TechCrunch’s DataPortability Conflict of Interest?

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 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.

Of course, Arrington has been accused of not disclosing conflicts of interest before and has personally addressed the issue.

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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43 Responses to “TechCrunch’s DataPortability Conflict of Interest?”

  1. Chris Saad on April 16th, 2008 9:08 pm

    Heya - great and detailed post. You like conspiracies hey :)

    Just to clarify a few things.

    We refer to it as the DataPortability Project (rather than ‘Foundation’) for example because it is not a legal entity - at least not yet.

    Techcrunch hosting and posting about our logo comp is just a way of supporting the cause that we all believe in. So is their donation.

    The statement that Techcrunch has no financial interest in DataPortability is also true (I don’t believe that a donation is the same as having a financial stake? Maybe I am wrong there. Also that comment was before the announcement of the donation) - they don’t own or control it - that’s what Michael meant.

    When we set up the legal entity (which is now possible thanks to Michael’s donation and some kind pro-bono work from lawyers) Techcrunch will release the funds and we will be completely transparent about how they are used.

    In fact that conversation has started in earnest

    Thanks for keeping the industry honest - keep up the good work hunting for drama - but there really isn’t any here :)

    We just have a lot of people graciously helping us out and we are just trying to keep up.

  2. Cyndy Aleo-Carreira on April 16th, 2008 9:20 pm

    Wow. Coincidentally (or not?) I saw this article pop in my feeds not long after I saw Chris Tweet a link to a post about the legal status of the group (

    It is a little weird seeing things like… I just figured TC was hoping to attach themselves to the fame wagon DP seems to be pulling.

  3. Grendel on April 16th, 2008 9:31 pm

    Fortunately Saad hasn’t let his DataPortability fame whoring affect the shipping date of Particls… Oh, wait.

    It’s amazing the way Web 2.0 is turning conventions on their ears. In olden days, people would figure out what they wanted to do, get something working, and only then would they form a standards body to standardize it. At this point they might form a non-profit, and then be able to take charitable contributions.

    Nowadays, you come up with a standards effort, pick a name, start a logo contest, have a high-level phone call where nothing is decided, go to parties and host meetings, and take charitable contributions. Then you think about setting up a legal entity to accept the contribution that’s already been announced, pick a logo, and maybe at some point you get around to deciding on some parameters for a standard and developing some requirements. Who knows, at some point you might even have a spec, and, god forbid, try to get something working.

    Maybe I’m old fashioned, but I’m thinking only one of the above will lead to any code or a workable spec.

  4. Chris Saad on April 16th, 2008 9:38 pm

    My comment addressing the post seems to be stuck in moderation - hopefully it will get released sooner or later hey :)

    @Grendel Web 2.0 has indeed turned things on its ear - DataPortability is an experiment in Radical Transparency - which means the community gets to decide things along the way.

    Logos and Donations are sexy so they make the news - dig into the wiki for the technical stuff mate.

  5. Grendel on April 16th, 2008 9:45 pm

    That’s great. It doesn’t work, but it’s great that you want to be transparent… I guess…

  6. Manuel on April 16th, 2008 9:47 pm

    What investigative journalism Drama. You forgot to note that Chris is staying at Mike’s house. Also, do you have any idea why the contest is hosted on Clearly it could have been hosted on or any other domain since mediatemple is hosting it.

  7. Drama 2.0 on April 16th, 2008 10:08 pm

    Chris: thanks for your post but there is “drama.”

    First, in his post on TechCrunch, Michael classified his contribution as a “donation” to a “charity.” Until you are a registered, tax-exempt entity, you have no business allowing your “project” to be presented as a charitable entity.

    In your own blog post, you state “Techcrunch donates $6,625 to DataPortability.” Again, this implies that DataPortability is a valid entity and the “donation” would suggest to the average person that you were some sort of non-profit organization.

    If you wanted to be truly transparent, would it not have made more sense for all parties to announce that the “donation” has been committed and will be made once you have a legitimate tax-exempt organization? That would have been the responsible thing to do.

    Furthermore, that you’re not even sure if you’ll be organizing as a non-profit is problematic.

