Posted on April 16, 2008
Filed Under Web 2.0 Kool Aid |
A reader of The Drama 2.0 Show who wishes to remain nameless sent me an email earlier pointing out some interesting facts related to the recent coziness between TechCrunch and the DataPortability Workgroup.
Yesterday, TechCrunch’s Michael Arrington announced that the $13,250 in ticket sales was being “donated” to “charity.” Which “charities”? The OpenID Foundation and the DataPortability Workgroup, each one of which will receive $6,625.
First, it’s important to note that there is a distinction between a “charity” and a “non-profit, tax-exempt organization.” All charities are non-profit, tax-exempt organizations but not all non-profit, tax-exempt organizations are charities. I don’t see any indication that the OpenID Foundation or DataPortability Workgroup are registered charities.
Interestingly, however, I could find no evidence that the there is even a DataPortability non-profit, tax-exempt organization located in the United States to which a “donation” could be made. The OpenID Foundation, for instance, is registered in Oregon, but a search for a legal entity with “DataPortability” (or “Data Portability”) in its name turned up nothing according to the Secretaries of State in the obvious locales (California, Delaware, New York, etc.).
Furthermore, there was absolutely no information I could find on the DataPortability Workgroup website that details the legal nature of the organization. The OpenID Foundation, on the other hand, posted its By-Laws which clearly state that it is an “Oregon nonprofit public benefit corporation.”
Even more interestingly, DataPortability’s “Chairman,” Chris Saad, is apparently based in Australia. He is also apparently the CEO of Faraday Media, which is listed as the “Registrant Organization” for the dataportability.org domain name.
According to the Australian government’s ABN Lookup service, Faraday Media Pty. Ltd. is “Not entitled to receive tax deductible gifts.”
Of course, this is a moot point since any donations a United States business entity organized in the United States (ostensibly such as TechCrunch) makes to an international “charity” are tax-deductible only under certain circumstances: if made to a “charity” organized as a foundation or trust, the donated funds must be used in the United States or by a United States division; if the “charity” is organized as a corporation, this requirement does not exist.
This, however, appeared to be a moot point as well because the ABN Lookup service found no entity in Australia with “DataPortability” (or “Data Portability”) in its name and if Faraday Media is the entity under which Chris Saad is running the “project,” it is established that Faraday Media is a for-profit entity.
Given that the DataPortability Workgroup was apparently still discussing its structuring as a legal entity , it appeared most likely that the DataPortability Workgroup did not exist as a non-profit, tax-exempt organization and therefore any claims that donations to it represented charitable donations would be false and misleading.
In other words, it looked like the DataPortability Workgroup had been inspired by the rules of Web 2.0. In Web 2.0, you get users first and think about making money later. In Non-Profit 2.0, you apparently accept donations as a “charity” before you form a charitable entity.
Out of fairness to the DataPortability Workgroup, I emailed Chris Saad asking for information about donations and the organization’s tax-exempt status. I didn’t receive an immediate response, but I doubted that Saad’s apparent inability to respond quickly to two simple questions about his organization had anything to do with the fact that Saad had been busy to tweets, , and with Michael Arrington (about pretty girls); the DataPortability Workgroup is a big organization that must require a lot of work - it has a whopping 1,001 to 5,000 “employees” Saad’s LinkedIn profile.
Clearly, if the DataPortability Workgroup was going to apparently with Arrington’s , some clarification about the DataPortability Workgroup and its legal standing was in order. One would also hope that Michael Arrington, a former attorney, would have been more careful about publicizing a “donation” to a “charity” that didn’t seem to exist based on a reasonable search.
And then I found the answer. In a post on his blog today, Chris Saad thanked TechCrunch and the TechCrunch team for their donation and noted:
We will be setting up a legal entity and a council to decide how the money is used. As usual we will be keeping everything as transparent as possible and making sure the community has maximum input.
Hopefully the companies and individuals that have already apparently donated to the DataPortability Workgroup understand that without the existence of a tax-exempt entity, their donations have not been tax deductible, unless, of course, they decide to try to backdate and falsify payments and receipts.
Of course, it doesn’t say much that Chris Saad has been running around as the “Chairman” of an entity that doesn’t exist and would permit people to claim “donations” to this non-existent “charity.”
The question over whether or not the DataPortability Workgroup even exists as a real entity, however, was just the beginning of this story.
On the same day that Arrington announced his “donation” to the DataPortability Workgroup, he also announced “DataPortability Launches New Logo Contest.”
