Snopes.com in Danger of Shuttering - Asks for $500K in donations

[Mick West]

In a rather odd turn of events, David Mikkelson, the owner of the fact-checking site Snopes.com has announced he's partially lost control of the the site

https://www.gofundme.com/savesnopes

We had previously contracted with an outside vendor to provide certain services for Snopes.com. That contractual relationship ended earlier this year, but the vendor will not acknowledge the change in contractual status and continues to essentially hold the Snopes.com web site hostage. Although we maintain editorial control (for now), the vendor will not relinquish the site's hosting to our control, so we cannot modify the site, develop it, or — most crucially — place advertising on it. The vendor continues to insert their own ads and has been withholding the advertising revenue from us.

More details from the NYT:
https://www.nytimes.com/2017/07/24/business/media/snopes-crowdfunding-proper-media.html

The site, which gets all of its revenue from advertising, created a crowdfunding page on Monday, seeking $500,000 from readers to remain operational indefinitely. It says that Proper Media, the vendor that runs its advertising services, has withheld the site's revenue and has refused to relinquish control of the site. That leaves Bardav — the company that owns and operates Snopes — with no way of moving the site to a new host or installing its own ads, said David Mikkelson, a founder of the site.

"We have had no income whatsoever for the last several months," Mr. Mikkelson said in an interview on Monday.

When asked how long the site could last without a successful fund-raising drive or legal victory, Mr. Mikkelson responded: "Not a whole lot longer."

Proper Media and its lawyers tell a starkly different story. They say that Snopes employees will continue to be paid from the advertising revenue, and that Mr. Mikkelson should be removed from the company because of wasteful spending.

(lots more detail in the link)

More details here:
https://techcrunch.com/2017/07/24/snopes-seeks-crowdfunding-in-ownership-battle/

I spoke with Snopes's David Mikkelson about the situation. He contests just about everything alleged by Proper, including the idea that it owns half of Bardav and Snopes.

"The position we were in was, we had this popular website but outdated architecture," which he hired Proper to help modernize. "It's not like we were having financial problems, but as long as I was basically running the entire operation there was no way we were going to grow." Mid-contract, Proper made an aggressive bid for control, paying what Mikkelson said was an "exorbitant" price for the other half of the company.

The contract with Proper was one that could be canceled at any time by either party, and that's what Mikkelson says he did, as part of his everyday job as President of the company. Even if Proper's owners were on the Bardav board (they aren't, he noted), their permission wouldn't be necessary because it's not a board-level decision, and anyway they would have to recuse themselves for conflict of interest.

What's interesting here is that Mikkelson has already managed to raise $272K in just 10 hours!

The legal dispute seems rather tangled. Snopes already took something of a credibility hit from tabloid coverage of Mikkelson's divorce. It's probable the anti-Snopes crowd will be quick to exploit these new problems.


Documents:

Original Complaint:
https://www.metabunk.org/attachments/snopes-complaint-pdf.27922/

Response from David Mikkelson:
https://www.metabunk.org/attachment...8-17_cross_complaint_1500945341220-pdf.27919/

57 07/24/17 Defendant David Mikkelson's Opposition to Plaintiff's Motion for Preliminary Injunction
https://www.metabunk.org/attachment...position_to_plaintif_1500942570695-pdf.27918/

 

[Mick West]

The mentioned complain paints a tangled picture of dubious dealings:
http://www.courthousenews.com/wp-content/uploads/2017/05/Snopes-COMPLAINT.pdf
example:

1. This case involves unlawful jockeying for ownership and control of the factchecking website Snopes.com ("Snopes"). Snopes advertises itself as "The definitive Internet reference source for urban legends, folklore, myths, rumors, and misinformation" and recently entered into a high-profile agreement with Facebook to integrate factchecking services into its social media platform. But while Snopes is built entirely around the concepts of transparency and truth, its founder, Defendant David Mikkelson ("Mikkelson") has engaged in a lengthy scheme of concealment and subterfuge to gain control of the company and to drain its profits.

