Report in London Questions Sail America’s Financial Setup

The complex saga of the America’s Cup defense took yet another strange twist Friday when The Times of London published a report suggesting that the not-for-profit Sail America Foundation has been funneling money into bank accounts of directors and officers, including Stars & Stripes skipper Dennis Conner.

The article also alleged that Sail America, which is seeking $10 million to fund a September Cup defense against New Zealander Michael Fay, began 1988 owing $2 million to creditors from its successful 1986-87 campaign in Australia.

Tom Ehman, executive vice president of San Diego-based Sail America, on Friday called the article “grossly misleading.”

Sail America President Malin Burnham, in a prepared statement, said the article was “inaccurate both in substance and tone.”

“Unlike many other 1987 America’s Cup campaigns, Sail America has long since paid all bills associated with our successful challenge,” Burnham said in the statement. “All compensation and expense reimbursements have been legal and reasonable as well as comparable to other America’s Cup syndicates and to other similar charitable organizations in the United States.”

Ehman said the article was based on the faulty premise that Sail America has misused money that “might otherwise have gone to charity.”

“What they don’t recognize is that the expressed charitable purpose of Sail America, and the other syndicates, is to win the America’s Cup,” Ehman said. “Everything else is incidental to that.”

Ehman linked the story to infighting in the yacht world. “When you’re on top, you expect this sort of thing,” he said. “It’s just a routine part of the ballgame.”

The Times of London ‘s report evidently was based on federal tax returns for the years 1984-86 filed by Sail America Foundation for International Understanding, the nonprofit organization Conner formed in 1984 to bring the America’s Cup back to the United States. Ehman said the IRS investigation of Sail America referred to in the London article was a “routine audit” that began in December.

Ehman said the audit was limited to returns filed for the year 1985 and that he did not believe it would endanger Sail America’s nonprofit status.

During that year, Conner earned $175,000 in consulting fees, according to copies of the filings provided Friday by Sail America. Sail America also paid $69,000 to Executive Administrator Sandy Purdon, and $146,597 to Sail America trustee John Marshall for his work as design coordinator.

Ehman, who joined Sail America in July after serving in a similar capacity with the New York Yacht Club’s America II syndicate, described those payments as “completely comparable” to those paid by most of the American syndicates connected with the 1986-87 challenge in Freemantle, Australia.

Payments made to Sail America officers and directors “were properly reported to the IRS via annual Sail America Foundation tax returns,” Burnham’s prepared statement said.

Ehman said Sail America already has raised half of the $10 million needed to stage the September defense against Fay and is making “steady progress” toward raising the remainder. That goal has been complicated by costly legal battles--including the New York Supreme Court suit that will determine if the race will even be held.

He said the $2 million in disputed expenses referred to in The Times of London article was primarily a result of the upcoming September race against Fay.

The London article was similar to one written by Joanne Fishman, former Sail America project coordinator, for New York-based Motor Boating & Sailing magazine’s May issue.

Sail America, Fishman’s article said, “ . . . is in the throes of reorganizing this spring as charges of conflict of interest swirl around Dennis Conner, its main man on--and off--the water.”

The San Diego Yacht Club is “virtually powerless,” wrote Fishman, now a contributing editor for the magazine. “Dennis Conner himself, it seems holds all the cards.”

Fishman was referring to Conner’s multiple roles as Sail America trustee, skipper of the Stars & Stripes boats and owner of Dennis Conner Sports Inc., which she described as “the exclusive marketing agent for the team and the Cup event.”

Ehman dismissed Fishman’s article as “the work of a disgruntled former employee.”

Ehman said Conner’s company was selected because “he is the best guy in the world to do the fund-raising.”