PROPOSED PARTNERSHIP BETWEEN USCF AND AMERICA'S FOUNDATION FOR CHESS

Outlined by John McCrary in consultation with Erik Anderson

The following is an outline of suggested ideas for a partnership between the
USCF and the America's Foundation for Chess (AF4C), formerly known as the
Seattle Chess Foundation, for the good of organized chess in the United States.

History: This proposed partnership grew out of talks between Erik Anderson,
founder of AF4C, and John McCrary. The initial such discussion occurred in
March 2001 at the US China match in Seattle. There, Erik suggested that USCF
would function more efficiently if it had a board composed of very wealthy and
successful business people. He observed that such persons were very unlikely to
run in a USCF election, however, partly because of the notorious nature of our
politics and its personal attacks on candidates.

Later AF4C announced its intention of helping to develop scholastic chess
nationwide. In response to that, I spoke several times with Erik Anderson and
with Michelle Anderson (no relation) of AF4C about ways to coordinate their
efforts with those of USCF. On this topic I spoke with Michelle at the
Kasparov-Deep Junior match and later with both Andersons during a conference
call regarding funding the 2004 US Championship. Erik and I spoke again by
phone in July, and then in person in my suite in Los Angeles on August 5.

Subsequently, Erik proposed a partnership between our two entities. One
condition of closing such an arrangement would be an initial donation of
$500,000 to help stabilize USCF's finances. Another condition was that the
purpose of such an arrangement would be to strengthen the idea of unified
organized chess in the US, in order to prevent the fragmentation that may
result from any weakening of USCF in its ability to provide services.

RATIONALE FOR AN ARRANGEMENT

USCF has been in a negative feedback cycle for some years, because of the
steady loss of adult regular members. As a result, there are fewer members in
the highest-paying category to support the fixed costs associated with
providing services, so that each remaining member must provide more toward
those fixed costs. Any business in such a '"doom loop, " unless it can
significantly increase its paying customers, must do one of the following: a)
Raise per-member prices ( fees or dues), and thereby lose more customers
(members); b) Cut services, and risk losing member support; or c) Deliver
services more efficiently, but this usually requires capital, and the loss of
members to support fixed costs generally prevents the accumulation of more
capital for this purpose.

Obviously the only effective correction for the negative-feedback cycle
described above is to reverse the membership loss. However, none of the various
attempts to do this have worked. US Chess Live was started by the Redman Board.
The McCrary Board left US Chess Live in place, but cut spending by over $80,000
annually for that service without impairing its operations. However, it had
very limited apparent impact on USCF membership. At least three membership
drives have been implemented since 1999, but none has produced desired results.

Since the dues increase in August 2002, all major membership categories have
been hurt. Adult Regular Memberships declined by more than 10% between November
2002 and November 2003 inclusive, even when Economy Adult Memberships are added
back in. Youth Memberships declined by about 5% during that period, and
Scholastic Memberships became flat with no net growth. Since Scholastics had
previously been growing substantially, the loss of growth was, in effect, a
decline in that category.

Furthermore, demographic analysis is alarming. I graphed data provided by Mike
Nolan in 1999, and was shocked to see that the major part of adult USCF
membership is over 40. I have since learned that similar negative trends are
threatening other organized mindsports such as Bridge.

In spite of these declines, chess in the United States is booming. There are
millions of new chess players of all ages in the US now, and media mentions are
becoming much more common. Yet USCF is not successfully appealing to most of
these new players.

AF4C presents a major opportunity for US chess to address these overwhelming
challenges by adding substantial new financial resources to the eroding revenue
base of dues and fees. As a result, USCF could then deliver and promote new and
more efficient services for both old players and new. AF4C is associated with
men who are in a class by themselves for their personal resources. For example,
Scott Oki is one of America's 385 richest men according to the Internet, with a
net worth of $750,000,000. He is retired and devoted to philanthropy. I
understand that another person associated with AF4C may be even richer. The
USCF has never before been approached by such a substantial group. Their track
record with the US Championship is outstanding, and they have carried that
event to historic highs well beyond their contractual obligations.

I might mention that AF4C's initial involvement with the US Championship was
opposed by some Board members for reasons similar to those being suggested
today by some to oppose this arrangement. It was suggested that the Seattle
Chess Foundation, as they were then called, was a "them" who would take away
USCF's property. One Board member, for example, told a Seattle resident in
March 2001 that they had "taken USCF' s crown jewel." Instead, they have taken
the US Championship to unprecedented heights while fully respecting USCF's
status at all times.

