A reason for me to change my couch status to YES!
And I added the following message…

I host so my status is YES but unfortunately not through the for profit company CouchSurfing. Contact me through a genuine non profit hospitality exchange network instead: BeWelcome.

I also encourage you to copy and adapt this message on to your couchsurfing profile.

Seems that Casey is giving up the 501c3 status due to “This approach is one that doesn’t fit into the categories our government traditionally uses.”.

I’m not amazed, but I *AM* disappointed. Seems to me one good reason to (re)try BeWelcome.org!

It’s hard to assess in how far the CouchSurfing Board is meeting these requirements, apart from 4 (recommended) and 15 (essential): all 5 members of the board have American citizenship, are living in California, are in their thirties, there is one female member and 3 out of 5 are receiving a salary.

Most of the other points don’t seem to be available for public scrutiny (at this point it’s even unclear to me if there are any bylaws).  It would be nice if there were a bit more clarity about this charity.

By the very definition of our mission, we have a commutation solution that is 100% inclusive. We invite everyone everywhere into the community: old, young, conservative, liberal, east, west, black, white, gregarious, introverted, rich or poor. The beauty of addressing a communications challenge of this nature—bridging cultural differences and building understanding between people around the world—is that the more diverse our membership base is, the more fully we will achieve our communications goals.

This excerpt is from the submission of Couchsurfing Inc. for the Society for New Communications Research (SNCR), where Couchsurfing won the Award “for Excellence in New Communications” for Nonprofits November last year.

We operate on a shoestring budget. This has required us to become experts in distributing our workload to a large, often remote, volunteer work force. We currently only have four paid staff members. We have two approaches to make this happen: sophisticated online volunteering tools that allow hundreds of members to easily perform needed tasks such as individually greeting every new member, and responding to every member inquiry

If you feel like ranting protesting, comments go here.

With hesitation I take on the task of writing a summary with my view on legal and financial issues, because I’d rather do something more pleasant on this public holiday in Germany. I’ll try to be brief, and I won’t bother with lots of links to documents I’ll mention. If you want to see them in the original, and check whether you agree with my assessment, please ask the management to publish them, and not me. They have them all, and most are public information by law.

What does 501(c)(3) mean?

The term 501(c)(3) relates to a clause in US tax law which gives federal tax exemption to certain organisations, both charitable and non-charitable (eg certain types of family trust funds which serve as a tax shelter for private wealth). Having 501(c)(3) status does not automatically mean the organisation is a charity. But if a charity wants federal tax exemption, and especially if it wants the ability to issue tax deductible donation certificates to US tax payers, or if it wants public funds (grants), it needs 501(c)(3) status. That status requires the organisation to file annual reports, including full financial statements on a form called ‘990’, to the US tax authorities (IRS), and to publish those reports and a number of other legal documents (on a web site, or in print, and send a copy on request). The status also imposes a number of rules on how the funds are used. Charity status does not change the private nature of an organisation, but in fact puts its funds under public supervision.

What is Couchsurfing’s legal status?

It was registered under the name “Couchsurfing International Inc” on 02 April 2003 by Casey Fenton, with four hired straw men as fellow incorporators to make up the legally required number, in the form of a Non-Profit corporation in the US state of New Hampshire. He was sole director and officer at least until 28 January 2007. Non-Profit does not automatically equal charity. Primarily it means that the corporation does not distribute any profits as dividends to its owners or share holders. It can, however, make profits and accumulate them, and if one wants money out of it, one has to pay oneself salaries, in addition to expenses. That’s what Casey Fenton started doing in 2005.

Was Couchsurfing a charity from the start?

That remains a little unclear. The original incorporating document, the Articles of Association, dated and signed March 2003, allow “charitable, religious, educational and scientific purposes” or purposes according to 501(c)(3), which is wider than just saying “charitable”.

One concern, however, is that none of those dedications of the corporation’s income or assets are stated with the qualification “irrevocable”. It may therefore be possible in future to change the purpose of the corporation, or indeed change its status from Non-Profit to For-Profit altogether.

