[ga] [ga-icann] Perspective on funding ICANN -- PROPOSAL for an AUDIT

["William S. Lovell" <wsl@cerebalaw.com>]

ICANN seems to be collecting few contributors. Discussion of one of these
was floated by Chuck Gomes
in the message:

Subject:
        [ga] Advantages to Option B
   Date:
        Tue, 20 Mar 2001 07:40:53 -0500
   From:
        "Gomes, Chuck" <cgomes@verisign.com>
     To:
        "'ga@dnso.org'" <ga@dnso.org>

The other involves the Markle Foundation, but unfortunately my email searcher can't
find anything on it except an old note posted by Joop re travel, but you all should be familiar
with that.  For perspective, consider Verisign's $21 Billion that went to NSI (i.e., to its
stockholders):

http://cnnfn.cnn.com/2000/03/07/deals/verisign/

And also consider that the Markle Foundation has a few bucks. Finally, consider that under
the IRS rules, tax-exempt organizations must receive some certain percentage of their income
from charitable donations -- don't recall the number off hand.  The topic of Chuck Gomes
email noted above shows that the NSI/Verisign does not qualify: contractual requirements
that the recipient become subsidiaries of the donor preclude any such classification. (And by
the way, having co-opted all of the structural aspects of the Internet, NSI/Verisign seems to
be in the course of buying up all the hardware and everything else -- the monopolistic
juggernaut rolls on!) So from whence comes any dollars (for the DNSO as set out in our
currently active vote -- have you voted yet?-- or anything else) that are truly charitable?

Seems to me, a prerequisite to any donation to any charitable (or "public benefit" corporation,
under California law) must rest on having a confidence that any monies donated will in fact be
spent as the donor wishes.  You may all recall the United Way brouhaha of a few years ago
in which, as I recall, the President or Chairman or whoever had headed south with a ton of
bucks -- one must always be confident that nothing like that has or will happen with ICANN.
Even so, one has images of tables full of cash surrounded by Directors filling their pockets --
no actual PROOF of any such thing have I ever seen, but yet this sort of allegation floats about
like a harrying horse fly. How does one put an end to that and get donor confidence?

But one way, for which I see no provision in the Articles or Bylaws, is a public audit (but see
further below). What I do see are these:

From the Articles of Incorporation:

5. Notwithstanding any other provision (other than Article 8) of these Articles:

     a. The Corporation shall not carry on any other activities not permitted to be carried
on (i) by a corporation exempt from United States income tax under § 501 (c)(3) of the
Code or (ii) by a corporation, contributions to which are deductible under § 170 (c)(2) of the Code.

     b. No substantial part of the activities of the Corporation shall be the carrying on of propaganda,
or otherwise attempting to influence legislation, and the      Corporation shall be empowered to make
the election under § 501 (h) of the Code.

     c. The Corporation shall not participate in, or intervene in (including the publishing or distribution
of statements) any political campaign on behalf of or in opposition to any candidate for public office.

     d. No part of the net earnings of the Corporation shall inure to the benefit of or be distributable
to its members, directors, trustees, officers, or other private persons, except that the Corporation
shall be authorized and empowered to pay reasonable compensation for services rendered and to
make payments and distributions in furtherance of the purposes set forth in Article 3 hereof.

     e. In no event shall the Corporation be controlled directly or indirectly by one or more
"disqualified persons" (as defined in § 4946 of the Code) other than foundation managers and
other than one or more organizations described in paragraph (1) or (2) of § 509 (a) of the Code.

* * *
8. Notwithstanding anything to the contrary in these Articles, if the Corporation determines
that it will not be treated as a corporation exempt from federal income tax under § 501(c)(3)
of the Code, all references herein to § 501(c)(3) of the Code shall be deemed to refer to
§ 501(c)(6) of the Code and Article 5(a)(ii), (b), (c) and (e) shall be deemed not to be a
part of these Articles.

From the Bylaws:

Article V, Section 7. CONFLICT OF INTEREST

    The Board, through a committee designated for that purpose, shall require a statement
from each Director not less frequently than once a year setting forth all business and other
affiliations which relate in any way to the business and other affiliations of the Corporation.
Each Director shall be responsible for disclosing to the Corporation any matter that could
reasonably be considered to make such     Director an "interested director" within the
meaning of Section 5233 of the California Nonprofit Public Benefit Corporation Law
("CNPBCL"). In addition, each Director shall disclose to the Corporation any relationship
or other factor that could reasonably be considered to cause the Director to be considered
to be an "interested person" within the meaning of Section 5227 of the CNPBCL. The
Board shall adopt policies specifically addressing Director, Officer and Supporting
Organization conflicts of interest. No Director shall vote on any matter in which he or
she has a material and direct interest that will be affected by the outcome of the vote.