2. Snopes is owned by Bardav Inc. ("Bardav"). Bardav was founded in 2003 by Mikkelson and his then-wife, Barbara Mikkelson ("Barbara"). Mikkelson and Barbara each owned one share, or 50% of the equity in Bardav.

3. After a contentious divorce, Barbara sold her equity in Bardav to Plaintiff Proper Media in July of 2016. 4. Proper Media is a San Diego-based Internet media company. Proper Media manages several top-ranked web properties and, at the time of its purchase of Barbara's interest, it was already managing a significant amount of the operation of Snopes. Proper Media's management of Snopes is governed by a written General Services Agreement.

5. Because Bardav elected pass-through tax treatment under Subchapter S of the Internal Revenue Code, Bardav's shareholders may not be companies (such as Proper Media, which is a limited liability company). 26 U.S.C. § 1361(b)(1)(B). The deal was therefore structured as a sale by Barbara to Proper Media's individual shareholders. Proper Media's members would only hold the shares for the benefit of Proper Media. Accordingly, Bardav approved the issuance of fractional shares in the names of Proper Media's five members, including Vincent Green ("Green"), who was a small minority member of Proper Media; however, no fractional shares were ever issued by Bardav

6. As a member and officer of Proper Media, Green owes fiduciary duties both to the company and to its other members under its Operating Agreement. These fiduciary duties include duties of loyalty, care, and good faith, and any actions taken adversely to Proper Media are expressly prohibited.

7. Mikkelson was unhappy that Barbara maintained ownership of half of what he always considered to be his company after the divorce. Thus, after Proper Media's purchase of Barbara's share, Mikkelson sought to finally gain control of Bardav by aligning and conspiring with Green. Although Green purportedly holds only a small fraction of Bardav's equity (which he only holds for the benefit of Proper Media), when combined with Mikkelson's 50% interest, it would purportedly give Mikkelson majority control of the company.

8. Beginning in February 2017, Mikkelson conspired with Green to block Proper Media's access to the personnel, accounts, tools, and data necessary to manage Snopes. On information and belief, Mikkelson, in conjunction with Green, intentionally did block Proper Media's access to personnel, accounts, tools, and data to take over Snopes and to prevent Proper Media from performing under the General Services Agreement. Furthermore, Green instructed three Proper Media employees not to return to the Proper Media office and removed over $10,000 of equipment used by these three employees from the Proper Media office.

9. Shortly thereafter, Green resigned from Proper Media. Green resigned using a Snopes email account, indicating that he was now a direct employee of Mikkelson at Bardav.

10. Accordingly, Mikkelson has induced Green to breach the Proper Media Operating Agreement as well as Green's fiduciary duties

There's lots more. It seems like (from Proper's account) then Mikkelson owns half of Snopes, the individual members of Proper Media own the other half. But Vincent Green technically owns a small part of Proper's half, so he could band together with Mikkelson to form a controlling interest (even though he did not pay for his share).

 

[Mick West]

The court documents can be accessed here (at cost):
https://roa.sdcourt.ca.gov/roa/
Case number 00016311

57 07/24/17 Defendant David Mikkelson's Opposition to Plaintiff's Motion for Preliminary Injunction (attached)

B. Plaintiffs Cannot Show a Probability of Prevailing Because Their Claims are
Unsupported by the Facts

Certain of Plaintiffs' preliminary assertions of fact are demonstrably inaccurate. For
example, Barbara's shares were not sold to Proper Media (contra, Motion p. 3, lines 12-13); they
were sold to Messrs. Richmond and Schoentrup, and three other individuals, as is well established
by the evidence (supra), including Mr. Schoetrup's own declaration in a prior matter,
signed (tellingly) before the GSA was terminated. Plaintiffs offer no evidence to suggest that
there was any agreement regarding the Bardav shares between any of the individual shareholders
and Proper Media, nor a voting trust, nor other collaboration. There is no credible or admissible
evidence to support Plaintiffs' position that Proper Media has any equity interest in Bardav.