Another concern is that Casey Fenton did not register the organisation as charity immediately with the Attorney General, as required by New Hampshire law, thereby avoiding certain filing and reporting duties, similar to those that come with 501(c)(3) status. As a result the organisation succeeded from April 2003 until November 2007 to keep secret from all members such documents that have to be filed with the Attorney General, and are public information by law, especially the corporate bye-laws, and the annual and full financial reports. This breached the law, and an investigation by the Department of Justice in New Hampshire is still pending, which might still result in the organisation and individuals being fined. In other words: Couchsurfing may, or may not, have been designed as a charity from the start, but unfortunately for several years it certainly did not behave like one. The general understanding in the community initially was that it’s Casey Fenton’s private company; he could do with it what he wanted; and it seems that he did for a long time.

How did Couchsurfing finally get on the official list of charities?

Following discussions in the community it seemed clear around September 2007 that Couchsurfing either indeed was a charity, but had breached charity law by not registering, or it was not a charity, in which case soliciting donations might have been fraudulent. As the management remained unresponsive to urgent questions, a complaint was placed before the Attorney General of New Hampshire on 05 November 2007, with a final warning and advice to the management to try and get their act together now.

On 14 November 2007 the Attorney General then received the registration and reports for 2003 to 2006. As a result Couchsurfing was then added to the official list of registered charities in New Hampshire, despite some remaining concerns. This has for instance made it possible for attendees of the Alaska collective to obtain volunteers’ visa or the US, whereas the earlier collective in Thailand still largely relied on volunteers taking the risk of breaking the local law and entering on tourists’ visa.

What are the remaining legal concerns?

At the time of filing on 14 November 2007 Casey Fenton was President (chairing the board of directors) and paid employee at the same time, and there is no indication that the situation has changed since. New Hampshire law expressly forbids that. As a result his employment contract may be nil and void, and the organisation may be entitled to reimbursement for all or part of the salaries paid to him.

From the time of incorporation until at least the middle of 2007 Couchsurfing did not have the legally required minimum of five members on its board of directors, for at least until the end of 2005 Casey Fenton remaining sole director and officer. This may mean that legal decisions and contracts from those years may be invalid, with all sorts of unforeseeable consequences. It may also cast additional doubts on the validity of Casey Fenton’s employment contract, if it was entered into by him as sole director contracting with himself as employee, which may also have violated legal “conflict of interest” rules.

Some of the documents filed on 14 November 2007 (under penalty of perjury) appear to be materially false or backdated, especially the full corporate bye-laws, “conflict of interest policy” documents signed by directors and officers, and the listings of directors for 2003 to 2006. The filed documents may create the wrong impression as if a full, legally composed board of directors had been in office throughout, and may disguise the facts leading to concerns about Casey Fenton’s employment especially. The other current four members of the board of directors have been made aware that they have been listed as serving during years when they were in fact not, and they appear to condone this, which may, if any of the above mentioned constitutes a criminal offence, in itself be a criminal conspiracy in that context.

What is the history of the 501(c)(3) application?

Even before incorporation, from at least 11 February 2003 to at least 15 July 2004, Casey Fenton stated on the web site that Couchsurfing was “a 501(c)3 Non-Profit Company”, when there is no evidence that an application had ever been filed, let alone approved, at that time. The management have never responded to questions about this with an explanation. (Incidentally this also shows that the company’s name was used at least two months before incorporation, which may constitute fraud.)

Amongst all subsequent statements are these: On 27 January 2007 Casey Fenton states: “We are in the process of moving to 501c3 and hope to do so in the next couple months”. On 13 April 2007 he stated: “We are filing for 501c3 status practically tomorrow”.

The management stated on 24 November 2007 that the application was filed. On 28 April 2008 General Manager Matthew Brauer stated he had to “Edit supplemental statements for our 501c3 application”. Today, 03 October 2008, ‘desaparecida’ states in the Brainstorm group: “CouchSurfing has been asked for more information and additional papers … at least twice … This is what I heard in July in an informal talk”.

The above mentioned concerns held on state level may very well adversely affect the result of the application for 501(c)(3) status. Reversely, a failure of the 501(c)(3) application may ultimately affect the organisation’s status in New Hampshire.

Will Couchsurfing always stay a charity?

So far there is no guarantee for that. As already mentioned, the purpose of the corporation, or even its non-profit status could possibly still be changed. The discussion in the community has therefore come forward with the suggestion to introduce the word “irrevocable” into the ‘dedication of assets’ clause in the corporate bye-laws. This would simply require a documented resolution by the board of directors, but unfortunately this has not found any response from the management.