BASIC PRINCIPLES

The following are the basic principles any such arrangement should observe:
1) The USCF remains the overall membership organization for any arrangement,
and the governing body for chess in the US. In case of a merger, the
organization continues as the US Chess Federation.

2) Very large donations are arranged by AF4C to stabilize USCF's current
condition.

3) In return for these very substantial donations and future contributions of
resources, a new model for the USCF Board will be established. That model will
allow certain positions to be provided to large donors, while others will be
elected by USCF.

4) A clear mission statement would be written and would serve as the definition
of the USCF's purposes which any partnership would be expected to meet. The
Board would be responsible for meeting the services and expectations of that
mission statement.

CORPORATE FORM

This proposed arrangement has taken various hypothetical forms. One such form
might be a merger of the two entities, while the other possible form could be a
partnership involving certain services such as scholastic, but still under the
USCF umbrella. A proposal based on the latter possibility was discussed at
length with the Scholastic Council in December, where it received a positive
endorsement. However, one problem with a partnership is that certain services,
such as membership processing and ratings, would need to be provided by USCF's
central office to allow maximum integration with USCF's other functions. Since
the USCF central office lacks resources, there is concern by AF4C that those
services cannot be delivered efficiently enough under such a partnership model
to make the overall arrangement attractive to donors. There is also the basic
problem of duplicated overhead under such an arrangement, since both USCF and
AF4C would have offices. .

Thus, the proposal of a merger of the entities has been put back on the table.
Under such a merger, potentially the offices of the two entities could be
combined, and other resources shared with minimum duplication.

QUESTIONS

The advantages of a merger are attended by certain questions, however, which
include the following:

a) What would be the IRS status of a merged entity? AF4C is a 501 ( c ) (3),
which allows educational purposes and even the promotion of national and
international sports competition. However, USCF is a 501 ( c ) (4), which I
believe is a " social welfare organization." How does membership organization
concept relate to a 501 ( c ) ( 3 ) ?

b) How would a merger interface with USCF's plans to relocate?

c) What services would be provided by a merged entity? At least, would it have
flexibility to respond to changing market conditions regarding demands for
kinds of publications, Internet play and websites, etc. It would need to
continue current activities of promoting adult amateur play and working with
local groups.

d) How would a new entity interface with the US Chess Trust?

e) How should the Mission Statement of any new entity be written to assure that
the future efforts of that entity be consistent with established parameters?

f) In a larger sense, can USCF under its present model of dues and fees, and
services, survive and thrive without this partnership? If so, how?

SUMMARY

I think that the first step this task force should take is to enumerate the
questions on specifics, such as corporate form, that need to be resolved before
a finalized proposal can be put before the Delegates. We should also brainstorm
any additional suggestions we have. After this has occurred, we can summarize
recommendations regarding the idea of this proposal and its details. As far as
possible, our discussions should occur by e-mail, copied to all of us, with a
target date for completion of our task by the middle of May. (To anticipate the
Board meeting of May 22-23.)

On 05 Jun 2004 09:01:24 GMT, (WPraeder) wrote:

PROPOSED PARTNERSHIP BETWEEN USCF AND AMERICA'S FOUNDATION FOR CHESS

[snip] ...

BASIC PRINCIPLES

The following are the basic principles any such arrangement should observe:
1) The USCF remains the overall membership organization for any arrangement,
and the governing body for chess in the US. In case of a merger, the
organization continues as the US Chess Federation.

2) Very large donations are arranged by AF4C to stabilize USCF's current
condition.

3) In return for these very substantial donations and future contributions of
resources, a new model for the USCF Board will be established. That model will
allow certain positions to be provided to large donors, while others will be
elected by USCF.

Since you are a candidate for election, we need to know whether you,
Wayne Praeder, are in favor of this.

I will tell you right now that I am opposed. For many years you have
been the strongest advocate of the OMOV or "One Member One Vote"
system. I am surprised to see that now you are suggesting that several
members of the USCF Board be wealthy people who are not elected but
who instead make large donations to the organization.