    You’ve created a situation where people have been told that a “donation” has been made to a “charity” that doesn’t exist and by your own suggestion, you may not even form a tax-exempt entity.

    More importantly, however, is the fact Arrington claimed on the same day that he announced the donation that TechCrunch has no “financial stake” in DataPortability, which I think is extremely misleading.

    Clearly your grasp of the legal issues surrounding business structure is lacking so let me make it simple:

    1. Arrington states that he’s made or is making a “donation” to your “charity.”
    2. In a post on the same day he states that he has no “financial stake” in your non-existent “charity.”
    3. Since tax-exempt business entities in the United States cannot issue shares (i.e. “financial stakes”), the clear implication of Arrington’s comment is that there is no financial relationship between TechCrunch and DataPortability.

    See the problem?

    I would point out that if you’re relying on Arrington’s money to help you get DataPortability off the ground as a legitimate organization (i.e. to actually form the organization), a reasonable person might question what influence he could possibly exert on the organization through you even if he has no direct visible involvement.

    As somebody who serves on and has served on non-profit boards, you might want to heed the following:

    1. How you present your organization and its operations matters for a lot of reasons (both legal and otherwise). Publicly accepting “donations” before you’re even formed is not good.

    2. The mere appearance that any undue influence could be exerted on the organization through personal or financial relationships is extremely problematic.

  8. WinExtra » From the Pipeline - 4.16.08 on April 16th, 2008 10:32 pm

    […] TechCrunch’s DataPortability Conflict of Interest? :: The Drama 2.0 Show - some interesting questions being asked about the charity donations  to organizations that technically may not be charities. […]

  9. Grendel on April 16th, 2008 10:56 pm

    If there’s no influence and no stake in DataPortability by TechCrunch, why did the announcement of the contest voting only appear on TechCrunch? Did $6,625 buy TechCrunch exclusivity on DataPortability announcements? If you’re looking for the sexy news story about the logo and donation, why not spread the news as widely as possible?

  10. Bill Gates on April 16th, 2008 11:00 pm

    Great article.

    As a side, and long standing questions I’ve had: Will DataPortability actually DO anything (other than parties & KoolAid shots)? As far as I can tell, there is absolutely no reason for any [serious] company to allow for such open standards (”everyone here’s all my FaceBook info in this public FOAF - spyder away!”). It would undermine what little hope at monetization they have now as their membership would be too fluid to be measurable. And all the false altruistic self-righteousness is sickening.

    Is DataPortability simply more Web 2.0 smoke and mirrors [yes]? Will it turn into a snooty matchmaking service at $1500/plate [yes]? Has it already [send me an invite pleeze]?

  11. Mick Liubinskas on April 16th, 2008 11:04 pm

    Man, what a waste of time. Such melodrama.

    Chris is a volunteer trying to create a new open standard that could be really valuable to the tech community, and he’s working his arse off for it, as are all the other DP crew.

    Mike Arrington is not trying to save the whales, he’s just letting people buy tickets where the money goes to support Data Portability. I think that’s pretty clear.

    If you’re buying the ticket purely for the tax break, then you’re really shouldn’t buy the ticket anyway.

    If you’ve got all day to try and make a controversial story out of nothing, then hey, go for it, although I’d prefer you go do something useful.

    Chris, I’d leave this alone, you’ve got more important things to do.

  12. Brady Brim-DeForest on April 16th, 2008 11:19 pm

    Let me set the record straight:

    1. The discussion thread conversations about the DataPortability legal structure have been going on since early March (at the latest). See Chris’s link above regarding the current conversation.

    2. As far as the voting system goes, here are the details:
    In late February, when the logo contest was announced, I realized that we needed, for the public vote, a system as eloquent and simple as that deployed for The Crunchies (

    *I* personally asked Michael Arrington if he would be willing to stand up a similar system, or pass the source code on to us.

    Mark at TechCrunch graciously passed me on to their web developer, Fred Olievera at (who built the application for The Crunchies), who generously offered to build a voting system for us.

    Michael offered to host the voting system and because we were hoping for and anticipating a significant amount of traffic we accepted his offer (we were unsure if the current website could take the traffic).