Once the 501(c)(3) status is obtained this may change, but that will depend on the precise nature of the application, and the particular sub-case of 501(c)(3) exemption. It is unfortunate that the management refuse to publish the application, which may lay all doubts to rest, and would enable the community to add their expertise and help. However, the organisation is legally only obliged to publish the application once it has been approved. This means that if the application remains unsuccessful, they will never be legally obliged to publish it, so that it may never become transparent why it was rejected.

If the organisation has applied for genuine charity status according to 501(c)(3), then everything is fine. If it has made use of one of the other options of tax exempt status, that may in theory be given back voluntarily in future, and the organisation could still be changed into a commercial enterprise. However, at that point all tax benefits received so far would have to be repaid. Practically speaking the crucial point after receiving 501(c)(3) status would probably be when they start issuing tax deductible donation certificates to US tax payers; from that time it may well be impractical and too expensive to try and get out of tax exempt status again. This is the reason for some sceptics to fear that the management may not earnestly want the tax exempt status.

What about the financial statements on the web site?

Couchsurfing has published skeleton financial statements on its web site since 2004. Despite promises to have them independently audited, they remain unaudited. No budget forecasts are published, despite Casey Fenton’s statement on 15 June 2007: “we hope to have ready before mid July … our budget forecast for 2008”.

The published statements only show income and expenditure, and omit all assets and liabilities accounts. This raises the concern whether the substantial amounts of accumulated funds have in actual fact been held in corporate bank accounts at all times, or whether irregular personal “loans” have been made, which are expressly forbidden by New Hampshire law. These concerns are aggravated by comparatively low figures for interest income being shown, given the total of funds that should have been in bank accounts over time. It was communicated in May 2008, as an achievement resulting from the General Manager’s presence at the collective in Thailand (sic!), that a higher interest bearing savings account had been set up in the US.

So far the organisation is under no legal obligation to publish financial accounts themselves, although they have to file the information with the charity regulators, and it is public by law (meaning: everybody can ask the Department of Justice in New Hampshire for a copy), so those listings on the web site are voluntary. However, the figures on the web site are incorrect and often don’t match the figures in the official filings. Whilst there are no significant deviations, accountancy is supposed to be an exact science, and any irregularity, however small, is cause for concern.

What information is public by law and how to get it?

Couchsurfing has to file annual reports and full financial statements for the previous calendar year by 15 May of each year. As already mentioned, according to New Hampshire law they have no obligation to publish those themselves, but the information is public by law, and everybody can request a copy from the Department of Justice in New Hampshire. This includes the documents submitted for registration, especially the corporate bye-laws.

Should 501(c)(3) tax exempt be granted, similar reporting duties will apply, and the report to the federal tax authorities can then just be copied to the state agencies. One important difference will be that then the organisation itself will have the duty to publish, and everybody can ask the organisation for a copy. Once the status is given this will, as mentioned above, also include the full initial application.

At the moment Couchsurfing appears to be complying with the legal minimum requirements for disclosure of public information. Publishing skeleton financial statements without being required to may see as if they went above and beyond the minimum requirements, but that is not really the case, as the published figures are wrong. However, in the world of charities, voluntary and non-government organisations it is generally seen as good practice to be forthcoming and cooperative in disclosing information in which there is a justified public interest.

Conclusion

It would be in the interest of building trust and stability in the community if the management changed its policy from doing the minimum required by law to doing the maximum permitted by law. For an organisation with the core purpose of running a web site there really is no excuse for not having all the information on there.

As there seems to be a policy of ignoring discussions in the groups, and insisting on submitting all “questions” through ‘Contact Us Questions’, I will submit a copy of this posting in that way, stating that I would like a response to all issues raised, and I will post here any response I will receive.

And now I need a drink. Sorry for the length. ;-P

This is not a report, this is a “shut the fuck up” list. What this list tells me is: “LOOK! We’ve done A LOT! Leave us alone!” Doogies (a CSCT participant) sums it up best in one of his comments on this site:

You wanted to know everything we did in Thailand so you get a document with more than 500 achievements we accomplished there for couchsurfing.

More than 500 achievements! Wow! Unfortunately, I find it clearly symptomatic of a miserable professional result. I’ve seen this approach before: Whenever a large project failure had to be covered up. Been there, done that myself. It’s a sleight of hand technique: By pointing at a huge, unreadable and almost entirely unverifiable list of statements, they are hoping to hoodwink the CS donation base that all that money is serving a purpose and probably to fool themselves in the process. The person responsible for this style of writing is Mandie, showing us again how incompetent she is at what she does. Hold this report up to the standard of any serious non-profit organization and it just becomes sad. This is not a report, it’s a hastily thrown together list of things people could still remember doing.

