sea-tested the big boat, and also is prepared to order the construction of one or two traditional monohulled boats if need be. And he has gone on a veritable sailing-talent shopping spree.

Among the top-shelf sailors signed on by BMW Oracle after Valencia was the legendary skipper Coutts, who is itching to get back on the water and do battle with his old pal and new nemesis, Bertarelli. Lately, they’ve been training on that big, black boat off San Diego, and honing their skills on monohulls in an AC-class regatta whipped up this spring by the Kiwis as a way to keep everyone sailing.

“We’re optimistic, cautiously, that we’ll win the court case,” Oracle’s Ehman says. “I hope we can, because if we don’t, it’ll be the end of the America’s Cup as we know it.”

A court loss likely means Oracle would not compete in AC 33 at all-the U.S. boat has already missed a December entry deadline. And no other U.S. yacht club has stepped forward. For Ellison, it’s a high-stakes gambit: He could gain significant control of the Cup process, and perhaps grab it for himself-or, ironically, be remembered for creating the first America’s Cup ever without an American entry.

“That would be a pity,” Alinghi’s Latorre says. He notes that sailing fans around the world stoked by the last Cup in Valencia just want the matter to be settled so they can watch high-level boat racing resume.

“If only Larry and Ernesto will let us.”



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