    3. As far as backdating donations goes, that would never be necessary (in the United States at least). *If* we go the non-profit route and apply for 501(c)(3) status, the 501(c)3 exemption status will be backdated to our incorporation date. That’s the law.

    Hope this helps to clarify,

  13. kent on April 16th, 2008 11:29 pm

    In promoting the event, TechCrunch stated that “As usual, tickets are $10 to manage the guest list, and proceeds will be donated to charity.” The name of the charity to which they intended to donate was not given in that post.

    It might be interesting to see what other “charities” event proceeds have gone to.

  14. Drama 2.0 on April 16th, 2008 11:38 pm

    Mick: apparently you don’t understand what’s at issue. The people who bought tickets were paying for a party - they were not told that the purchase of the tickets could be deductible.

    Arrington apparently made the decision to donate the proceeds but one of the two problems pointed out here is that, as of this moment, DataPortability does not exist as a tax-exempt entity even though Arrington informed his readers that the money was being donated to “charity.”

    Now there’s even debate as to whether or not DataPortability will be organized as a tax-exempt, non-profit organization.

    If you can’t see the issue with this, I’m sorry for you.

    Brady: I linked to the discussion you reference. I find it a little bit confusing that it’s taken this long to get your ducks in a row on this and that Chris would allow there to be a public impression that DataPortability was a tax-exempt organization. His public-facing posts (and comments) don’t make the situation clear.

    Forming a 501(c)3 is not difficult and for all the work that has been done, all of the publicity that has been received and all of the conferences I’m told Chris has attended and does attend, one might wonder why arguably the most important step in legitimizing this “project” has played second fiddle and now has your group scrambling to deal with the situation.

    In regards to backdating, I made that point because right now it’s unclear whether Arrington and/or other parties have actually made “donations” (cash or otherwise) that they would be planning to write off for tax purposes.

    As noted, the tense used in some of these discussions makes it impossible to know what transactions have physically taken place. In your own email here, you state:

    Disclaimer: I am certainly okay with the idea of stashing all of the cash under Chris’s mattress.

    Clearly, if donations of money and other goods/services of value have already been made, those who have made them will not be able to claim them as tax deductions since you have not filed for incorporation.

  15. Jordan on April 17th, 2008 12:50 am


    Yeah…i wonder if there are more charities that don’t exist that he donated the money to

  16. Grendel on April 17th, 2008 12:57 am

    Send donations to the “Send Grendel some Spitzer-quality hookers” fund, care of me.

  17. michael arrington on April 17th, 2008 1:04 am

    So I normally don’t respond to posts like this because it tends to create an incentive for people to write posts like this, but I’m going to give it an honest shot. If you’d like to discuss this further, on or off record, I’m happy to, but you need to email me if.

    Unlike some of your more lighthearted/humorous/sarcastic posts, you are being serious here, so I am being serious back.

    I think you are saying a couple of things

    1. that essentially I paid dataportability to let us host their logo contest on our site, and that this is an undisclosed conflict of interest.

    2. that there’s some funny stuff going on with the charity/nonprofit issue and that there are tax issues, honesty issues, etc. around that.

    3. You brought up the NYTimes thing which talk about me accusing them of a conflict of interest.

    On no. 1, Brady’s timeline is correct. But I think you have a different issue, which is about appearances.

    In a normal conflict of interest situation with a journalist, they’re writing about something that they have a financial stake in, meaning that their coverage may/will bring them financial gain. Generally this is through advertising revenue from the subject, or ownership in the subject.

    In this case, forgetting the timeline since it works in our favor, we’re giving (not investing) money to dataportability. They’re setting up as a nonprofit through a third party organization, and we are holding the money until that is completed. It’s a donation, whether it a charity or not, and whether its tax deductible or not. We have no ownership in the entity, and since it is, or will be before we transfer the money, a non profit, there’s no upside for us. We’re just giving them money because we support their goals.

    We also offered to host their logo contest on our site. Most people would see this as a cost to us, but I understand the more subtle point I believe you are making of traffic, links etc that are real benefits to a site. All I can say is that there is no (I believe) Google analytics code on the site increasing our page view stats, and links to a subdomain don’t help with technorati rankings.

