X-Message-Number: 14287
Date: Thu, 10 Aug 2000 12:44:39 -0400
From: Paul Wakfer <>
Subject: Re: CryoNet #14275, 14280 - INC tax exemption etc
References: <>

> Message #14275
> From: 
> Date: Wed, 9 Aug 2000 12:10:41 EDT
> Subject: INC tax exemption etc
> Wakfer has clarified a couple of issues I raised. Further on tax exempt
> status of INC:
> Not being a lawyer, I can't offer any legal opinions, and am not intimate
> with the legislative and regulatory details. However, certain things seem
> perfectly clear at least on a common-sense basis.
> INC has contracted to allow 21CM exclusive marketing rights to any useful
> results of INC research, the hippocampal slice cryopreservation project.

This is in return for 21CM providing the services of Greg Fahy without
which the Project would not exist and could not be conducted. In
addition, as stated before INC gets 10% of the gross of any profits from
the research, which is a substantial portion.
> In
> other words, some of the money is provided by individual donors who may then
> take a tax deduction, INC being a 501(c)(3) organization. Some of the money
> is provided, indirectly, by the U.S. taxpayers, because of the tax
> deductibility of the donations--and this gift is generally unwitting and
> unwilling.

This is a distortion of what taxation and charitable deductions are all
about. No libertarian would ever look at it that way. The logically and
morally correct way to view it is that INC is preventing the US
government from *stealing* a certain portion of the donor's money and
making it possible for that donor to *direct* that money to research.
The donor's money does not *belong* to the government or any other
taxpayers by right.

> The commercial benefit potentially goes to 21CM, meaning its
> shareholders and management.

Only a portion goes to 21CM, the portion earned by their contribution of
services of Greg Fahy as described above.

> Donors to INC could even find themselves paying
> through the nose for cryopreservation services using INC/21CM procedures or
> services,

They will pay no more than any other customer for those services does.
There is no legal way that they can be allowed to pay less. Otherwise,
they would be getting *value* for their donation which is not allowed by
the tax regulations.

> these having been licensed by 21CM to other for-profit companies
> including BioTransport, perhaps. This cannot be kosher.

It may not be "kosher", but it is all that can be legally done with the
current organizational arrangement. If you can come up with a method by
which the donors might legally obtain some special consideration for
their donation I would be delighted, and I believe so would 21CM. If you
will recall, when I attempted to do just that via a trust scheme during
the Prometheus Project, I was roundly and severely criticized and
attacked, and it was implied that I was some kind of charlatan.

> If this sort of thing were generally allowed, then, for example, IBM could
> contract out some of its research to a tax exempt university, in return for
> exclusive marketing rights. The research would be paid for, in part, by
> donors to the university, e.g. alumni--again, generally, unwittingly and
> unwillingly. IBM's shareholders and management would reap the benefit.

Actually, I think exactly this is done all the time. :-)
In effect, INC is hiring 21CM as its marketing agent and giving it a
large share of any profits. In this case the share is bigger because the
cost of Greg Fahy's service to the project is a major percentage of the
entire cost of the project. INC also retains *ownership* of the results
of the research, any patents and such.

> This
> CANNOT be the intent of the original legislation or of the regulatory
> agencies.

Sorry, but you are wrong here, mainly because of the details that you

> In the case of INC and 21CM, some involved will care and some will not.

If it is wrong and/or unjust then every right-minded person should care.

> Some
> may just want the research done at any cost--better to be relatively poor and
> potentially immortal than relatively rich and soon slime, and it doesn't
> matter who gets the money. But of course the choice is not that simple, and
> some would care even if it were that simple.

And they should. Certainly *I* care.

> The conflict has now escalated in view of the reported impending change,

Once again I am sorry to have to say it, but the conflict is only in
your mind. In reality, there is no conflict.

> with
> Dr. Pichugin slated--according to Wakfer--to work in future directly for
> 21CM.

*If* they approve him. Right now they are not at all thrilled at the
prospect. That is why INC needs the funding, to continue to support the
work at least until 21CM is certain that Yuri is a valuable worker and
21CM will take over support for his work as directed by Greg.

> I suspect that some prospective donors to INC will consider themselves
> suckered unless they get some 21CM stock in return.

