[At-Large] ICANN Board Nomination

Karl Auerbach karl at cavebear.com
Tue Sep 14 23:41:42 UTC 2010

On 09/14/2010 03:21 PM, Bret Fausett wrote:
>> Board payment is a difficult issue.
> Another factor to consider is that, under California law, volunteer
> Board members of non-profit corporations are generally immune to
> personal liability....

It's been a couple of years since I last looked, but the California law 
was somewhat tricky because of a Federal immunity statute that may have 
preempted the California immunity statue in some circumstances.

When I was on the board I found some situations where neither immunity 
statutes nor insurance would have offered any protection.  (I warned the 
board; but as usual I got the Cassandra treatment.)

In particular there was a situation in which ICANN was paying a lot of 
$$ to a contractor that had no legal right to collect those $$ (and I'm 
talking about $$ numbers with lots of zeros.)

What made it "interesting" was that the recipient of those $$ was a 
person who was not only a founder and corporate officer of ICANN  but 
also a person with significant direct control over corporate acts.

That raised a thing that our US internal revenue service (our national 
"tax man") calls "intermediate sanctions" - 

The penalties under intermediate sanctions land on the recipient of the 
$$, on the corporation, *and* on the officer and directors of the 
corporation.  And those penalties are designed to be draconian.

But what makes it most interesting is that those penalties are defined 
as a tax - 

Now, I am not at all sure that the California statutes can immunize a 
director against the payment of a Federal *tax*.  And I do wonder 
whether typical D&0 insurance will insure against the payment of a *tax*.

In other words whether volunteer or not, whether covered  by D&O 
insurance or not, there may be significant personal risks to serving as 
a director on the board of a non-profit corporation.

These are some of the reasons why I always suggest to a potential 
director that they go to their own legal counsel for advice on these issues.


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