There is plenty to learn from the report though. In general, it appears that the largest part of the participants has been busy analyzing and communicating. Also, tech has been very busy, probably the most productive team overall (this has always been the case in CS). If anyone seems to have done anything, it’s clearly the programmers. We’ll see how well it all holds up in the summer.

Things that I noticed right away:

• Jim Stone is a scary control freak, which we already knew from the way he bullied everyone in the CS Wiki. Look at what occupies him:
  • ” A reminder system to let people know they should update any reference that has been identified as violating our terms of use.”
  • “References are no longer completely deleted when removed, just hidden for safety concerns. We also know who deleted it, what the reference said, and when it was deleted.”
  • “Deleted Images: The safety team can easily delete images from accounts that are deemed inappropriate. The member is also emailed to let them know with instructions on what they can do next.”
  • “Refined a tool that more easily identifies real spammers and harmful users and doesn’t temporarily falsely identify members as being spammers as often now.”
  • “Deleted posts: every post that’s been deleted, why it was deleted, who did it, when, and ability to reactivate it with one click.” (I’d love to see this list of “whys” sometime.)
• Rachel is a one-stop CS police force: “Directly handled several member disputes.” She obviously doesn’t need to report to anyone, because obviously every communication is an achievement and a report of Rachel’s activities simply isn’t listed.
• Speaking of communication, Mandie thinks this is an achievement: “Email to ambassadors explaining website downtime.” My god. An email. The “report” is full of nonsense entries like that.

But all that is just fun and games. It clearly wasn’t edited anymore than the average OCS post (this says enough), providing hours of entertainment. Meetings are NOT achievements, neither are writing emails, calling people or “Finding a suitable caterer and arranging for daily delivery of food.” (Obviously nobody felt like cooking in a country with such a low wage scale.) Who cares about the “bi-weekly shopping trip”? Or what about ” Administered half-way point evaluation meeting with House Manger.”? That one was from Matthew Brauer, who has a truly sad list of achievements and still can’t spell his name right. (What the hell is it with using nicknames in an “official” report anyway?)

But what is really interesting is what is missing:

• Where is all this generated material being kept? Things like “plan for Alaska Collective including budget, roles, objective and location”, “desired skills sets for volunteers in team”, “‘Core concepts’ to help uncover and articulate what CouchSurfing is about, not about, what its mission is.”, etc etc. The server team doesn’t mention installing a document repository and the Wiki has been shot down Jim Stone style. So, unless I’m mistaken (no way to verify unless Doogie could come out his tower to enlighten us), all these wonderful documents either don’t exist or are sitting in someones harddrive or mailbox. Either way, that will mean 90% of “work done” will be tossed away again for the next collective, like it has happened 2 times already. Remember the huge “organizational chart” that was created before CSCNZ? Exactly. CS management = the way of the Dodo.
• There is absolutely NO mention of 501c3 status. None. Let me repeat that: the entire 501c3 process is completely absent from this report, even though it was in quite a few announcements. What happened guys? Didn’t you work on it or is it not an achievement? Or maybe, perhaps, it was a miserable failure?
• There is not one mention of drafting contracts and exactly one reference to legal work:
  “Phased out one-on-one verification on the advice of our legal team: verification now only available through credit card or a verified PayPal account.”
  Right, so all those expenses towards the CS lawyer(s), 14,234$ in 2007, have only resulted in another way to increase profits? It appears nobody had a contract or even insurance (only travel insurance is mentioned), since none of that is mentioned. (Search for: “legal”, “contract” and “insurance”.)
• What the hell is going on with Casey Fenton (who also doesn’t need a last name)? Why doesn’t he have his own personal achievements, like his buddies Matthew or Jim? Why is he mentioned in second place of a team twice? My guess is that they are trying to shield Casey from direct comments on his behind-the-scenes style of control. Who are they kidding? Where has the “leadership team” gone? Where are the board meetings? Who is on the board anyway? Of course, it’s also possible Casey couldn’t be bothered to write down his list of “achievements” and/or Mandie didn’t dare to ask him.
• Did you know CS has a new team in charge? Neither did I. This time, it’s simply called “CouchSurfing Management” and guess who’s in it? Matthew, Casey, Jim and Weston (member since April 15th, 2007). Congratulations guys, you have finally managed to create your little Northern American boys club.

