By Noel Randewich and Jonathan Weber
SAN FRANCISCO May 11 (Reuters) - Less than 24 hours before a British sailor died in an America's Cup boating accident on San Francisco Bay, billionaire Larry Ellison, the mastermind behind this year's competition for the world's oldest sporting trophy, was celebrating his sailing triumphs at a red-carpet gala.
The exclusive party, held Wednesday at a newly completed cruise terminal that is serving as the America's Cup headquarter, featured a flattering documentary film, "The Wind Gods," produced by Ellison's son. The Oracle software company co-founder and CEO beamed as guests sipped wine and chatted about the upcoming races.
There was no mention in the public remarks of the many controversies that have dogged San Francisco's first America's Cup regatta, and organizers hoped the gala would mark a fresh start.
But the death on Thursday of Olympic gold medalist Andrew Simpson, who was trapped underwater after the Artemis Racing team's 72-foot high-tech catamaran capsized and broke apart in a training run, was precisely the type of incident that critics of Ellison's approach to the event feared.
The arcane rules of the America's Cup allow the winner to decide where and how the next competition is held. Ellison and his team, now known as Oracle Team USA, won the trophy in 2010 after a convoluted legal battle resulted in an unusual one-on-one competition with the then-defending champion, a team backed by Swiss billionaire Ernesto Bertarelli.
Ellison, an enthusiastic proponent of high-tech advances in sailing, then established a new organization, known as the America's Cup Event Authority, to decide the location and the ground rules of the next challenge. The specifications for the boats led to ultra-lightweight, double-hulled vessels with hard "wing" sails and hydrofoils that can cruise at close to 50 mph (80 kph).
But Thursday's accident marked that second time that one of the sleek boats foundered amid the heavy winds and rip currents of San Francisco Bay. And the expense and complexity of the high-tech approach may have discouraged potential participants and hurt the economics of the event: organizers had once expected as many as 14 challengers, but only three chose to compete.
"When you push the technology beyond the point of safety I'm not sure that's good for any sport," said Scott MacLeod, a managing director at the sports marketing firm WSM Communications who has worked closely with America's Cup teams and sponsors for two decades.
The accident could conceivably lead to the outright cancellation of the races, or a last-minute switch to a different type of boat. The head of the America's Cup Event Authority, Stephen Barclay, told a Friday news conference that an investigation was under way and that "nothing is off the table."
Assuming the regatta series moves ahead as planned, with the first races among the Cup challengers scheduled for July 4, organizers will have to work to prevent the accident from further undermining the event's finances.
Private fund-raising efforts are supposed to defray any costs to the city of San Francisco, but thus far they have fallen short of the goals. And the city is scaling back its estimates of the economic benefits.
Mark Buell, chairman of San Francisco's America's Cup Organizing Committee, said a fundraiser scheduled for Thursday evening had to be canceled, though he expressed confidence that the city would ultimately reach its goals.
HIGH TECH GAMBLE
Ellison had hoped to attract new interest in the sport with super-fast, high-tech boats that would sail close to the shores of San Francisco Bay.
Unlike past America's Cup races, spectators would be able to see the action from shore, and advanced TV graphics along with the picturesque setting would make it uniquely broadcast-friendly. A preliminary "World Series" featuring smaller catamarans racing in San Francisco and other cities around the world was designed to generate unprecedented interest.
But only three teams are challenging Ellison: Artemis Racing, bankrolled by a Swedish billionaire; Luna Rossa Challenge, backed by the Prada fashion empire; and a New Zealand team sponsored by the Emirates airline. That compares with 11 challengers the last time a full America's Cup regatta was held in 2007.
Event Authority spokesman Tim Jeffery said the weak global economy was the main factor in limiting the number of challengers and sponsors. MacLeod and others point to the cost and complexity of the so-called AC72 boats, noting that it costs more than $100 million to mount a serious challenge.
A spokeswoman for Ellison declined to comment on the accident or whether the boat specifications had affected participation.
The risks associated with the new boats first became clear last fall, when an Oracle boat flipped and was swept under the Golden Gate bridge and out to sea. No one was hurt in that accident, but the boat required millions of dollars and months to repair.
"To be successful, these boats have to be built fairly close to a point where they might fail. Minimizing weight and maximizing stiffness is kind of the mantra," said Chuck Hawley, who has crossed the Atlantic in a catamaran and is now chairman of safety at US Sailing, a governing body that promotes the sport.
The Artemis boat that broke apart on Thursday may be beyond repair, though the team has another boat. New Zealand and Luna Rossa, however, have only one boat each, and a mishap could knock them out of the competition altogether.
America's Cup officials said it was too early to say whether the design of the boats is inherently flawed. "All we know is the boat ended up capsized, the hull upside down, broken in half," said America's Cup Regatta Director Iain Murray.
But Hawley and other observers said that based on pictures they had seen, it appeared the boat had a structural failure that caused it to capsize, rather than the other way around. An Artemis spokesman could not be reached for comment.
"The question now is whether the participants think the death was a fluke or whether they think the boats and racing is inherently so dangerous that someone else could die," said Richard Spindler, publisher of Latitude 38, a Bay Area sailing magazine, in an email.
"The America's Cup is not supposed to be a life and death competition."
Meanwhile, some in San Francisco remain critical of the city's decision to support the event. The city's costs were initially estimated at about $32 million and later scaled back to just over $20 million, and private fund-raising is supposed to cover the bill.
But Buell acknowledged the fundraising had been "a heavy lift," in part because of the diminished size of the event. The latest economic study shows a $900 million boost in local economic activity from the event, down from the $1.4 billion initially projected.
A spokeswoman from the mayor's office did not respond to a request for comment.
The deal with the city was contentious from the start, with Ellison's team even threatening at the 11th hour to take the event to Newport, Rhode Island. An especially controversial part of the original plan that would have given Ellison valuable development rights in exchange for renovating some piers was ultimately scrapped altogether.
"Many politicians have fallen prey to the America's Cup mystique, complete with their swanky cocktail parties and silver trophy viewings," said former San Francisco supervisor Aaron Peskin, a leading opponent of the city's involvement in the event. He called Thursday's accident a "tragic irony."