America’s Cup Stiffs San Francisco Workers, Fails To Pay Full Contracted Wages

America’s Cup stiffs San Francisco Workers? Read on.

America’s Cup, SF. If you’re as excited about the event being here in San Francisco and the SF Bay Area as I am, then you expect the organization to get everything right, and maintain good relationships with everyone.

And if you’re as excited about the America’s Cup as I am, then you’re going to be as disappointed in America’s CUP CEO Stephen Barclay as I am after you read my blog post.

According to numerous reports and SF City Hall sources, America’s Cup CEO Stephen Barclay has not authorized the San Francisco America’s Cup organization to pay full contracted union wages to San Francisco-based businesses – in particular, Hartmann Studios.

Hartmann Studios is under contract with America’s Cup Event Authority to set up events related to and help stage the races at the center of what’s called “America’s Cup.” San Francisco Chronicle Columnists Matier and Ross reported today that the America’s Cup Event Authority owes Hartmann Studios almost half-a-million, or $400,000 in unpaid not including the $56,000 in administrative costs the City and County of San Francisco has incurred to date. That’s a total of $456,000.

Matier and Ross quote America’s CUP CEO Stephen Barclay as saying “I’m absolutely unaware of this. I’m staggered.”

Really?

Not according to an extensive email letter dated Sep 25, 2012, and titled “Budget Discussion.” The email specifically mentioned the contracted union wages, or “prevailing wages” that the America’s Cup Event Authority has to pay San Francisco organizations like Hartmann Studios.

The email was from Hartmann Studios President Mark Guelfi, and to Mirko Groeschner, the person’s who’s name is on a number of America’s Cup communications and is Marketing Director of BMW ORACLE Racing, and it was copied for Rosie Spaulding, who manages events for America’s Cup, and for Sam Hollis, America’s Cup Event Authority General Counsel (he’s their lawyer who previously worked on London’s 2012 Olympics Bid before then working for the America’s Cup).

Given that the “Budget Discussion” was with three top America’s Cup executives, and that they all report to and work with America’s CUP CEO Stephen Barclay, for Mr. Barclay to tell Matier and Ross that he’s “absolutely unaware of this” and that he’s “staggered” stretches the imagination.

Indeed, read on and you’ll see the smoking gun that points to this blogger’s assertion that Barclay did know about the prevailing wage costs and the monies owed both Hartmann Studios and The City and County of San Francisco.

Here’s the email, with the email addresses removed:

From: Mark Guelfi
Date: Tue, Sep 25, 2012 at 6:37 AM
Subject: Re: Budget discussion
To: Mirko Groeschner
Cc: Keith Lovitt, Rosie Spaulding , Sam Hollis , *Matt Guelfi Guelfi , *Mike Guelfi Guelfi

Mirko –

Thanks for sending. I am always happy to discuss budgets and hope I was able to clear up some of your questions on our call Sunday morning. I circled back with Keith yesterday and reviewed the budget. Please see below for responses to your questions.

Shipping – These numbers come directly from our vendors to transport product to and from the venue. There is a significant amount of product ordered, which requires tractor trailer transporting. With fuel prices increasing these numbers are becoming significant costs to all of our budgets. We ask our vendors to break out their proposals by equipment, staff, labor and trucking/shipping so we can see and better analyze the detail.

Hartmann Production Staff – With regards to your call-out of Ian’s days onsite, I had the same question. Keith explained that Ian will be managing the load-out of the Yacht Club Peninsula Hospitality, which is planned to extend to October 15th. All of our pre-production time are estimates based on the scope of the project and will be billed as actuals once the project is complete although I don’t expect any surprises.

Hotel Nights/Per Diem/Travel – We normally use 100 percent local staff — both full time and those on our extended project team — however, there is nobody “left standing” in the Bay Area that is available. The city is extremely busy during the next ACWS race with Fleet Week, Blue Grass Festival, the 49ers Game, Giants Playoff Game, North Beach Festival not to mention Oracle OpenWorld. We would have had to book production staff 6 to 8 months ago in order to hire locally. Hotel costs are also significantly higher due to demand during this time period. Oracle OpenWorld alone sells out the entire city and much of the Bay Area. August costs in comparison were about half of what we are paying in October.

Parking Attendants – This was a request from Rosie via the city back in August, encouraging a “friendly face” assisting your security team in directing traffic. The request was made again for the October event.

Daily Maintenance – This was a carry over from August for litter pick-up/general cleaning for all tents on a daily basis. Rosie has since requested that this role is folded under the “greeners” that ACEA is hiring and will be removed on the budget revision.