    I offered to them to give them the code (with Fred’s permission), or host the site, or do whatever else it took to help them. They are a very small organization, and I know how hard it can be to do even small things like put up a voting site when you’re that young. I simply meant it as an act of community by offering it. When they said they wanted us to host it, sure, I thought “cool, some links,” but that was about it. And that isn’t a conflict of interest, it just is what it is.

    There’s no connection between the two, and even if there was, there’s no conflict of interest in the sense that we’re promoting a startup for any sort of financial gain.

    On no 2, I honestly never thought that people would think they could deduct the ticket price. They’re paying to get into an event with free alcohol, I think the rules on that are pretty clear. We give the money to charity bc I want to make it clear that the ticket price is only to control no shows (a big problem with our early events), not to generate extra revenue. However, even if we did keep the revenue, there’s nothing dishonest about that, assuming we don’t lie about donating it.

    On no. 3, I dispute the whole set of facts and set forth my argument on crunchnotes when it all happened. I accused the NYTimes of having a financial conflict or a friend conflict, and they responeded “we would never take money for a post” ignoring the friend conflict issue. I apologized sarcastically, but paidcontent reported otherwise, even though the reporter wasn’t in the room.

    I really do think that it is perfectly reasonable to question the Times or any other media outlet. Even they slip up every once in a while (

    In summary - and I’m speaking openly and honestly here and hoping for some level of respect back - I think there are some dots missing in your arguments, and I think that even if your arguments were 100% correct there is no “conflict of interest,” and I think you overlook the fact that I was just trying to support an organization that is doing good things for the community and needs financial support.

    In the past, we’ve donated money to schools and to donors choose.

  18. Nancy Cole on April 17th, 2008 1:25 am

    Not much more to add other than agreement with Mick Liubinskas. How the government handles payment from
    TC to DPWG is their business — whether there is a 501(c)3 to donate to, or whether a vendor payment is made, is a non-issue to the spirit of the intention. TC is supporting the DPWG philosophically, and in some small form, when they are able, financially. That is the important piece. Let the tax accountants work out the deductions, or not.

  19. Mick Liubinskas on April 17th, 2008 1:27 am

    Drama, I do get the issue you are getting at, but I think you’ve made a lot out of nothing.

    1. Yes, people are buying tickets. Will they get tickets and get to use them? Yes.

    2. Is TechCrunch giving the money to Data Portability? Yep, good on them. Can’t they do what they want with the money? Tax deduction might be a bonus, but it wasn’t a condition of sale.


  20. Dick Hardt on April 17th, 2008 1:33 am

    Donation prior to Foundation existing: Myself and others contributed money to the OpenID Foundation months before it existed. We had a belief that it was the right thing to do and that funds were needed to get it started.

    Hosting the logo contest — I wish that we had thought of having TechCrunch host the OpenID logo discussion we had a while ago. We had comparatively minor participation and I think this was a *good* thing for DataPortability.

    Summary: I think you are way offside. Michael did a *good* thing for what his readers and the attendees of the party care about. If Chris Saad blows the cash ROAST HIM!

  21. Joe Andrieu on April 17th, 2008 1:41 am

    Wow. You really don’t know what you’re talking about.

    First, the only error made so far as I can tell is that Mike Arrington mispoke about the Dataportability Project being a charity. This may ultimately be rendered a true statement, but at the time it wasn’t. And, if attendees at the party were told their tickets were tax-deductible, that would have been an error. However, you yourself claim this was not the case.

    Second, you obviously are not an accountant. Any legitimate business expense is tax deductible for a business. Promoting or sponsoring a fledgling organization like Dataportability certainly falls under that category.

    Third, financial interest means that the party with the interest has a future financial claim, in stock or royalties or something similar. Your example of the NYT and GreenPeace belies your ignorance. A donation doesn’t create a financial interest any more than hosting a party does. These gifts may be cause to wonder about a quid-pro-quo conflict of interest, but they themselves do not create a financial interest.

