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Archive for the '501c3' Category

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Shouldn’t Donna think of cooking the books?

*corrected version* 

How I just love retired accountants! It seems that Pickwick is on to another scandal

According to the (minimal, and legally insufficient) financial reports over the 3rd quarter 2007, CouchSurfing International inc. is well in the dough, and has a neat $101,900.69 in the bank… but wait a second, over that sum, why has the company made only $281.26 interest??!!

I know banks in the US are in a difficult position these days, but an interest rate of less than 0,27% seems pretty strange… Or could it be that someone is turning a private profit on these funds? Nah, that would be ridiculous, CS being a ‘non-profit’ and all…

Pickwick: Difference between non-profit and charity

Pickwick about the difference between a non-profit organization and a charity:

A charity needs to be non-profit, but not every non-profit organisation is automatically a charity.

A Non-Profit Corporation can’t pay the owner a dividend. He has to pay himself (or others) a salary instead, which he does ($88,150.22 since 2005, for salaries, payroll taxes, and temporary help). The rest of the money needs to be piled up on the company’s books: there’s an ‘emergency fund’ of $30,000 and accumulated ‘net income’ of $40,135.89 from 2004 to date. Other than that, a Non-Profit Corporation, which is NOT a charity, can do whatever it wants with its money like any other privately owned company. This includes the possibility of one day dissolving the company, or changing its status to For-Profit, and cashing in.

A CHARITABLE non-profit corporation will have a clause in its corporate bye-laws where corporate assets are dedicated to charitable purposes. It receives tax privileges, and in exchange comes under public supervision and is subject to reporting and disclosure duties. It will be much more difficult for individuals to profit, and if done right, even impossible.

The confusion is understandable because colloquially the terms ‘charity’ and ‘non-profit’ are sometimes used as if synonym. The problem here is that this misunderstanding might be intentionally exploited. Ultimately the proof whether an organisation is or isn’t a charity lies in the public register of charities, both on State and Federal level, neither of which contains an entry for this company.

So the logical conclusion is that either it is NOT a charity and claims that it is are false, or it IS a charity, in which case it has not complied with registration, reporting and disclosure duties. In either case, as a NON-charity, or as a NON-REGISTERED (unrecognised) charity, any charitable solicitations, for money or volunteers’ time, might be illegal.

The common good

One thing that doesn’t cease to amaze me is the way in which many CS users react to Pickwick’s recent announcement to report the fraudulent actions of CouchSurfing International inc. to the New Hampshire District Attorney. Besides the deafening silence by He Whose Opinion Matters, two kinds of responses are noticeably frequent:

  1. What that you ever did for CouchSurfing.com entitles you to take this kind of action?
  2. What is your interest in harming CouchSurfing.com?

To me these reactions indicate that the community at large does not recognise a crucial difference between civil litigation and criminal prosecution. The former is a legal procedure between two parties, each with their private interests; the latter is between ‘the people’ and whoever harms the public interest.

That’s right, the public interest, and CS users would do good to realise that they are the public here. Just some points for consideration:

  • If you decide to donate a (substantial) amount of money to CouchSurfing because you think it is a charity, only to find out it isn’t because the IRS fines you for illicit tax deductions, your interest is being harmed.
  • If you decide to donate valuable time as a volunteer to CouchSurfing because you think it is a charity, only to find out you’ve made a fool of yourself because you put free slaving on your resume, your interest is being harmed.
  • If Casey decides to sell your user data to a third party for a neat sum, and this party turns out to be a spammer, your interest is being harmed.
  • If you decide to donate code and programming effort to CouchSurfing because you’re an idealist and you believe in its cause, only to find out that Casey sells CouchSurfing International inc. to a large commercial player that turns CS into a paid service, your interest is being harmed.

To return to the responses I started with, it will be clear that the potential harm to the public interest is all the moral entitlement Pickwick needs for his actions. Second, they aren’t even his actions to begin with, let alone they could serve a private interest; if the New Hampshire DA sees sufficient reason to prosecute, they are the public’s actions.

Casey, please comply with the law

Please note that this post does not necessarily reflect views shared by all OCS posters and sympathisers. I put it here on my own initiative.

Norbert has placed the following post in the brainstorm forum on CS. I felt it should be cross-posted here, so that it can be given due public support by those who feel that’s appropriate. It sure has mine!