Audio Labor – This is for the peninsula audio system, which runs the entire length of the peninsula…Nearly a mile, which requires running cable that distance. The 20k number is actually for the install, onsite crew to run the system for the entire week, and to strike the equipment post event. Labor is billed on per day basis, which is why you see a qty of 9…(1 day install, 7 day show (includes rehearsal day), 1 day strike. With the technical aspects of the requests, you have to have crew onsite managing the equipment/show.

Power – The significant portion of this cost, is again labor. Running cable, installing, onsite techs adds up quickly. Fuel is also factored in and with the economic climate this has a significant impact on costs. John Briggs with Race Management has worked directly with our technical director to ensure we are as efficient as possible when spec’ing this equipment.

As I mentioned, labor is a significant part of all event budgets, especially when there are Union Requirements and Prevailing Wage implications. Hartmann’s model is to pass along our costs directly to our clients, plus our management fee (at Oracle discount rate) and we work hard to create relationships with vendors to reduce these costs as much as possible for our clients. I agree with you. We do need to find a way to come up with a plan much further in advance so that we can minimize these costs for future events.

I will follow up, as promised, and send a separate note to you, Sam, Rosie, Keith and I will probably copy Stephen in regards to my concerns about the prevailing wage language in your contract with the City of San Francisco and the Port. The cost of labor is going to skyrocket. A laborer that we are currently paying $12 to $15 to $18 per hour is going to get paid somewhere between $50 and $85 per hour.

As you know, we are responding to the City’s Labor Standards Department’s investigation of labor rates that were paid by my company and by our subcontractors at the August race. We sent a very large stack of payroll records and copies of cancelled payroll checks to the department last week. We have since confirmed that they have received. This department has also been in touch directly with our subcontractors and they have all agreed to supply the same information. We expect the Labor Standards Department to come back to us and identify what the prevailing rate are for each discipline i.e. tenting, staging, janitorial, etc.

We will certainly have a significant amount of of back pay that we will need to send to most of the people that worked on the August project and on the upcoming October project. We are not able to pay prevailing wage at the next race since the Labor Standards Department has not yet given us the prevailing wage rates. We will provide them with our records after the race and wait for them to come back to us. This is a very time consuming process to say the least.

We will not have liability in regards to any theatrical/stagehand work since we gave all of this work to the local stagehand union, IATSE Local 16. Additionally, Hartmann Staff and any vendor staff that performed theatrical work and was not a member of the local, was paid at prevailing rates so we are covered on this front. No back pay will be required.

Please know that the final budgets that we submitted for the August events and the proposed budgets that we have prepared for the October events do not completely reflect prevailing wage. We will submit a invoice in October or November for the balance due based on the direction that we get from the City.

I hope this helps. I am available to discuss today if you have some time to discuss. I can be reached on cell.

Best Regards,
Mark Guelfi

In his response to Mark Guelfi’s email two things become obvious: first, that it becomes clear that Mirko Groeschner has issues with the union wages, and was already seeking a way to lower costs for the America’s Cup event, and second, that he was going to tell Mr. Barclay about it – he refers to him as “Stephen” – as well as Mr. Hollis, or “Sam,” the general counsel. Here’s Mirko Groeschner’s response email:

Hi Mark,

thanks for being available this morning to talk.

Looked more intensively at the budget again. Below are a few points where I would question some of the items or at least – I am not sure I understand fully the reasoning.

Perhaps we have a chance to talk towards the beginning of the week again.

Shipping: 21.400 USD. Do we need that much?
Hartmann Production Staff: as we discussed, pls have a look at the quantities again
Hotel nights, per diem and travel for crew: this is 44.000 USD, can we not have local crew that goes home each day?
Parking Attendant: Do we need that? Almost 6.500 USD
Daily Maintenance: 22.000 USD (what are these guys doing?)
Audio Labor: it says 1 day installation but still there are 20.000 USD – is that ok?
Power: when I add all costs for Labour, generators, shipping, electrician etc. I arrive at an amount of almost 100k USD….

Secondly, I will send to Stephen and Sam a note considering labour costs.

For labour in some areas it looks that we pay about 180.000 EUR. In more detail there is:

Stage Labour: 83.000 USD
Power distribution Labour: 55.100 USD
Audio Labour: 20.000 USD
Daily Maintenance: 22.000 USD

We need to find a way to plan all that a little more in advance and reduce some of these costs to make our events affordable.

Best, Mirko

So from this, it’s clear that America’s CUP CEO Stephen Barclay either wasn’t forthcoming with Matier and Ross or his deputy Mirko Groeschner withheld the information from him – neither direction is a good one, but I’m not believing that Mirko failed to tell Stephen about this issue . Again, the email exchange happened seven months ago – that’s ample time for Mr. Barclay to have known about the wage cost issue, and have done something about it.

As of this writing, it appears the something was to pay nothing to either Hartmann Productions or the City and County of San Francisco.

Stay tuned.