    Next time you want to bash someone, try doing a bit of homework before you go on your rant.

    The fact is, putting together any sort of organization is a challenge. Doing it on a volunteer basis with consensus-driven governance is even harder. If you really care so much about the purity of Dataportability’s non-profit claims, you should get involved and speak up. ANYONE can join the mailing list and if you had an ounce of integrity you would speak your peace there.


  22. Drama 2.0 on April 17th, 2008 1:59 am

    Mick: what is your point about the tickets? You brought up the issue of tickets and I informed you that they are not relevant to the discussion. Nobody who purchased tickets was given the impression that the purchase was tax deductible. What’s so hard to understand?

    Dick: I would argue that there’s a difference between individuals donating money to a cause that they believe in (regardless of its legal status at the time) and an A-list blogger with wide readership publicizing the fact that he “donated” to a “charity” that doesn’t exist.

    The donation may very well be a “good thing” for DataPortability but I stand by the argument that it should have been represented accurately.

    Joe: a few points.

    Arrington claimed to have made a “donation” to a “charity.” A “charity” does not exist at the current time and thus if money has changed hands, it is not tax deductible.

    If money has changed hands under this scenario, I have no interest in whether or not TechCrunch’s accountant expenses it in some other fashion and did not make any statements related to this. It certainly couldn’t be expensed as charitable donation as was represented and that is the scope of this post. Again, I argue it’s misleading to claim that you’ve made a “donation” to a “charity” that doesn’t exist.

    As for my use of “financial interest” - point taken. Quid-pro-quo conflict of interest would have been the more appropriate term.

    Finally, the challenges of putting together an organization have nothing to do with this matter. They do not belie the fact that DataPortability is not a non-profit organization but that nobody involved has done anything to publicly clarify the fact that it isn’t one despite the fact that a large number people have been given that impression.

    In short, I fail to see the challenges that would have prevented all those involved from accurately describing the situation.

  23. andrew korf on April 17th, 2008 2:06 am

    At the end of the day - Personally I think Mike Arrington is day in and day out trying to do the right thing for industry - and open communication standards in general - and deserves a break for his tireless efforts (while perhaps at times self serving) on that front. Is critical review of those efforts also healthy? personally I’d say yes as well… This thread seems to say more about vigorous interest and healthy debate with the concerned community than anything else.

  24. Paul Puri on April 17th, 2008 2:29 am

    I think Mike said it all. This is a non story. Time to push for Drama 3.0 where you have a chance to win the really big prizes. Maybe I’ll make a donation to it and say it is a prize winning blog that practices due diligence. But seriously folks, this is comedy gold. I’ve never heard of your site until today, and might actually subscribe. A win for you good sir.

  25. Manuel on April 17th, 2008 6:32 am

    Michael Arrington said: All I can say is that there is no (I believe) Google analytics code on the site increasing our page view stats, and links to a subdomain don’t help with technorati rankings.

    That’s not correct. Google analytics code does appear on the site and uses THE SAME site code as the main site. Meaning they didn’t even setup another profile for the site.

  26. Grendel on April 17th, 2008 7:36 am

    So here’s how the deal works out:

    Arrington gets:

    - Inflated page views for his domain
    - Apparent exclusivity on DataPortability news
    - Brand building of the brand

    Saad gets:

    - $6,625 to help pay for flying around to industry parties
    - A voting web site

    Sounds like a good deal for TechCrunch to me. Unfortunately the money to fly around the country will only keep things from getting done even more.

  27. Drama 2.0 on April 17th, 2008 10:27 am


    My primary points are as follows:

    1. Your post here states that you were donating money to a “charity.” As noted, the tense used made it unclear as to whether the money had been donated or was committed for a future donation. Obviously, you now indicate that the money will be held until there is some entity to accept it.

    You’re a former attorney so I don’t need to explain the legal definition of a “charity” (and the distinction between a “charity” and a regular tax-exempt, non-profit organization).

    Clearly, DataPortability isn’t a charity or even a non-profit organization at this stage of the game. If you were aware of this prior to your post, I think it would have been appropriate to state it (and to possibly use the correct terminology because even the OpenID Foundation does not appear to be a public charity).

