
Take action to save .org and prosecute those who sold out the internet - zdw
https://drewdevault.com/2019/11/29/dotorg.html
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pge
While I don't agree with the sale of the .org to a for-profit entity, I
believe the premise of this objection is not tenable. From what I can glean,
while PIR is a non-profit, it was not a non-stock company (non-profits are
often, but not always non-stock companies, meaning they have no shareholders).
Were it a non-stock company, it would be impossible for it to be acquired for
any material compensation, because there are no shareholders from whom to buy
the company. In this case, however, it appears that PIR was a wholly-owned
subsidiary of ISOC (ie. a stock corporation with a single shareholder). As
such, it is an asset of ISOC and can be sold by ISOC legally. A non-profit is
allowed to sell its assets, so long as it does so at fair market value, and
the value received remains on the balance sheet of the non-profit (i.e.
proceeds cannot be distributed to any kind of shareholders). As long as ISOC
retains the $1B it received and continues to use it to further the mission
that it was given non-profit status to pursue, such a transaction is perfectly
legal.

(I'm not a lawyer but have been involved in the creation and certification of
multiple non-profits, including in Va. where PIR was formed, and have been
party to asset sales from non-profits.)

~~~
ptest1
(I also work in the nonprofit space)

In this case, ISOC should almost certainly lose their 501(c)3 status, as the
transaction is unrelated business income, and may or may not have been sold at
fair market value (I don’t believe it was). In either of these cases, the
penalty is at minimum the removal of their 501(c)3 status.

I believe they may be preempting this by converting themselves to a “B Corp.”

The case of ICANN is more interesting. I believe they knew what was going on
here, and facilitated this transaction to their former CEO. In this case, the
IRS has good reason to revoke ICANN’s 501(c)3 status, as this transaction was
self-dealing.

~~~
pge
Unrelated business income does not cause a loss of 501(c)3 status, it's just
that the unrelated income is not tax exempt (i.e. the org which otherwise does
not pay taxes on income has to pay income tax on the unrelated income).

Also, if I understood correctly, it is PIR that is considering becoming a B
Corp, which they can do since they cannot remain a 501(c)3 now that they are
owned by a for-profit entity.

Last, it would be very difficult to prove this wasn't a fair market value
transaction. There was an investment banker involved (Goldman), so I assume
they shopped to a number of different parties, in which case it's hard to
argue that the price paid (assuming it was one of the highest bids) is not the
FMV.

As I said in my original comment, I don't like the transaction, so don't take
this as a defense of the appropriateness of selling it to a for-profit. But I
think it is difficult to challenge on the basis that the transaction itself
was illegal.

~~~
ptest1
Excessive unrelated business income causes a loss of public charity status due
to failing the public support test. In this case it’s moot because ISOC is
giving up on their status regardless. I was wrong saying 501(c)3 status is
lost- instead, the organization becomes a private foundation with accompanying
restrictions and regulations (e.g. disbursement requirements).

In the case of ICANN, I can see the IRS dropping 501(c)3 status. While the
final purchase price of the .org asset may or may not have been at fair market
value (as you note, having GS involved gives credibility), it’s undeniable
that ICANN made it possible by lifting price hikes. I don’t see how it isn’t
self-dealing, unless ICANN truly had absolutely no idea their former CEO was
going to acquire .org. I think it’s more likely that they were convinced to
lift the price hikes by their former CEO.

~~~
pge
you raise an interesting point that caused me to look deeper into the 990s
filed by ISOC and PIR. So, I share this in case you are curious (or getting
sucked down this rathole like I am:)).

In 2017, ISOC created the Internet Society Foundation (like PIR a wholly owned
subsidiary of Internet Society). PIR was a cash machine, generating ~$75M in
cash, which they recorded as having been paid out in grants. ISOC split that
so that ~30M showed up as revenue on Internet Society's 990, and $43M showed
up on the newly created Internet Society Foundation's 990 as revenue. This may
have been to avoid ISOC failing a public support test? (I'm operating at the
limits of my understanding at this point and haven't taken the time to dig
into this question). I am going to speculate that the proceeds from the sale
of PIR will also go into the Foundation.