“This is my final appeal to Casey and the Leadership Team. I haven’t filed my report yet with the Attorney General of New Hampshire. I would prefer not to do it. I don’t like the role. And I don’t like the fact that this may divert resources into legal procedures, costs, and possible fines. Don’t get me wrong, though: I’m not making any excuses for myself. I will do it if I have to, whether I like it or not. It will not be my fault for reporting it, but the fault of those who broke the law. Yet I feel there is still time to ‘heal’ the situation. CouchSurfing has been represented as a charity without being one, and has thus violated the law. It has failed to comply with registration, reporting and disclosure duties. It has obtained donations of money, time and skills under false pretenses. It has broken the law. It has done the wrong thing. The best defence against those charges obviously is to make it a real charity immediately. That would not undo the legal violations, but it would make them ‘technical’ rather than substantial, and I suppose they could then be overlooked.

This would have to be done with credibility. Mere words will no longer be enough, especially when they are cold, and don’t show an intention to reach out. It would be good to hear an admission of mistakes here and there, or at least an acknowledgment that help from members could be useful. I would like to see the true message of strength from the Leadership Team that comes with admitting they’re not perfect. How could they be? They are mostly young, motivated people, at the beginning of their professional lives, working for us in exchange for a bag of peanuts! So be who you are; don’t claim to be Bill Gates! If you say: this is what I’m good at, and here’s where I need assistance, people will come and help you. If you claim to be perfect, and are arrogant with it, people will try to prove you’re not so perfect after all. If we disagree, by all means do it your way, and not mine, as you’re the ones doing the work, but don’t lie and don’t bully.

I believe a genuine charity is the best way forward, as it will allow motivating future volunteers. This organisation has to spend a lot of time and effort on finding out what it wants from volunteers, and more importantly: what it wants to offer them. It needs to learn urgently that volunteering is a give and take situation, and not a one way street. That doesn’t negate that many volunteers are perfectly happy. They have found rewards for their work, mostly in their own local communities. But that is their own achievement, just like the volunteering itself. The organisation does not seem to be offering much. Where’s the volunteer training? Where are the written testimonials given for thousands of hours of dedicated services, that people might use for job applications in their CV, proving they exercised and acquired skills? Instead cold emails are sent out that “your services will no longer be retained due to personal differences”. Wrong way. Volunteers need to be at the very heart of the organisation. Please treat them as ‘human resources’, not as free labour without minds. I fear there is no ‘healing’ of the wounds suffered by some ex-volunteers, as some of them seem too deep. The effort here will need to be: not to let it happen again.

CouchSurfing, and a number of individuals, may face serious legal consequences, and real pressure can be put on you to honour your word and become a charity. That will happen unless you make it obsolete by doing the right thing now. You can’t, however, be forced legally to put the word ‘irrevocable’ in your bye-laws asset dedication, but you may realise it’s the ‘open sesame’ that leads forward and restores trust. In any event, the obligations that come with genuine charity status (irrevocable or not) to adopt acceptable (team) corporate governance instead of a one-man-band, to have annual reporting and disclosure duties, in other words: public supervision, will be a huge improvement. It will be both: control and support mechanism, to ensure you’ll do the right thing. Please do it.”

What do the LT actually do?

We used to get the excuse “Casey is too busy”. Now we get the excuse “The LT is too busy“. This begs the question, too busy doing what?

CouchSurfing now has 4 full time, paid members of staff. That’s a 300% increase in professional resources within the organisation. What exactly are all these professionals doing?

Here’s a few things they’re not doing which they could be doing.

  • Publishing finances, up to the minute (it’s really not hard)
  • Getting 501(c)(3) status (again, really not hard)
  • Publishing LT meeting minutes (extremely easy)
  • Getting a new NDA sorted (seriously, it doesn’t take 15 months)

Perhaps they’re too busy partying, having threesomes, burning da man, banning people from the wiki, spreading the verification disease, etc. Who knows eh? ;-)

503 Service Unavailable

I just got back from my travels, so I want to change the couch status on my CouchSurfing profile. Unfortunately I’m getting a lot of…

503 Service Unavailable

No server is available to handle this request.

I hope this will be quickly resolved. Still, funny how this technical issue coincides with CS’s dodgy legal status.

An addition, after some complaints about this blog post, which is, I contend, a bit silly on its own…

The dodgy legal status of CS is related to the financial situation. A 501(c)(3) status means paying less tax, and complete transparency (if a politician in San Francisco can make his Quicken books public, in real-time, why not CS?).

And it’s clear how finances and server issues are related. The time and money Casey spent on partying with Jim on his birthday (and renting a limo) would have been better invested in server hardware and maintenance.