    Based on the discussions DataPortability is having, it still appears that there is no certainty a non-profit will be formed.

    2. Your post here states that you have no “financial stake” in DataPortability. Again, as an attorney, you certainly know that you cannot have a “financial stake” in a non-profit organization and thus, to somebody who understands this, your post reasonably implies that there is no financial relationship between TechCrunch and DataPortability.

    Perhaps you simply support their goals, but you pointed out just one of the possible conflicts somebody might perceive.

    Personally, the conflicts I see that are more problematic are:

    a) Data portability is a hot subject in the Web 2.0 community and DataPortability has a lot of support. Your donation has created an “association” between DataPortability and TechCrunch. What is the real value to you? I am obviously not in a position to say with any certainty but I would argue that the “association” you’ve created does have some value for TechCrunch because the data portability “movement” is very popular with the Web 2.0 community. There’s also always the question of whether your association will create a relationship in which you get access to DataPortability news before others do, etc.

    b) Your donation appears to have encouraged Chris Saad to get his paperwork in order. Saad’s post above even indicates that your donation has now made it possible for them to form a legal entity. Clearly, this creates a situation in which one might reasonably argue that you could plausibly exert influence on the organization. Could this foster a quid pro quo conflict of interest (thanks Joe)? After all, Saad’s statement implies that you’re essentially helping pay for them to form a legal entity.

    I have the following questions, which you’re obviously not obligated to answer but that I think are fair:

    1. When you posted about the donations being made, did you know that DataPortability was neither a “charity” nor a tax-exempt, non-profit organization? If so, why did you choose to characterize it as such instead of accurately explaining the situation?

    2. Would you not agree that an average person reading about a “donation” to a “charity” would reasonably assume that a donation was being made to a legitimate, duly-organized charitable organization?

    3. Is there a reason that you chose to state “We’re hosting the site with Media Temple but have no financial stake in the organization”? Why was that statement made as opposed to a more transparent statement such as “We’re hosting the site with Media Temple and recently made a donation to the organization” or even nothing at all?

    4. If Chris does not form a non-profit entity and/or instead forms a for-profit entity, would you still make the “donation”? If yes, would you inform your readers that all donations were not made to “charities” as they had been told?

    5. Do you feel that it’s important for relationships and monetary transactions between bloggers and other entities be described accurately?

    6. Based on other information that has come to my attention but which I do not intend to disclose because I don’t think it’s most relevant to this discussion right now, I would be interested to hear your views on the ethics of individuals and entities who may be covered by (or which have business-related relationships with) a blogger staying at the home of the blogger. What boundaries, if any, do you think exist here?

    Lastly, I wrote this post primarily because I think these issues do have substance and deserve answers. You have a lot of readers who consider you a legitimate news source and who ostensibly have some expectations related to accuracy. Additionally, your “donation” has, by Saad’s own admission, encouraged others to offer donations of their own.

    While I can make no claims related to the motivations for your donation and a discussion of such is out of the scope of my interest anyway, I do think it’s hard to argue that inaccurate statements haven’t been made about DataPortability and I also think it would be hard to argue that the possibility of an appearance of conflict has not been created. Obviously, some of that is due to Saad being “behind the curve” (in his own words via email) but you did choose to describe your support as a “donation” to a “charity” when that clearly isn’t factual.

    The ancillary reason for this discussion, however, as I think is clear in my post, is that this situation provides a valid opportunity to discuss journalistic standards as they relate to blogging.

    As is obvious, we disagree on a number of issues related to journalism and you’ve expressed some pretty candid views about mainstream journalism. There are certainly valid critiques to be made but if mainstream journalism is going to be scrutinized, the form of journalism bloggers engage in should be too, especially when it comes to how organizations and relationships are portrayed.

    I won’t lie: I think your decision to characterize your support of the DataPortability Workgroup as a “donation” to a “charity” was extremely sloppy and not in line with the standards one would expect of a journalist but I’d also point out that if the New York Times, for instance, made a similar mischaracterization and it was caught, bloggers would certainly jump on it as soon as they caught it. And rightfully so.