What else do you see missing from the report? What do you think is the funniest “achievement”?

Almost exactly a year ago, the OCS initiative was started. Initially, our hope was to entice the LT with concrete ideas and campaigns, to get them to address the various serious issues we had discovered at the heart of CS. Not much has changed however and most of the changes have not been for the better:

• CS is legally still in very dubious water. Still no 501c3 status, after… 3 (or 4?) years of claiming it?
• Casey still holds all the legal (and financial) strings and has decided to set up camp in Alaska next, which is essentially his home.
• Transparancy is down, censorship is waaay up. (Search engines have been blocked and CS has a permanent censorship/security team now, almost like during the cold war!)
• CSC Thailand can be declared a failure as well now, after the NZ meltdown. I haven’t seen anything positive come out of it, but we’re still waiting for the “memo”.
• “Not talking to anyone” has become the official communication mode for the entire organisation.

And so, with a heavy heart, I’m renewing the OpenCouchSurfing.org domainname by 2 years. In all honesty, I had serious hopes that it wouldn’t be necessary to have this website for more than a year. I (personally) was perfectly willing to “bury the hatchet” if there was even some semblance of progress. Alas, it is not to be. CS still makes me angry, especially for the obligation I feel towards its wonderful community to speak up about its numerous failure, shortcomings and shady deals.

Maybe now is a good opportunity to start thinking about OCS “2.0″. The way I see it, the signal to noise ratio on the blog could be better and there have been some points of discussion we could re-raise at this point. Anonimity, re-posting and privacy concerns come to mind. More importantly, I believe OCS should refocus its efforts towards a clearly understandable and easy to navigate website. Right now, I can only imagine the confusion of a random surfer on OCS. I still heavily support our “open for all” attitude, even with all the negativity that comes with that, but I think it can be channeled better.

So, in the spirit of transparancy and cooperation: Who would be interested in helping “revamp” and organise OCS? We’ll need to digg through a lot of information and restructure quite a bit, but I also think there is room for new activism. Things on my mind:

• An open call to ALL ambassadors for transparancy (and perhaps elections)?
• A good Q&A section, where we try to answer what CS doesn’t answer.
• Video?
• …

I also wouldn’t mind separating this “public blog” from a better structured blog with some editorial control that we could move to the front page. We could “rewrite” a lot of the current knowledge into practical, well researched and well written articles that would be aimed at the general public (including new members and press) and not just people with CS background knowledge.

Yesterday the news at CS announces:

Buggin’ Out!

Fixes to the “location bug” brings back functionality better than ever!
20. March 2008 Once again, the shining stars on our tech team have successfully tackled an error in the system to get things back to normal on the site for you.

You may have noticed the site was offline for a short while today. This downtime was scheduled so the tech team could fix the recent issues experienced with correctly reflecting members’ locations.

Check out what features are back for you!

* Nearby travelers on members’ home page will now actually be nearby!
* When you search for a couch in a city, you can now effectively search for members within a chosen radius of that city. Let’s say you want to CouchSurf in Gdansk, Poland but there are only a handful of CouchSurfers there. You can once again search for a couch within, say, 20 km of Gdansk. Hurray!
* Location map on member’s profiles will reflect the correct location. Members will no longer randomly be placed in Africa… unless you live in Africa!
* Recent member login location will reflect correct location as accurately as possible. (Click here for information on why it may not always be right) If you were logged in during the downtime, you may need to log out and log back in to show the proper location.

A round of applause for the tech team volunteers- job well done!

First of all: Great, they finally not only do something with the code they also announce it. I’ve also noticed, some minor bug fixes have been done (months after reporting) and some small improvement are online, most of them asked for again and again in the last years. But nothing really impressing. And here the good news already stop.

So let’s “check out what features are back” for us: All the four points mentioned in the news are based on one single topic: IP adresses and their localisation. As even CS explains at the linked page it’s not accurate. There are several reasons for that, like wrong settings from your ISP, using of company firewalls etc. This caused a lot of CUQs and cockroach posts when I was doing this kind of stuff. And it’s simply not to fix, the whole idea is a mistake.

