Out-of-pocket contractors have questioned how the NSW government and Lake Macquarie's economic development body tipped $1 million of taxpayers' money into the city's failed air race.
Lake Macquarie MP Greg Piper said on Friday that the government and Lake Macquarie City Council-funded economic development organisation Dantia needed to explain whether they performed adequate due diligence on Air Race Limited, the United Kingdom company behind the event.
"State funds for these types of events are always welcome, but I seriously question whether the government agencies or indeed Dantia did satisfactory due diligence on this event and the string of associated companies," Mr Piper said.
Contractors told the Newcastle Herald that they were owed about $300,000 for work they performed on the race last year before Air Race Limited (ARL) announced on Twitter in August that it was cancelling the four-round series in 2022, including the Lake Macquarie event.
Statement from Air Race. pic.twitter.com/AuAUlahSGk
— Air Race (@TheAirRace) August 12, 2022
The Herald has been told Dantia chased the air race as a regionally significant event for at least six years, since the time it was owned and operated by the global beverage company Red Bull.
Red Bull quit the sport in 2019, but Dantia reached a deal with ARL, the air race championship's new owners, in 2021 and secured $2.5 million in funding from the Department of Regional NSW's Regional Event Acceleration Fund.
Parliamentary secretary for the Hunter Taylor Martin announced the funding at a media event in April 2022, promising it would "allow the Air Race World Championship to host the high-octane aviation event in the Lake Macquarie region, putting the area on the international stage".
Lake Macquarie mayor Kay Fraser said at the time that the council was "excited to be hosting the Air Race World Championship ... a global event that will showcase our city and lake to the world and bring significant economic benefit to local businesses".
Dantia paid ARL $1 million as a first instalment towards staging the first race scheduled for November 2022, but it is now unclear whether that money will be recoverable.
Dantia confirmed it was trying to recoup money, but neither it nor the government would comment on whether they had performed due diligence on ARL or its related companies.
"As we are still bound by a funding agreement, we are working with the Department of NSW [sic] to recoup payments made to the event organiser," Dantia said in a written response to questions.
"Until such time as this is finalised, we are unable to provide any further information."
A government spokesperson said Dantia's funding request had been "assessed according to relevant guidelines by the Department of Regional NSW".
"DRNSW is working with the proponent on future event delivery options at Lake Macquarie," the spokesperson said.
The Herald has seen a text message from a Dantia employee to a contractor in October last year which suggested ARL was being wound up. Another contractor said he also had been told the company was bankrupt.
A search of the UK government business register shows ARL is still afloat, though its annual statement confirming its directors and address is six weeks overdue.
Australian Securities and Investments Commission records show an ARL subsidiary company, Air Race Australia and New Zealand Pty Ltd, is in the process of voluntary deregistration.
ARL signed the Hunter's reigning world champion, Matt Hall, to race in the series.
A spokesperson for Mr Hall said on Friday that he was one of those owed money and felt "bitterly disappointed and let down" by the event's cancellation.
One NSW-based contractor owed about $180,000 has compiled a dossier on ARL, its US parent company, Touchpoint Group Holdings Inc, and the two entities' directors and associates.
He said readily available information on the companies should have raised questions about their capacity to stage a global air race championship.
Touchpoint Group shares were trading at $0.0000 on the US stock market on Friday.
The media and digital technology holding company lists its address at 4300 Biscayne Boulevard, Miami.
Its website lists two related companies, ARL and Touchpoint Connect Ltd, a "robust fan engagement platform designed to enhance the fan experience and drive commercial aspects of the sport and entertainment 'business'".
The website's "news" section is empty except for a link to Touchpoint's stock market listing on Yahoo.
The contractor who compiled the dossier said he had been in regular contact with Dantia while working on the project but had not heard from the organisation nor Air Race Limited since October.
"It was all go and going really well, but we got to around early July and then basically the wheels started falling off when it came time for Air Race to pay the bills," he said.
"They'd signed a contract with Dantia which opened a gateway of money from the state government to help support the region and this event.
"I believe Air Race Limited was supposed to inject another $7 million a year, which it turns out was never there and never eventuated.
"I guess there was a hiccup in the due-diligence process. I'm not sure who did it."
The contractor said his research showed the business addresses listed for Touchpoint in Miami and ARL in London were both "shared virtual" offices and not an "actual physical address" for the companies.
"I was wondering why we had gone from a multimillion-dollar contract for three years to nothing and no one was really asking any questions," he said.
"A million dollars of that money had been given to Air Race Limited, and I can tell you that not one cent of that million dollars went back into Australia. I don't know where it went.
"We've had no explanation as to what's happening. All of a sudden, when the contract went south, no one has bothered to reach out to any of us. They've just decided not to talk about it."
A Hunter contractor owed money said "things started to go a bit quiet" in August.
"None of our invoices had been paid and people were starting to ask, 'What's going on here?'" he said.
"Probably September, October we were told by WhatsApp message or something ridiculous ... they'd declared themselves bankrupt.
"We've approached Dantia several times and Dantia's gone completely silent on it and won't engage with us.
"I'm very impressed with Dantia as an organisation. I think they're the best thing to happen to Lake Macquarie for a long time, but I am feeling pretty aggrieved by this."
Mr Piper said the collapse of the air race raised questions about "why so much taxpayer money was handed to organisers before anything had left the tarmac".
"At least $1 million in taxpayer funds were handed to ARL in 2021 to lock in rights for the event on Lake Macquarie," he said.
"That company used local businesses to begin planning and promotion, but few were paid and they're now down an estimated $300,000.
"Local creditors often take on work for these projects because they have state government backing and funding and can be confident that they'd get paid. They're now out of pocket and deserve an explanation.
"NSW taxpayers and local ratepayers also deserve to know what due diligence was done before that $1 million was handed over, how much this collapse has cost them, and if any of it can be recovered."
ARL anounced in May 2022 that it had cancelled the English round of the four-race series. It then called off the Australian, Indonesian and Malaysian rounds in August.
It said at the time that it was "totally committed as event organisers, competitors and fans of this incredible sport as we now focus on 2023".
The Herald attempted to contact Touchpoint Group for comment.
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