Having it related to the donation would be illegal, and if 21CM simply
gave them stock they would have to declare it as income.
> All of this does not imply that everyone agrees it is likely that INC or/and
> 21CM will produce results warranting that focus for their own discretionary

> funds. There will be more detail on this in the next issue of THE IMMORTALIST.

All that I ask is that you give me a chance to rebut your comments and

> Message #14280
> From: 
> Date: Wed, 9 Aug 2000 16:08:56 EDT
> Subject: addendum

> In my earlier post today, I left out of account the statement by Wakfer that,

> if Dr. Pichugin starts working directly for 21CM and brings the INC equipment
> with him, INC will first demand a new contract, ensuring that "any profits 
> which ensue from the research results will return to INC for its use to fund 
> additional research."

I clearly erred in not making this clear enough by not giving enough
detail. However, you have also distorted what I said by making an
out-of-context quote, since the "any profits" referred to in the above
sentence were INC's *share* of the profits under any new contract.

The current contract between INC/21CM relates only to the project while
being conducted at REI. When the project is moved to 21CM (made
necessary by lack of continuing support from REI), one of two
possibilities may occur.

1. INC will continue to have some part in the project to ensure that
there is leverage independent of 21CM ownership to ensure that the
research is done optimally according to the specifications of Dr Fahy,
world's foremost authority on this kind of research. Ie. INC
participation will give Dr Fahy more leverage to do things as he wants.
INC participation would then be by means of a loan of its equipment for
use by 21CM use and funding of certain parts or aspects of ongoing work.
Any arrangements for this would require a new contract for this ongoing
joint work. INC's benefit for funding could come from a percentage of
future profits from the work, or simply as a purchase of 21CM shares.

2. 21CM does not wish to have INC continue to participate. In this case,
INC will still likely be able to sell its equipment to 21CM, but
failing that it can sell on the open market.

In either case INC still retains ownership (in conjunction with REI) of
results from the research which took place before the project left REI
and still gets 10% of gross profits which 21CM makes from that research.

Actually, if you knew the detail of the contracts (I can send these by
email to who ever wants them), then you would be more concerned about a
"give-away" to REI instead of to 21CM. By the terms of the INC/REI
contract REI is supposed to get 50% of whatever profits INC makes.
However, that was on the understanding that the input from REI would be
equal to that of INC. However, REI ceased funding on Dec 31, 1999, yet
because of Yuri's visa situation, we *cannot* move the project from REI
and terminate the arrangement for many months yet. Thus, by the time the
project ends at REI, much more than half of its funding will have come
from INC. This is all my fault. In the contract with REI, I should have
anticipated that this might occur and should have clearly stated that
the percentage of profit share would be prorated according to the
funding input.

> Well, in light of past history, that sounds like a tall order.

That is only because you have misinterpreted what I said. Perhaps you
misread it? Now that I have fully explained, I expect you will
understand that it is both "kosher" and reasonable. :-)

> Even if Saul 
> were to agree to something like that, how could it be interpreted and 
> enforced?

Just as *any* contract can be enforced. These things are done all the
time. The contracts have arbitration clauses and are enforceable in a
court of law.

> Since everything will be more or less melded together under the 
> 21CM roof, who can say which results contributed how much to ultimate 
> profits?

That is one of the purposes of the clear scientific documentation of
research. Dr Fahy is well versed in these sorts of situations having
in them many times before. They are very common, but I am sure he can
explain how it works much better than I.

> And would INC, assuming it receives some share of profit some time, 
> then "fund additional research" elsewhere--some now totally unspecified 
> project?

Either elsewhere or with an ongoing "say" in what is done by 21CM.

> In any case, this prospect leaves the potential donor, from whom Wakfer is 
> asking money NOW, in the position of blind trust and hope.

Not at all, as I have fully explained above.

Thank you for your continuing analysis and questions.
Hopefully, this will help explain things satisfactorily for other
readers as well.
As I have always said to my students, "If you do not understand, you
will be doing other students a favor if you ask a question, because they
too are probably having the same misunderstanding, but they are afraid
to ask and perhaps look stupid".
In that sense, you are the perfect student.

Paul Wakfer

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