Article XI, Section 2. AUDIT

    At the end of the fiscal year, the books of the Corporation will be closed and audited
by certified public accountants. The appointment of     the fiscal auditors will be the
responsibility of the Board.

    Section 3. ANNUAL REPORT AND ANNUAL STATEMENT

    The Board shall publish, at least annually, a report describing its activities, including
an audited financial statement and a description of any payments made by the Corporation
to Directors (including reimbursements of expenses). The Corporation shall cause the annual
report and the annual statement of certain transactions as required by the CNPBCL to be
prepared and sent to each member of the Board and to such other persons as the Board
may designate, no later than one hundred twenty (120) days after the close of the Corporation's
fiscal year.

And here's the funny one:

Article III, Section 2: ACCESS TO INFORMATION

(a) All minutes of meetings of the Board, Supporting Organizations (and any councils thereof)
and Committees shall be approved promptly by the originating body.

    (b) No later than five (5) days after each meeting, any actions taken by the Board shall be
made publicly available in a preliminary report on a publicly-accessible Internet World Wide
Web site maintained by the Corporation (the "Web Site"); provided, however, that any
actions relating to personnel or employment matters, legal matters (to the extent the Board
determines is necessary or appropriate to protect the interests of the Corporation), matters
that the Corporation is prohibited by law or contract from disclosing publicly and other
matters that the Board determines, by a three-quarters (3/4) vote of Directors voting,
are not appropriate for public distribution shall not be included in the preliminary report made
publicly available. For any matters that the Board determines not to disclose, the Board shall
describe in generic terms in the relevant preliminary report the reason for such nondisclosure.

    (c) No later than the day after the date on which they are formally approved by the Board,
the minutes shall be made publicly available on the Web Site; provided, however, that any
minutes relating to personnel or employment matters, legal matters (to the extent the Board
determines is necessary or appropriate to protect the interests of the Corporation), matters
that the Corporation is prohibited by law or contract from disclosing publicly and other matters
that the Board determines, by a three-quarters (3/4) vote of Directors voting, are not appropriate
for public distribution shall not be included in the minutes made publicly available. For any matters
that the Board determines not to disclose, the Board shall describe in generic terms in the relevant
minutes the reason for such nondisclosure.
_______

Point is, I don't see anything in the above that requires the Directors to do anything more than
(a) hand pieces of paper around among themselves; and (b) post "minutes" of their meetings.
That "Annual Report" goes only to themselves and to "such other persons as the Board may
designate," which sure as hell doesn't include anyone I've ever heard of in GA, etc. The minutes,
of course, are meaningless to get any handle on anything real -- they are first off redacted by
the Board, and (possibly?) other than the contractual issues mentioned in (c) immediately above,
what is really "not appropriate for public distribution" generally includes only personnel matters,
and nothing else I can think of at the moment. So it seems to me that if ICANN is to present any
kind of image (we exclude all of its self-serving propaganda on its pages) of public benefit,
openness, "bottom up," "consensus driven" and other such rot, it really ought to bare its
bones and let the whole world know how it really functions.

So how to do that? Another subject on which I periodically whine and fuss is our voting procedure.
Jeff Williams reports some 21 different things toddled up and sent for consideration at Stockholm.
I look at the agenda and see none of them.  I've also griped about "papering the walls with resolutions."
As just one way of doing that, so as to separate the wheat from the chaff, earlier I floated a balloon
about having (1) a PROPOSAL; (2) a DISCUSSION (I probably used another word); (c) drafting
of a trial RESOLUTION (with such changes as the DISCUSSION brought about); and then finally
(d) the AG Chair accepts some one particular RESOLUTION (at that stage, it's carved in stone; no
further amendments) and the DNSO voting process goes into effect.

The RESOLUTION that I suggest we start towards (not for Stockholm, of course, but next time)
in this thing that I so immodestly call a PROPOSAL would call for an independent AUDIT of all of
the ICANN books since day one; the auditing firm to be selected by other than the Board; and
results to be published on the Internet by the independent auditor upon completion.

When you read the Bylaws all you see is "in the best interests of the Corporation," but when you
read the Articles of Incorporation, drafted in accordance with the requirements of the IRS and/or
the State of California, you read "The Corporation shall operate for the benefit of the Internet
community as a whole . . . ." That's all us rabble in or out of the GA. So when you read the former,
interpret it as the latter, and methinks it is time that the proof of that particular pudding be provided.
The RESOLUTION need not be presented as an "either/or" -- either ICANN does it or we get
the IRS or State of California to require it, but methinks the handwriting would be on the wall.

Bill Lovell