This seems a little at odds with Mikkleson's statements that Proper does not own half of Bardav. It seems that this is the crux of the matter - Proper claims that they (as a corporation) bought half of Snopes, but for tax reasons it was in the names of the five people who made up Proper, and not Proper the Corporation.

Seems unlikely to end well - regardless of the outcome the legal wrangling will be interpreted one way by those who support Snopes, and those who are opposed to them.

 

[Mick West]

More details at the Atlantic:
https://www.theatlantic.com/technol...te-threatening-snopes/534708/?utm_source=fbia

Meanwhile, in a story as old as media, the site's editors worried that the co-owners didn't understand what Snopes was, and that they only wanted to juice its revenues, so they could sell it.

On February 18—in a much disputed series of events—Green and Proper Media's largest shareholders, Richmond and Schoentrup, had a contentious meeting. In the weeks that followed, Green either left or was forced out, and he went to work at Bardav, which is to say Snopes, where he remains.


On March 10, in an action that Proper Media disputes, David Mikkelson canceled the contract that had been in place governing interactions between Bardav and Proper Media. Mikkelson claims that he had a right to do so as CEO and sole director. Proper Media says that he could not because it was understood that Drew Schoentrup was a director of the company as well, even though he had not been elected through a formal process.

Also in dispute are Green's shares, which when combined with Mikkelson's, would give the two of them putative control of the company. Proper Media contends that, more or less, the shares belonged to Green and he was just holding them on behalf of the company.

There are many other claims and counterclaims flying around the filings related to the lawsuit. It's not interesting to go through all of them in detail, but what can be said: This is a mess.

 

[deirdre]

Snopes already took something of a credibility hit from tabloid coverage of Mikkelson's divorce

I guess so. The things you learn by reading MB! Oh my.

You would think they would have the brains to put in the divorce settlement that the other partner gets first dibs if one wants to sell their half of the company. smh.

 

[Mick West]

Mikkelson's initial response filing attached:

 

[Mick West]

I guess so. The things you learn by reading MB! Oh my.

You would think they would have the brains to put in the divorce settlement that the other partner gets first dibs if one wants to sell their half of the company. smh.

I doubt David would have been able to buy out Barabara, Snopes is worth millions. She just wanted to cash out.

 

[deirdre]

I doubt David would have been able to buy out Barabara, Snopes is worth millions. She just wanted to cash out.

but it could have only been for 1%. They really did build and own the company. It is reasonable that if one wants to bail the other should retain control ownership. Buy-Sell agreements can really be anyway people want them to be as far as I know. While I'm sure SHE wouldn't be happy with that arrangement, I would think the court would find the request reasonable under the circumstances (the company circumstances not the reason for divorce circumstances)

Anyway, they didn't so not worth worrying about.

 

[Mick West]

https://arstechnica.com/tech-policy...over-fact-checking-site-now-front-and-center/

A lawyer representing Proper Media, Karl Kronenberger, denied any impropriety.

"Nothing is being held hostage by Proper Media," he e-mailed Ars. "All key files have been delivered to Bardav, so they can run the site themselves, just as they did for years prior to doing the deal with Proper Media."

For his part, Mikkelson countered that the relevant WordPress "content, themes and templates, and the database" were only handed over Monday night, after Snopes' fundraising campaign began.

So if Mikkelson has all the data now, he can just move the site elsewhere, and put his own ads on the site.
Currently the site goes to 209.15.34.68, a Cogeco Peer 1 hosting address, with a CDN on static.snopes.com (69.16.175.42).

It's a big site, to be sure, but it's just a Wordpress site largely serving static content. He should be able to move it over the course of a day or two. So there does not seem to be a huge obstacle to him restarting a revenue stream.