“Run the show how you think you must…”

I might have used other words, and I definitely don’t have the skill to do (or bluff?) this sort of stuff, but I’m not unhappy to see that Pickwick is seriously kicking some butt:

It’s getting heart breaking in here. And cold. Icy cold. All the ‘open source’ and ‘charity’ debate left me disagreeing, but unhurt. This Thai project does me in.
www.couchsurfing.com/collective_thailand_application.html

First the cold, demanding, uppity language itself. Then what looks like a “suck ‘em dry & spit ‘em out” attitude of present and future ‘Volunteer Coordination’. Then the cynicism luring generous, well meaning people to commit crimes and risk jail for lying to immigration police in a post 9/11 world.
www.couchsurfing.com/group_read.html?gid=429&post=401914#pos…

Shame on you. Shame on those who do it. Shame on those who sit close by and watch in silent complicity. It’s time to hold Casey & Friends accountable, if not to members, then at least to the law.

The Royal Thai Government have received a formal query about the immigration requirements for the project. They know you are coming, so you better cut out the criminal part of your plan.

The charity question needs a decision. Casey opened his mouth in 2003, and he now either sings, or shuts it again. No more smoke screens. Run the show how you think you must, but run it well, and stop lying. A thoroughly documented formal query about possible Unlawful Charitable Solicitations will be placed before the Attorney General of New Hampshire “practically tomorrow”. My advice: hurry and be there first, with a genuine charity.

The Casey Fenton Show

In 2005 CouchSurfing was a business entity in the US state of New Hampshire, that’s for sure. You can even find the annual report of 2005 there to see that the Board of Directors consisted of Casey Fenton, and that the president of the organization was Casey Fenton. The treasurer was Casey Fenton, and last, but not least, the secretary was, you might have guessed it… Casey Fenton. This might have changed in the meanwhile.

So, what is the current status? Why hasn’t there been an annual report of 2006? As of this day, is there more variation in the official positions of CouchSurfing International Inc.? We were informed that Dan and Seb are members of the board now, but before January 2007, when Casey announced that he was the only member of the Board, many people thought that all 4 Founders were on the Board. Or not? We can’t know, since…

Last Annual Report Filed Date: 12/24/2005
Last Annual Report Filed: 2005

More burning questions:

  • Why did CS  (or rather Casey) pretend to be a 501(c)(3)?
  • Are there bylaws? And if so, what do they look like?
  • How can we get more insight in the situation? Is it possible to get informed about organization at US government instances, e.g. the IRS, or the N.H. Dept. of Revenue Administration?
  • And why is there not more public information?

With the nauseating smell of deception all around, it’s probably about time for Casey Fenton to start thinking about disclosing some more of “the facts”.
Disclaimer: Do not believe everything you read here. But do check out the links.

Three easy ways for direct action

Did you ever volunteer for CouchSurfing? Please edit this (incomplete) summary of time spent volunteering for CS.

If you’re active in the CS groups you probably found out that it’s not allowed anymore to discuss politics and policy in the Brainstorm groups. Threads are moved to the newly formed Politics and Policy group. Since groups are ordered by number of members, it is not so prominent yet, but with 39 or 42 members (39 on the group page, the number 42 can be deduced from Casey’s profile; and I hope this is just a normal bug) in its short period of existence it is a sign that couchsurfers do care about the politics of this organization. You can help by joining the Politics and Policy group, so that it will be a bit more prominent (hint: you can set it to “No Communication”, if you don’t want to be on it at all times, that’s how I set all my groups, and that’s how I found out that someone kicked me out of Brainstorm and then joined me again).

If you haven’t already, please fill out this survey about the questions that will be offered to the Leadership Team. And although I would have posed them in a different way, I think the most important questions are:

  • Are there any full bye-laws of the corporation, further than the Articles of Agreement, or a draft thereof, and if yes, will you post it?
  • Are you willing to adopt a clause in the corporate bye-laws that irrevocably dedicates all assets to charitable purposes?
  • Is there any draft of the 501(c)(3) application (Form IRS-1023), and if yes, will you post it?

But of course, just pick your own favorites. You can choose 20!

CS organisational policies vs the risk of litigation

As posted in the politics and policy group

As Norbert points out here, the LT’s apparent unwillingness to make haste with the 501c3 application for tax exempt status, as well as their unwillingness to publish corporate bylaws or make drafts of these available for discussion, may well be construed as an (attempt at) fraud, because donations and services are and have been obtained under the (currently false) pretense that CS is a charity.

Needless to say, this renders CS extremely vulnerable to all sorts of liability suits, interestingly of the kind that is likely not to be covered by the ToA. Basically, any user who has donated volunteer work or money (besides the verification fee) to CS can claim that he has been the victim of this fraud; add to this the easy access to legal representation in the US (due to no cure, no pay) and Norbert’s prediction that liability is likely to extend to all natural persons working in, and owning CS, and you can easily grasp the size of the time bomb Casey’s currently sitting on.

And how do you reckon that Casey, Jim and Mattthew were to produce the funds needed for compensation if this happens? Precisely, from the sale of CS to a commercial third party, which is entirely within Casey’s right…