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Federal court throws Mavericks up for auction: Harbor District surf contest permit can be offered in Cartel’s bankruptcy
May 12, 2017, 05:00 AM By Samantha Weigel Daily Journal

Daily Journal file photo
Permits for the Mavericks big wave surf contest may be up for auction, however, locals aren’t expected to let the event go without a fight.

The future of one of the most contended big wave surf competitions in the world could be in the hands of a Southern California judge as the battle to capitalize on Mavericks has crashed into federal bankruptcy court.

On Wednesday, the court agreed Titans of Mavericks and Cartel Management could auction off its assets — which may include a local multi-year permit to hold the surf competition through 2021.

The action also may have stripped a layer of control from the San Mateo County Harbor District, which issued the permit to the Los Angeles companies before they declared bankruptcy. Local officials had hoped they could decide to whom the permit would go, but one interpretation is that the federal court superseded the special district’s authority. However, unknowns are afloat, as others contend a permit doesn’t guarantee the right to host an event.

On June 1, a range of “ultra high-net-worth individuals,” media companies, sports brands, television networks and others are slated to start bidding on the Titans brand for a minimum $1 million, according to Cartel’s filings with the court.  

But even with the Harbor District’s permit, any entity seeking to host a surf contest at Mavericks will have to win approvals from a slew of other regional, state and federal authorities before potentially running events as early as this winter.

The Harbor District filed an objection to Cartel’s fast-paced auction schedule and pointed to provisions that the permit it issued in 2015 could only be sold with prior approval from the local agency. The U.S. Trustee, a division within the U.S. Department of Justice, made a similar argument in an objection it filed Tuesday. But on Wednesday, the court overturned most of the district’s objection. Instead, the bankruptcy court decided its anticipated June 7 confirmation of a buyer would ultimately usurp any other government approvals required, according to filings.

District officials were disappointed by the news, and noted they would review whoever makes the highest bid and potentially file an objection if commissioners disapprove — although the court could again dismiss their objections.

“We’re going to continue to do what we think is right for the public because it’s a public event and all of San Mateo County benefits whether it’s through economic development, recreational purposes or even if you’re competing, it’s a huge asset,” said Virginia Chang Kiraly, vice president of the Harbor District’s Board of Commissioners. “We’ll try to keep as much local control as possible.”

Harbor Commissioner Sabrina Brennan said Wednesday’s decision leaves room for interpretation and said there’s a possibility the permit might not be included in Cartel’s auction. She argues the Harbor District will still have the ability to decide whether to execute a transfer of the permit and ensure anyone looking to host a contest meets requirements such as having insurance and the ability to run a safe event.

“The permit is not assignable without consent of the Harbor District,” Brennan said, adding bidders should realize “when you hand over $1 million, you might get a permit but it has Cartel’s name on it, not your own. … There’s going to be a lot of work to be done. It’s just simply not for sale.”

She added the district or other interested parties could follow with objections in court.

Snatching up Cartel’s assets is far from all that a buyer must need to do before hosting a contest at the surf break off Pillar Point Harbor in Half Moon Bay. There’s a litany of other approvals and permits that need to be earned from regional, state and federal agencies. One of the toughest to secure for Cartel last year was from the California Coastal Commission, which ordered the next year’s event to include women and did not issue a multi-season permit.

After partnering with local organizers in 2014, Cartel held one successful event in 2015 before filing for Chapter 11 bankruptcy in late January of this year citing political and financial difficulties among other things.

Mavericks Invitational Inc., a group of locals who led prior events before partnering with Cartel, argue the contended permit actually belongs to them. The group — comprised of Mavericks maven Jeff Clark, his wife Cassandra, and local business owner Brian Overfelt — has also filed a $2.14 million claim against Cartel.

MII contends the Harbor District surreptitiously dropped their name from the permit instead of just adding Cartel for insurance purposes. Initially, they had applied for an extension, but following the board vote staff made changes including for the first time making the permit sellable, Overfelt said.

“It’s ludicrous, it’s a massive mistake,” Overfelt said, adding the questionable permit could taint the auction process. “We’re just waiting to see what happens, I believe if someone opens the curtain and sees what a mess this is, no one will want to touch it because there’s too many things that can happen.”

In the meantime, MII joined the bankruptcy case by recently filing a claim against Cartel alleging their former partner owes them $2.14 million. Among other things, MII says the cost of their planning and operations guide, as well as event permits including the Harbor District’s, is worth $1.25 million.

Cartel says it’s spent up to $3 million on branding and staging the big wave surf contest. According to its filings, Cartel alone faces almost $1.9 million in debt while the Titans company also faces unpaid bills.

As part of the auction, interested buyers have to prove they have the financial means to offer at least $1 million before gaining access to Cartel’s “data room,” which has information about what will be for sale. Those who decide to place a bid must put a $50,000 deposit and a starting offer. The bids would then increase by $100,000 increments, according to Cartel’s filings.

Attorneys representing Cartel did not return requests for comment.

The goal of the bankruptcy court is to try and recover losses to Cartel’s creditors, which Harbor District officials note doesn’t exactly align with their priorities to retain local influence over the event.

The contest depends on volatile surf conditions aligning between November through May when the event can be called in as little as 48-hours notice. The invite-only contest attracts 24 of the bravest surfers from around the globe to descend into Half Moon Bay. Organizers must coordinate a flurry of activity to ensure contestants arrive, line up media coverage, and ideally host a festival for viewers who are no longer allowed to watch from the beach.

The World Surf League, which runs the international Big Wave World Tour, previously expressed an interest in operating a Mavericks contest and could again throw its hat in the ring for a minimum $1 million. 

Overfelt contends MII, which has experience running the event and includes Clark who first surfed the wave before kicking off contests in 1999, is well-versed it what it takes to tackle Mavericks. Moving forward, whether it’s through a partnership or other means, Overfelt said the beloved local event must stay true to its roots.

“The future of the event should lie with the community,” he said.

samantha@smdailyjournal.com

(650) 344-5200 ext. 106

Twitter: @samantha_weigel 

 

 

Tags: permit, event, harbor, cartel, million, court,


Other stories from today:

Former bookkeeper from Pacifica pleads guilty to bank fraud
Trial date set for man who critically injured police officer
May revise draws praise and concern: Local legislators respond to Brown’s updated budget
 

 
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