Interestingly, the ISOC 990 does not show their ownership in PIR as a material
asset on the balance sheet. One would think that a wholly owned sub that has
$90M+ in revenue and throws off $75M in cash would be treated as an asset of
value? It's possible there is something about non-profit accounting that makes
this okay under GAAP - not something I know much about, but it caught my eye.

I don't know how to evaluate the self-dealing question - I have dealt with
some of the other issues here (eg disposition of non-profit assets, unrelated
income, etc) as a non-profit founder, board member, or treasurer, but I have
never wrestled with a self-dealing issue (thankfully!), so I don't know what
the courts would look for there.

Edit: source here is 2017 990s for Internet Society, Internet Society
Foundation, and Public Interest Registry, pulled down from Guidestar. 2017 is
the most recent year available for all three.

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shantly
Seems like the most likely route to success would be for a few big internet
companies to set up a .org nonprofit and treat it as the authority, ignoring
icann. Fork the tld, in other words.

~~~
aaomidi
This is essentially impossible though.

It sounds good but I don't see most ISPs caring.

~~~
andrewflnr
The ISPs don't have to. You only need the major OS and maybe browser vendors.

~~~
aaomidi
Major OSes just use the ISP DNS server - changing that would break a lot of
stuff.

For example in countries with limited internet, you need to connect to the
ISPs servers (redirect from http sites) to purchase data allowances.

------
ben509
> The level of corruption on display by the three organizations involved in
> this scam: ICANN (Internet Corporation for Assigned Names and Numbers), ISOC
> (The Internet Society), and PIR (Public Interest Registry), is astounding
> and very illegal.

If these organizations are so corrupt, then them selling .org simply
demonstrates that they're too corrupt to manage it. We can't simply reverse
this, you're just handing it back to the entity that sold it.

So... what do we replace them with? Because I'm pretty sure you'll get a new
organization made up of people who will be as fallible and prone to corruption
as any of these organizations and Ethos are.

~~~
xur17
To me the fundamental problem is that _someone_ has to own the tld itself.

~~~
dpau
a non-profit consortium consisting of .org stakeholders could be a start

~~~
aaomidi
Cooperative ownership.

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bjelkeman-again
Is there anything meaningful that non-US based people can do? Who is ICANN
accountable to internationally?

I read this, and it doesn’t seem they are accountable to anyone? But I am
probably wrong. Enlighten me. [https://www.icann.org/stewardship-
accountability](https://www.icann.org/stewardship-accountability)

------
LiNeXT
> Funny how this all happened right when the American public would be
> distracted

The vast majority of the American public wouldn't care about this no matter
when it happened.

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gwright
It was a mistake to have GLTDs other than the two-letter country codes. That
would have ensured that the DNS namespace was partitioned in a way that mapped
directly to legal jurisdictions.

As it is now, we have the proliferation of GTLDs that with an extremely
ambiguous mapping to legal jurisdictions.

~~~
paulryanrogers
Agreed. Still, for large, international companies and institutions I doubt the
`.int` TLD would have caught on.

~~~
fanf2
.int is for international treaty organisations. It is highly restricted, it is
not available to companies.

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irq-1
Can FAANGish companies setup an alternative root for .org? We would all prefer
a technical solution, but we don't have one today.

~~~
ghjyui
No. For example, I have a .org email domain. In order to make this work,
everybody involved, that is dns, email hoster and various dbs, ssl certs
infra, browsers and email apps, they all need to properly resolve my .org
domain. It's unrealistic to expect all these parties to suddenly respect the
new dns resolver.

------
toyg
Looks like Russian-style "privatization" has finally come to America!

~~~
ghjyui
It's the opposite. Iirc, icann was a semi gov entity and everybody complained
that the internet is effectively controlled by the US gov via ICANN. So the
gov decided to yield and give ICANN freedom. Sure enough, icann was quickly
captured by pirates.

~~~
toyg
I was referring to the original sellout of USSR institutions during the '90s:
as the world pushed the Soviets to renounce public ownership, they sold off
massive assets at fire-sale prices to well-connected profiteers.

Here, .org had certain restrictions that made its governance somewhat
"public". Those restrictions were removed and the asset was hurriedly sold, at
a debatable price, to well-connected profiteers. Looks very similar to me.