The USCF has been in existence since 1939. The American Foundation for
Chess has only been around for three years. While you speak of how
wealthy the American Foundation for Chess Board Members are, you fail
to mention the fact that they reneged on the deal they made and could
not come up with the money to hold the US Championship as schedluled
in January 2004. This in turn led to the crisis involving the US
Woman's Olympic Team.

How can we agree to merge with and give seats on our board to an
unreliable business partner? This seems to be one of those half-baked
ideas which will prove unworkable in practice. Your proposal (most of
which I have snipped) involves a major corporate reorganization which
would be almost impossible to accomplish legally.

Sam Sloan
I am also a candidate for USCF Executive Board.

Since you are a candidate for election, we need to know whether you,
Wayne Praeder, are in favor of this.

I will tell you right now that I am opposed. For many years you have
been the strongest advocate of the OMOV or "One Member One Vote"
system. I am surprised to see that now you are suggesting that several
members of the USCF Board be wealthy people who are not elected but
who instead make large donations to the organization.

Sam,

I've taken my filters off so I can better interact with the participants on
rgcp. It is good, as usual, to hear from you. By the way no need to thank me
for making this USCF proposal document available to the readers here. I can see
you would not care for Erik's suggestion of a managing board in which the
majority would be appointed wealthy donors, who donated $50,000 each for
membership on the board.

You may have missed that the proposal was authored by John McCrary in
consultation with Erik Anderson. You also may have missed that items related to
this proposal has been discussed in all three Executive Board meetings from
September through May inclusive. Lastly I suspect you overlooked that I
provided my view on any merger considerations in my June 2004 Chess Life
candidate statement.

To specifically answer your question the answer is no I am not in favor of this
specific proposal. I do however think there is potential for win-win
partnership with the AF4C if we explore joint business opportunities rather
than focusing on board membership. Hopefully you will correct the
misunderstanding from the previous post.

I probably won't debate this topic with you as I'm spending all my efforts
right now working on a chess trivia game I can publish if I am selected to
serve on the board.

I'm sorry if I make you nervous, however, it appears I'm may be also making
some other USCF old-timers nervous. You are in good company. Best of luck to
you in the election.

Regards,
Wayne Praeder

"WPraeder" wrote in message
...

QUESTIONS

The advantages of a merger are attended by certain questions, however,
which
include the following:

a) What would be the IRS status of a merged entity? AF4C is a 501 ( c )
(3),
which allows educational purposes and even the promotion of national and
international sports competition. However, USCF is a 501 ( c ) (4), which
I
believe is a " social welfare organization." How does membership
organization
concept relate to a 501 ( c ) ( 3 ) ?

This is a surmountable problem. Libraries, museums, churches, and PTAs have
members. The issue is what makes it a 501(c)(3) in the first place? Cultural
and education missions are the obvious avenues to approach.

b) How would a merger interface with USCF's plans to relocate?

Nonfactor. The money is in Seattle so that's where we need to be.

c) What services would be provided by a merged entity? At least, would it
have
flexibility to respond to changing market conditions regarding demands for
kinds of publications, Internet play and websites, etc. It would need to
continue current activities of promoting adult amateur play and working
with
local groups.

Good question, the more money the more services we can pursue.

d) How would a new entity interface with the US Chess Trust?

By phone, mail, and email?

e) How should the Mission Statement of any new entity be written to assure
that
the future efforts of that entity be consistent with established
parameters?

Yes.

f) In a larger sense, can USCF under its present model of dues and fees,
and
services, survive and thrive without this partnership? If so, how?

No. The board will be composed of well-heeled individuals directing a
professional management team. Oh yea, maybe a couple of token GMs.

StanB

This is wonderful news. Almost too good to be true.

The only thing that strikes me as odd is that our angel would allow any
vestiges of previous governance -- in form or personnel -- to contaminate
the new federation. In my opinion organized chess in the US desperately
needs a washout period, free from past USCF influences. With very few
exceptions, nothing and nobody currently associated with USCF should remain.
We need a clean slate.

Angelo

"StanB" wrote in message
...

"WPraeder" wrote in message
...

QUESTIONS

The advantages of a merger are attended by certain questions, however,
which
include the following:

a) What would be the IRS status of a merged entity? AF4C is a 501 ( c )
(3),
which allows educational purposes and even the promotion of national and
international sports competition. However, USCF is a 501 ( c ) (4),
which
I
believe is a " social welfare organization." How does membership
organization
concept relate to a 501 ( c ) ( 3 ) ?

