WELLINGTON (Reuters) - New Zealand's government said on Thursday it would halt public funding for the body organising next year's America's Cup pending the outcome of an investigation into "financial and structural matters".
The government and the Auckland Council this week launched a probe into allegations about financial mismanagement at America's Cup Events (ACE), which will run the event on behalf of the holders Team New Zealand.
No further payments would be made to ACE while the investigation was carried out, Iain Cossar, Ministry of Business, Innovation and Employment, General Manager Tourism, said in a statement.
"This will be revisited pending the outcome of the process."
The investigation comes as Team New Zealand (TNZ), which will defend the 169-year-old sailing trophy in Auckland next year, blamed "informants" for spreading "highly defamatory and inaccurate" allegations about the organisation.
Cossar said the government had set aside NZ$40 million ($26 million) as an event fee to be paid to ACE. It had so far paid about NZ$29 million "in line with contractual funding milestones".
"This process is ongoing and there are contractual agreements in place," Cossar added.
The New Zealand government and Auckland Council have contributed about NZ$250 million in total for the hosting of the event, which included infrastructure spending.
TNZ chief executive Grant Dalton said on Wednesday the body had reported an alleged email scam to police after TNZ transferred money to a fraudulent Hungarian bank account.
TNZ have denied any wrongdoing and said they had co-operated fully with the government's investigation.
Teams from Britain, Italy and the United States are due to compete early next year in revolutionary "foiling" monohull yachts to decide who will challenge New Zealand in a series of head-to-head races for the America's Cup.
($1 = 1.5401 New Zealand dollars)
(Reporting by Greg Stutchbury; editing by Richard Pullin)
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