Pickwick: “Charity status: what Casey didn’t tell”

Pickwick got access to some interesting documents and wrote an interesting analysis of the current legal state of CouchSurfing, as always, displaying a lot of insight and highly readble. I’m happy we have the permission to copy his work.

When Casey wrote to everybody about the application for federal tax exempt status according to Section 501(c)(3) IRS Code, he omitted to mention something:

On 14th November 2007 he filed an application to register Couchsurfing International, Inc. as charity in New Hampshire, including the Articles of Incorporation, Corporate Bye-Laws, and Annual Reports for 2003, 2004, 2005 and 2006, with financial statements. The information in those documents is public by law. If enough members write to ask for a copy, it may well turn out to be easiest for the management to finally make it public on the web site. Until all members can read it in detail, and make up their own minds, here are some highlights and comments:

1. It is now clear that for four years running Casey has violated New Hampshire law by not complying with registration, reporting and disclosure duties, and has exposed the organisation to the risk of being prosecuted and fined.

2. Even as of today no Certificate of Registration has yet been issued by the State of New Hampshire, and the application for registration as charity is still pending. There still are areas of concern about which I have been in communication with the Directorate of Charitable Trusts in the New Hampshire Department of Justice.

3. For example: Casey is still a paid employee and presides over the Board of Directors, whereas according to New Hampshire statute RSA 292:6-a “No employee of a charitable nonprofit corporation shall hold the position of chairperson or presiding officer of the board”.

4. For example: Statements about members of the Board of Directors over the course of time are untrue and inconsistent. Even in his application to the Attorney General Casey tries to create the impression as if the corporation had always had the five directors which New Hampshire statute RSA 292:6- requires as minimum figure. The truth is that in the 2005 Non Profit Report, which Casey filed with the Secretary of State of New Hampshire on 24th December 2005, he lists himself as sole director and officer, and still stated this to be the case publicly on 28th January 2007. Two more members were then appointed later in 2007, and listed in the online Policy FAQ. This information was removed from the web site after I mentioned the legal requirement of a minimum of five directors in the groups.

5. It seems that members of the Board of Directors currently are:
Casey Larkin Fenton
Daniel M. Hoffer
Sebastien G. LeTuan
Rachel Dicerbo
Joseph Matthew Brauer
I fail to see what could be so secret about this information that the previous list of directors was completely removed from the web site, and not simply updated by adding the fresh appointments.

6. The company finally has proper corporate bye-laws. The Board of Directors now decide by majority vote, so that Casey can be overruled. So far there was an informal ‘consensus model’ which effectively meant that Casey had a veto.

7. The bye-laws state in Article III Section 2: “Casey Fenton shall serve as a permanent member of the Board of Directors until such time as he voluntarily withdraws or is removed by majority vote of the Board of Directors for just cause.”

8. The corporation now had to adopt a Conflict of Interest Policy which restricts certain insider deals.

9. Instead of using Form 990 (for charities), in 2004, 2005 and 2006 the annual tax returns were filed on Form 1120 (Corporation Income Tax Return), which would be consistent with a non-profit corporation which is NOT a charity. Form 990 is by law “Open to Public Inspection”, Form 1120 is not. The annual tax returns for 2004, 2005 and 2006 now had to be re-filed on the proper form.

10. Matthew T. Whatley is designated as Chief Financial Officer. He is the man Casey thanked profusely for being a “key force” with the 501(c)(3) application, omitting that Matt Whatley is entitled to charge $225/hour for legal services and $125/hour for preparing tax returns. above). Matt Whatley is the man who describes himself as having “elite ninja tax skills” www.taxninja.com/ and who, for his fee, seems to have “mistakenly filed form 1120 instead of 990” because he ‘didn’t know’ better. He is the man who claims to be the corporation’s lawyer, but apparently ‘didn’t know’ what New Hampshire law required. He is the man who is said to have drafted the controversial revisions of the Volunteer/Non Disclosure Agreement (NDA) which have driven numerous key volunteers away.

11. The financial statements to the Attorney General were notarised on 31. October 2007. They are NOT identical with the financial statements on the web site. Whilst there is no large discrepancy in the sums total, hardly any individual figure in the official version matches the published one. Firstly this shows that the book keeping so far seems to have been a farce. Secondly it is hard to understand why the statements on the web site have now remained uncorrected for more than five weeks.

Despite some remaining areas of concern, which will hopefully be clarified soon, I believe great progress has been made overall. The organisation has now come under a certain degree of public supervision which should ensure that the right thing will be done more in future. It is a pity that Casey and his friends still seem to behave like reluctant witnesses, where everything has to be dragged out of them, and they only admit to facts that have already been proven against them. It’s not smart, and it looks suspicious.

Now would be a good time for them to publish all relevant information on the web site.