Oracle hit with unprecedented penalties for America's Cup cheating San Francisco (Reuters) - Software mogul Larry Ellison's Oracle Team USA suffered a major setback in its effort to retain the America's Cup sailing trophy when an international jury on Tuesday docked the team two points and kicked three team members out of the event for adding illegal weight to Oracle boats. The penalties, unprecedented in the history of the 162-year-old event, are a big boost for challenger Emirates Team New Zealand, which will face off against Oracle in the Cup finals beginning on Saturday. New Zealand demolished other would-be challengers in the qualifying races, and bookmakers have made it a slight favorite to take the trophy from Oracle. The Cup finals are a best-of-17 series, and Oracle will now enter the event two points behind: it will need to win 11 races to win the series, while New Zealand will only need to win 9. Oracle will also be sailing without a key crew member, Dirk de Ridder, a 40-year-old Dutchman who was banished from the event for his role in the weight scandal. Another Oracle sailor was suspended for the first 4 races, and two shore crew members were barred from any further participation. The scandal first came to light in July, when 45-foot Oracle catamarans that had been used for a preliminary series known as the America's Cup World Series of Racing - and were raced again last week in a youth competition - were found to have illegal bags of lead and resin wedged into their frames. Oracle said the team had gained no advantage from the extra weight and that the skippers and team's managers were unaware of the alterations, but it nonetheless agreed to forfeit its World Series victories. The 45-foot catamarans, unlike the 72-foot boats being used in the main event, were a "one-design" class, meaning all teams were supposed to have exactly the same boat. An international jury of five sailing experts was charged with investigating the situation. In a report released Tuesday, it said it had found five instances of prohibited modifications in three Oracle boats. "The incidents are serious and unprecedented in the America's Cup," the jury report said. The seriousness of the breaches cannot be understated. Oracle was also ordered to pay $250,000 in penalties to two charitable foundations. "The rules infractions involved only a few of our 130 team members, and were done without the knowledge of either our team's management or the skippers who were driving the boats," said Oracle team CEO Russell Coutts in a statement. While we disagree with the unprecedented penalties imposed by the jury, we have no choice but to make the necessary changes to personnel on our race boat and do our best to use the next four days for the new team to practice and get ready for the start of the 34th America's Cup. For Ellison, who won the Cup in a controversial 2010 match off the coast of Spain, the sanctions are the latest embarrassment in a Cup regatta where little has gone as planned. With many potential participants scared off by the cost and complexity of the AC72 boats, only three teams challenged for the Cup, undermining the economics of the event. A training accident in May killed a British sailor and forced contentious safety-related changes in the rules. Attendance is also far below projections, with most in San Francisco paying little attention to the event. Still, many observers expect the finals series to be competitive, which could yet vindicate Ellison's decision to use high-tech catamarans that can reach speeds of more than 50 miles per hour. Ellison has not commented publicly on the cheating scandal. Editing by Jonathan Weber and Ken Wills