This is a surmountable problem. Libraries, museums, churches, and PTAs
have
members. The issue is what makes it a 501(c)(3) in the first place?
Cultural
and education missions are the obvious avenues to approach.

b) How would a merger interface with USCF's plans to relocate?

Nonfactor. The money is in Seattle so that's where we need to be.

c) What services would be provided by a merged entity? At least, would
it
have
flexibility to respond to changing market conditions regarding demands
for
kinds of publications, Internet play and websites, etc. It would need to
continue current activities of promoting adult amateur play and working
with
local groups.

Good question, the more money the more services we can pursue.

d) How would a new entity interface with the US Chess Trust?

By phone, mail, and email?

e) How should the Mission Statement of any new entity be written to
assure
that
the future efforts of that entity be consistent with established
parameters?

Yes.

f) In a larger sense, can USCF under its present model of dues and fees,
and
services, survive and thrive without this partnership? If so, how?

No. The board will be composed of well-heeled individuals directing a
professional management team. Oh yea, maybe a couple of token GMs.

StanB

With very few
exceptions, nothing and nobody currently associated with USCF should remain.
We need a clean slate.

Angelo

Angelo,

Please note it is my understanding that the result of the May board meeting
presentation was that the board voted 4-1 (Brady dissenting) to thank AF4C for
their efforts on behalf of chess, and looked forward to further discussions on
how we could work together.

Regards,
Wayne Praeder

Angelo,

Please note it is my understanding that the result of the May board meeting
presentation was that the board voted 4-1 (Brady dissenting) to thank AF4C
for
their efforts on behalf of chess, and looked forward to further discussions
on
how we could work together.

Regards,
Wayne Praeder








Wayne,
Do you know why Brady dissented?

This is beginning to remind me of FIDE or worse, when the AAU was run by a
bunch of "amateur" rich white men.

A question?
When AF$C takes over the four rich guy seats on the board vs three OMOV elected
seats, of what benefit is the supposed infusion of $500,000. Even in USCF four
is more than three. The rich guys are just shifting coins in their own pocket.

I would say this looks like a hostile takeover, but who knows.

In a previous offer by AF$C to USCF, Eric offered John McCrary $500K for all
the rights to the USCF Scholastic National Championships.
McCrary was all for this.
Of course, McCrary was never one of our bright lights, but not even a moron
would have given the USCF Scholastic away permanently for 500K and the idea was
quickly killed.

However, look at the benefits to AF$C if wonder boy McCrary had been able to
carry the day.
The cost of the US Closed championships would have landed squarely on the backs
of the kids tournaments.
Another example of McCrary outsourcing his gray matter :-)

Richard Peterson

Anyway,

Wayne,
Do you know why Brady dissented?

Richard,

No, I'm sorry, I do not know.

Regards,
Wayne Praeder

"ASCACHESS" wrote in message
...
In a previous offer by AF$C to USCF, Eric offered John McCrary $500K for
all
the rights to the USCF Scholastic National Championships.
McCrary was all for this.
Of course, McCrary was never one of our bright lights, but not even a
moron
would have given the USCF Scholastic away permanently for 500K and the
idea was
quickly killed.

However, look at the benefits to AF$C if wonder boy McCrary had been able
to
carry the day.
The cost of the US Closed championships would have landed squarely on the
backs
of the kids tournaments.
Another example of McCrary outsourcing his gray matter :-)

AF4C ran the Washington Elementary championships this year, the biggest
ever.
I have no idea how they did financially (I hope they made some money) but
the registration fee was $25. This was a $5 increase from previous years but
I'm sure the venue being in Seattle metro had something to do with that.
Next
year's, run by someone else, will also be $25.

No evidence of gouging. AF4C seem like the good guys to me.

On 05 Jun 2004 15:03:48 GMT, (WPraeder) wrote:

I probably won't debate this topic with you as I'm spending all my efforts
right now working on a chess trivia game I can publish if I am selected to
serve on the board.

Very good! Now we find out that Wayne Praeder can make a joke. First
one ever from Wayne.

Thank you,

Sam Sloan

P.S. For the benefit of anyone new here, the brunt of this joke is Tim
Hanke.