    Whether you like it or not, you’re one of the most prominent bloggers and I think given the fact that it has clearly been established that there are inaccuracies in your post about a “donation” to a “charity” that doesn’t (yet) exist, a discussion about the level of accuracy and disclosure that is acceptable in the blogosphere is a valid, worthwhile discussion.

    You and others certainly have the right to argue that this is a semantic debate and that a mountain has been made out of a molehill. In my opinion, however, that would say something interesting about the blogosphere in terms of the level of accuracy and disclosures readers should expect and are willing to accept. In other words, I’d like to see what differences, if any, blogosphere “stakeholders” are will to tolerate between the standards mainstream journalists are held to and the standards blog journalists are held to.

  28. jro on April 17th, 2008 11:05 am

    I’m not sure I see any other hairs left to split here. Not taking sides, but Michael — you as well as anyone should know about the appearance of conflict.

    I won’t make assumptions about the intentions of any party, but when terms like “charity” and “donation” and “not-for-profit” start getting thrown around, it leads to certain expectations about use and so forth.

    On the face of it, a donation to a group that hasn’t been properly configured to receive funds (other than to cash a check and figure out what to do with the money) doesn’t exactly reflect very well on the donor.

    The explanations I’ve read surrounding this sequence of events sound almost like they came from the Bush administration. Not to imply anything sinister, but Michael and Chris — the appearance isn’t flattering.

  29. Eddie on April 17th, 2008 11:59 am

    looks like you’ve been shilled by the twits….

  30. Grendel on April 17th, 2008 11:00 pm

    Someone considers TechCrunch a legitimate news source? Please get them the help they need Drama…

  31. Debbie Davies on April 17th, 2008 11:03 pm

    Your point would have been better made, and people would have had time to read it, by quoting the bible Matthew 6:3 ‘but when thou doest alms, let not thy left hand know what thy right hand doeth’. Michael Arrington would have had to choose something unrelated to his own business for it to be charity.

  32. Drama 2.0 on April 18th, 2008 1:51 am

    Grendel: in all fairness, TechCrunch does often do a good job at breaking news in the startup space. I pull up TechCrunch a few times a week (or when somebody sends me an interesting TechCrunch story) and treat it for what I think it’s worth - startup/tech news that usually isn’t very deep but that is often timely.

    Of course, the vast majority of the online news websites and blogs that I read on daily basis are not related to startups and technology and I would be lying if I said that I thought much of TechCrunch’s “news” is truly important and substantive in the overall scheme of things.

    One of the issues that I have with Arrington’s position on the mainstream media is that the mainstream media reports on subject matter that is far broader and more demanding than the startup world.

    He has attacked the institutions that engage in “real journalism” but I’ve yet to see the blogosphere provide a viable replacement for the “real journalism” entities like the New York Times engage in. Perhaps I’ll change my mind when Arrington goes to places like Iraq or Venezuela to uncover stories that have significant implications (politically, economically, environmenally, etc.).

    Right now, especially outside of the technology space, I mostly see bloggers who regurgitate news that is first reported by the mainstream media. Sometimes they throw in a half-decent opinion. Sometimes.

    This doesn’t mean bloggers don’t have a place in the world but clearly based on the situation and discussion here, it appears that the standards which are expected and accepted in the blogosphere are quite different than those expected and accepted in the mainstream media.

    Debbie: nice one. Would have saved me quite a few words. C’est la vie.

  33. on April 18th, 2008 8:11 am

    […] other situation, coincidentally, involves TechCrunch itself. Drama 2.0 pointed out a potential conflict of interest involving TechCrunch and Data Portability this week. The the post alone demonstrates how some […]

  34. Somebody in Silicon Valley on April 18th, 2008 10:50 am

    If Drama doesn’t know it or won’t say it…Chris Saad has been staying at Michael Arrington’s house while on his SF/SV trip.

  35. Somebody in Silicon Valley on April 18th, 2008 11:12 am

  36. on April 19th, 2008 12:27 am

    One thing is providing hosting for the contest and another not even taken into consideration is using the subdomain to access the site.

    Why don’t use instead?

