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Jimbo Wales catches VC from Bono on Mexico City rooftop

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Not-for-profit meets profit

Nonetheless, Wool insists that Marc Bodnick met with Wales and the Wikimedia Foundation board several times since that first meeting, and Bono lunched with Wales and his wife in Mexico City, with Elevation footing the Foundation's bill. Judging from conversations with board members, however, Wool does not believe an official deal has been struck.

Such a deal would break the law, says Arthur Rieman, of the Los Angeles-based Law Firm for Non-Profits. After all, Wikimedia is a tax-exempt charitable foundation. "As a not-for-profit, you have no investors," Rieman told us. "If a VC is making donations, they may not have any expectations of a return as a matter of law. Otherwise the [non-profit] is not allowed to be tax exempt.

"Most of the laws regarding exempt organizations are designed to prevent what the IRS and Congress call private benefit - meaning the assets and activities of the non-profit may not provide any benefit to individuals or companies unless these benefits are incidental or causally related to the operation. For instance, if it's a child welfare agency and kids and their families are benefiting, that's OK."

That said, Rieman also points out that there are ways for board members or even a big donor to make money from a non-for-profit.

Without a doubt, the Wikimedia Foundation could turn on the profit tap at any time. "In the not-for-profit world, there are always non-profits that make money. If they do not have net income - from whatever sources - they do not survive," Riemen continued. "And many non-profits set up for-profit subsidiaries, or they spin off some of their assets to credit earned income."

Precedents include the Mozilla Foundation, which spun off a for-profit company around the Firefox browser. And Rieman points to the example of Minnesota Public Radio (MPR), which built a for-profit for Garrison Kellor's Prairie Home Companion, passing hefty salaries and compensation plans to MPR executives. The Minnesota attorney general investigated the deal for nearly two years, but eventually let it stand.

Yes, McNamee would be scrutinized if he horned in on a deal to commercialize Wikipedia, Rieman says, and he might even face a fine from the IRS. But there might be ways around this. "It would be dubious. But lawyers make many interesting decisions."

Whether or not McNamee is interested in making money from Wikipedia - for himself or for someone else - the facts remain: He's donated a hefty wad to the Foundation, and he has the ear of Jimmy Wales.

The Willypedia Affair shows that Wales is willing to violate Wikipedia's mission in favor of a personal relationship. And this particular personal relationship is backed by more than $1.35m. ®

Update

Our story originally said that Roger McNamee recently made two donations of $500,000 to the Wikimedia Foundation. The Foundation has now responded to us, and it says this is incorrect. McNamee merely facilitated these donations, "introducing" the Foundation to the donors.

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