If it works properly IP localisation is a serious threat against privacy. Your company sees where and when you login (during work time? from somewhere else when you call in sick?), so you may loose your job. Your stalking Ex is able to track you. At some places the nearby couchsurfer feature is widely used to annoy females with inapprobiate mails. Exact localisation while travelling is a useful information for criminals interested in your unguarded flat (this is especially useful if you’ve got a verified adress and CS places the the google marker in search exactly at your home).

But the main point is: IPs can easy be faked/changed. There are several services in the internet who offer anonymous access to webpages, there is software like Tor to hide your IP and makes it very, very difficult to trace you. At the moment CS tries very hard to block IPs from those services/networks but it’s a ridiculous attempt and doesn’t work if you accept some reloads while using the software. If someone does the work to setup a profile for abusing CS, hiding the real IP is no big deal. And still CS calls this a security feature. As at least the techno crowd must know that’s not true, so insisting on IP-Localisation as security feature must be called what it is: a lie.

When you know an organisation is lying to you about a serious issue, how trustworthy it is at all?

PS – There is a lot to do about security at CS:
- encrypted login (SSL), especially because a lot of couchsurfers use the page from unsecure, public computers/connections while travelling
- really delete information, not only hide it (mails, profiles, …) but don’t hide useful information (profiles from thieves)
- don’t say it’s privacy VERSUS security,  it’s privacy AND security

What was missing, as usual, was any sort of external verification. Casey helpfully provided a link to the Wikipedia page on 501(c)(3) status and an irs.gov page for those eager to learn more. Neither of these links have directly relate to CouchSurfing, nor do they do anything to confirm CouchSurfing’s current legal status, or confirm that any application for 501(c)(3) status has been filed.

There was no link to a copy of the paperwork, no postal tracking number, no evidence whatsoever that anything has been filed anywhere. There was no copy of any filed paperwork regarding CouchSurfing’s current status, no links showing that “non-profit” status cannot be easily revoked in New Hampshire. As usual, we are expected to trust our “visionary leader”.

Personally, I think it’s clear that Comrade Casey felt the pressure from Pickwick’s legal questions, and the openCS campaign in general. The response was as usual, ignore, ignore, ignore, then organise a seemingly unrelated press stunt to make people feel better without actually proving anything.

In conclusion, until I see independent confirmation that CouchSurfing has filed for 501(c)(3) status, I will consider it a possibility at best. It is clear to me that the CouchSurfing leadership cannot be taken at their word.

However, congratulations are in order. After 3 years of talking about it and no less than 100 hours of work by Casey himself (a full two and a half weeks!), they were finally able to get the right papers in order. Phew. Good news is that CS is now eligible  for grants and your donations will be tax deductible (if you live in the US). There is money to be made!

Since we can take at least a bit of credit for speeding the process up, basically by shaming Casey into action, here are some of the things I would like to see CS take up:

1. Reduce the operational cost and significantly reduce the cost of “verification”, far beyond the sliding scale idea. There is absolutely no obvious need to be collecting and spending such a large amount of money. It is almost the anti-thesis of an organization that is based on free and voluntary lodging and low-cost traveling.
2.  Finally make the organization reflect the community. Get rid of the heavy US centric distribution in the leadership team. Organize elections.
3. Set up localized non-profit organizations, to allow the same financial and legal “benefits” for European CS-ers (the largest community in any case) and to allow a better local functioning.
4. Open up, become at least a bit more transparent. Get rid of the multitude of private groups. Publish meeting agenda’s, publish regular and non-PR reports.
5. Give back to the world. Share the code that so many people have worked on voluntarily or payed for by the community back to that community and to the world at large.
6. Cooperate. Finally get over your pride and cooperate with HC and BeWelcome. Not a single one of the users benefits from the fragmentation and competition between the different hospitality organizations.
7. Learn to be humble. Learn how to admit mistakes when you make them instead of lying about it or covering it up. Talk to people like the OCS-ers, even if every fiber in your body seems to struggle against that. You fears are unfounded.

My 7 wishes for CS in 2008.

Thomas

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…

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.

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.

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.”

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

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.

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.

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…

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.

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!

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…

Apparently there is a way for Casey to sell out, as long as the bylaws are not sorted out properly. Of course, these are currently far away from public scrutiny.

As Callum wrote:

I think the key question for Casey / LT therefore is about the company byelaws. How was the company incorporated and are there any provisions for changing the company status? Without that information, I am of the opinion that if 501(c)(3) status is ever achieved, Casey could voluntarily remove that status, pay the relevant tax, and then sell CouchSurfing.