    Contextually, it makes more sense to use a subdomain doesn’t it?

    There are not technical reasons to back the decision up as all it requires is to create a CNAME record that points to (the logo contest site IP address).

    The fact that Alexa ranking is based on traffic for all subdomains is not strong enough compared with all the publicity means for TechCrunch.

  37. David Novakovic on April 23rd, 2008 7:53 am

    Isn’t it funny how people who haven’t had anything to do with Chris are quick to point out the problems, but the people who know him personally or have dealt with him online are ready to defend him. you know why? Because he has done so much for DP and doesn’t forget anyone’s work when the attention is on him. He knows the value of a community and that it is a two way street.

    If people have issues with DP, join the work group and raise them. It exists for exactly these reasons, there is no “them and us” situation, DP stands for the freedom of everyone who uses the web. That includes the naysayers. Contribute constructively rather than trying to bring everyone down with you.

    Why not raise these concerns on the mailing list and try help the whole project? Oh that’s right, it’s more self serving to write them on your own blog :) I think you’ve missed the whole point of the project.

  38. Drama 2.0 on April 23rd, 2008 5:04 pm

    David: the point of this article was that TechCrunch failed to accurately report that a “donation” to a “charity” was not a donation to a charity and that an appearance of a possible conflict of interest has been created.

    As for Chris Saad, he may very well be a great person who has the best of intentions, but if he’s going to run around as the “Chairman” of a “non-profit” with “1001-5000 employees” (according to his LinkedIn profile) that does not even exist but is still willing to accept “donations,” you were living in a dream world if you don’t think that somebody was eventually going to point out the fact that it’s highly unprofessional and calls into question the “credibility” of Saad and his “organization.”

    This has nothing to do with the goals of DataPortability and the importance you think it has to the Internet community. It has everything to do with acting in a professional manner and not telling people that you’re something you’re not (especially when it relates to the sensitive issue of tax-exempt entities).

    That said, I absolutely should have posted the following on your mailing list:

    Hey guys,
    If we’re going to tell people we’re a non-profit organization, we might actually want to form one. I think we might have some problems if we tell people that we’re a non-profit when we’re not, and it doesn’t make us look very credible anyway.

    I’m sorry I assumed that at least one person within your “organization” had common sense.

  39. David Novakovic on April 23rd, 2008 10:53 pm

    We’ve already gathered how qualified your judgments of common sense are, based on the overwhelming response to your narky and sensationalist post. Yet again your response belies your complete lack of understanding of DP. The mailing list is not “mine” any more than it is yours. But, you are finally right about something, you should have posted it there, then this could have been a constructive discussion instead of an exaggerated browbeating.

    Which leads me to believe this article is just a form of advanced trolling. No more serious than your other parody pieces. :)

    Let’s find some other hairs to split, the only point you have to argue now is pretty weak. :)

    You riled a few egos, sparred with Mr Arrington, brought some big names to your blog. Well done sir, a success all round.

  40. on June 3rd, 2008 8:09 pm

    […] It’s obvious that in the circle jerk called the technology blogosphere, conflicts of interest are a minor inconvenience and accuracy is optional. […]

  41. TechCrunch Gets into Copy and Paste Press Release Journalism : The Drama 2.0 Show on June 24th, 2008 6:42 pm

    […] position on mainstream journalism and have also pointed out that his own standards are often quite lacking (more than […]

  42. Another Non-Existent Non-Profit, the Open Web Foundation, Launches : The Drama 2.0 Show on July 25th, 2008 4:03 pm

    […] in April, I criticized DataPortability for presenting itself (and allowing others to present it) as a legitimate […]

  43. Is Disclosure Meaningless in the Blogosphere? : The Drama 2.0 Show on September 16th, 2008 9:40 am

    […] conflicts of interest is standard practice for professional journalists. And it has been a real problem for bloggers (amongst other […]

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Drama 2.0 spikes the Web 2.0 kool aid by providing critical analyses of Web 2.0, its people, its startups and its impact on the world of media. Other topics are explored when Drama 2.0 has been drinking too much 1975 Dom Perignon. Read more about the Internet's version of Keyser Söze here.