Chris Saad originally launched the logo contest back in February and noted that submissions were due by March 11 (although appear to have been made after this date) and that a “web-based voting system” would be provided so that the “community” could pick the winning logo from a short-list selected by DataPortability and its “steering group.”
Flash forward to April 15 and guess who is hosting the voting. That’s right, . Coincidence?
This is where the story gets incredulous. In his announcement of the “new” logo contest, Arrington writes:
We’re hosting the site with Media Temple but have no financial stake in the organization.
Does the tax deduction Arrington would ostensibly expect to receive from “donating” money to a “charity” not count as a form of “financial stake”? Given that a non-profit corporation cannot issue stock, the term “financial stake” as used by Arrington is meaningless unless it reasonably implies that he has no financial involvement with the organization, even though one could not argue that he doesn’t have a financial relationship with the DataPortability Workgroup in light of the TechCrunch donation.
One must question why Arrington wrote something that made it appear that he and TechCrunch have no financial dealings with the DataPortability Workgroup on the very same day that he announced a donation to the yet-to-be-formed organization.
Instead, in the interest of full transparency, would it not be unreasonable to expect some disclosure? Perhaps something like:
We’re hosting the site with Media Temple and recently made a donation to the organization.
For somebody who once allegedly called the New York Times an “ethically-bankrupt institution,” I find this situation sadly ironic. Arrington is not stupid and as a former attorney, I can’t imagine that he doesn’t know better, even if he doesn’t personally believe there’s anything disingenuous about this.
But there’s something especially audacious about Arrington posting an announcement regarding a donation to an organization on the same day as he posts about a contest he’s hosting for that organization while making the explicit point that he has no financial interest in the organization.
It’s a bit like the New York Times announcing a $50,000 donation to Greenpeace on one page and on the next announcing that it will be hosting a promotion for Greenpeace, all the while noting that the newspaper has no financial relationship with the organization.
At the end of the day, if the apparent relationship between TechCrunch and the DataPortability Workgroup, and how it has been portrayed to TechCrunch readers and DataPortability Workgroup stakeholders, represents what bloggers are going to replace “old school” journalism with, those who celebrate the death of the real journalism are a sad lot indeed.
The fact that one of Web 2.0’s most popular “projects” could successfully be passed off as a “charity” that accepts “donations” when it apparently does still not even exist as a legal entity doesn’t say much about the Web 2.0 community.
And the fact that an A-list blogger who has told mainstream journalists they’ll be out of jobs but was forced to apologize to the New York Times’ Jim Roberts that he had no evidence to back up a claim of journalistic impropriety would be so sloppy or disingenuous to write about a “charity” that doesn’t exist while on the same day implying that he has no financial relationship with the “charity” doesn’t say much about blogging as credible journalism.
Update: as per the second comment below, Chris Saad a discussion tonight about DataPortability’s legal structure.
made by Saad:
We did indeed discuss if we *should* have a legal entity - but I think that with sponsorship dollars coming in we need to make this happen so that transparency is maintained for the community.
Again I don’t want to lock us into a specific entity type right now because the Laywers and others who have done this before may have good suggestions.
For example, I have been told that BigCos often find it hard to engage with Non-profits for various legal reasons and prefer to deal with ‘For-profits’. In that case a ‘Fo-profit’ with a directive to spend all profits back on the community might be in order (and achieve the same effect). Of course this the tax write off issue - but again, we will need to get advise on this at the point of registration..
Translation: we’re not sure what type of entity we’ll organize as and it might even be a for-profit.
I wonder if Arrington and the other people who have made “donations” were aware that Saad was not yet committed to forming a tax-exempt, non-profit organization.
This highlights the fact that there is no reasonable justification for anybody to have classifed the $6,625 TechCrunch has or will donate (the tense used has differed) as a “donation” to a “charity.”
There is no “charity” and DataPortability is scrambling to figure out what to do with itself.
Update 2: in the ongoing discussion on the DataPortability steering group about the legal structure of the DataPortability organization, in response to a question about why DataPortability needs money, Chris Saad :
In regard to why we ‘need’ money. Money makes the world go around. Stickers, Shirts, Banners, Flyers, Flights, Hotels, Cabs, Sponsoring events, Part-time project manager wage etc etc.
Sounds like they’re forming a tax-exempt organization for all the right reasons.
I wonder if, in addition to paying for flights, hotels and cabs, donations will be applied to the obligatory “.” I also ponder whether DataPortability would sponsor TechCrunch events.
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