OPEN LETTER TO USCF RE: ICC
by Hal Bogner
To: USCF Executive Director and Executive Board
Cc: EB Candidates, Chessnews.org, ICC management
Dear George, and Ladies and Gentlemen of the Executive Board,
On Thursday, April 19th, ICC Founder and President Danny Sleator called on
the USCF to invite ICC to the negotiating table to offer alternatives to an
apparently-secret, sole-source bid by USChessLive vendor Games Parlor for a
two-year exclusive extension to GP's relationship with USCF. In response,
ICC was invited by USCF President Tim Redman to appear before the Board in
Kansas City on Saturday, April 28. I was one of six members of ICC's team
who presented that afternoon, and who subsequently met with senior staff
that night to discuss the ways in which ICC might provide benefits to USCF
and its members.
On Sunday, April 29, ICC submitted a preliminary 'Letter of Understanding'
to the Board, and it is my understanding that the Board subsequently
granted the ED thirty days to negotiate with ICC (as well as GP) to
determine whether USCF should sign any agreements with respect to online
chess play. On Wednesday, May 2, ICC received a fax from ED George DeFeis
soliciting a proposal no later than Tuesday, May 8, and also posing 14
specific questions to be answered.
On Tuesday, May 8, ICC submitted an extensive document to ED George DeFeis,
answering the 14 questions, outlining a framework for a mutually beneficial
relationship between USCF and ICC, proposing several options to USCF,
inquiring about the time frame for completing negotiations and perfecting a
definitive proposal, and asking four specific questions.
On Wednesday, May 9, Mark James spoke to ED George DeFeis on ICC's behalf,
and George, you shared with Mark some information regarding the USCF's
situation, including some alarming items that supported ICC's fears that
USCF was on the verge of making a tragic error. Mark James shared with you
ICC's concerns that operating USCL might be an economic disaster,
regardless of whether GP or ICC acted as the operator of the service. I
will discuss this further below.
On Friday, May 11, I spoke to ED George DeFeis by phone. George, you told
me at that time that you had received the ICC proposal document, had read
it, and were considering it. You asked me several clarifying questions,
which I answered. I asked you about the time frame for negotiations, and
you told me that you had no specific time constraints, and that ICC should
expect to hear from you again shortly.
On Thursday, May 17, ICC heard from a rumor that GamesParlor claimed that
their contract was signed by USCF, and I followed up by calling you,
George, and asking you about it. You confirmed that this was so, and even
admitted that you had decided and signed it prior to when I spoke with you
on the previous Friday, May 11. I asked you about why you didn't tell me,
and in fact, why you pretended that it hadn't happened, and you told me
that 'at that point, you had not yet notified your Board.' I asked you to
send ICC formal notification that you had decided against ICC's
alternative, and you said you would send a letter. To date, no such letter
has been received by ICC.
On Saturday, May 19, Chessnews.org reported publicly that USCF had indeed
signed the GP contract on Thursday, May 10. It appears abundantly clear to
me that I was lied to by ED George DeFeis, and I must unfortunately
conclude that George, acting on behalf of the USCF, acted in bad faith with
respect to the ICC. (This is sadly reminiscent of last summer, when George
similarly assured ICC's John Fernandez that USCF was happy with the
agreement in place between ICC and USCF at that time, when in fact, an
initial agreement had already been signed with GP.)
Therefore, as someone who is associated with ICC, and also as someone who
is a USCF member with a long record of service to USCF and to Chess in
general, I feel it is appropriate to publicly address the issues raised
First and foremost, it seems shameful to me that the USCF is making
decisions without a proper analysis of its options, and without a full
understanding of the economic consequences of its actions. This is
compounded by acting in secrecy, and it appears that ED George DeFeis has
taken some actions without proper oversight by the entirety of the
membership of the Executive Board, each of whom has a fiduciary
responsibility to be informed of the far-reaching actions which you,
George, have described to Mark James. For example, you have described to
Mark James that the GP contract includes the following two astounding
- Games Parlor is scheduled to get $8 of every USCF $32 Internet Membership
- Games Parlor will get some percentage of increased USCF membership during
the term of the contract.
It is also clear that USCF has no understanding of whether USCL is
economically viable, and no understanding of the impact of running USCL on
USCF's own finances. Preliminary ICC financial models, based on our
limited understanding of the details of the current GP-USCF relationship,
suggest that neither party will recoup its operating costs, no matter how
many members are obtained. In fact, the greater the 'success' of USCL, the
greater the likelihood that either USCF or GP (or both) may be bankrupted!
I understand that there are many people within USCF who are infatuated with
the concept of USCF operating its own 'branded' online chess playing site.
But how this has led USCF to spend large portions of its membership
revenues on subsidizing Games Parlor's attempt to establish a competitor to
other existing online chess services (of which ICC is the undisputed
leader) is almost beyond comprehension. Somehow, Games Parlor has
presented USCF with a Trojan Horse, promising revenues to USCF while
actually draining the USCF treasury.
Initially, USCL was claiming to be 'advertising supported', but I am told
that virtually no advertising revenue ever materialized. Initially, USCL
was promised to USCF members as a membership benefit which would forever
be 'free' (that is, no additional fees would be required). Initially, perhaps,
Games Parlor thought it would ride the 'dot.com' stock market frenzy to a
successful stock offering; perhaps, under some secret clause in the USCF-GP
contracts, some misguided USCF officials even thought that USCF would reap
a windfall of cash from a public offering (IPO) of GP stock, and solve USCF's
financial problems for many years to come. However, my own professional
opinion is that USCF will lose money steadily on supporting USCL as a 'free
member benefit', until the day comes when USCL must cease to operate, at
which time USCF will find itself having to break its promises to the membership.
I respectfully request that the appropriate USCF governing body or bodies
properly address the issues I have raised above.
under separate cover as email:
- Initial 'Letter of Understanding' from ICC, 4/29
- Questions from USCF to ICC (received by fax 5/2)
- ICC-USCF proposal letter of May 8
Hal Bogner H M Bogner & Associates
email@example.com P.O. Box 143
tel: 650-726-6186 468 Metzgar Street
fax: 650-726-4102 Half Moon Bay, CA 94019, USA
Editor's comment: Many have been critical of the existing USCF
arrangement with Games Parlor, which has resulted in $30,000-plus revenues
from the prior ICC agreement being replaced by $100,000-plus losses under
the Games Parlor contract, with little or no apparent effect on USCF
membership totals. But if the above letter is correct, the Federation has just
made a bad situation much worse.
We do not understand the need for the
"rush to judgment" which resulted in a
two year Games Parlor contract renewal, without providing the most prominent
online provider, ICC, a real opportunity to submit a competing bid, and without
consulting the USCF Delegates, who meet in less than three months and who
according to the Bylaws are "responsible for the management of the USCF."
Even more astonishing are the claims that the new contract provides Games
Parlor with an $8 commission on every USCF Internet Membership sold, as well
as a percentage of any increased USCF membership during the term of the
Does the first clause mean that when a
regular member renews for the internet
fee of $32 rather than the regular fee of $40, Games Parlor makes $8 even if that
player does not use US ChessLive, leaving USCF with only $24? If this is true,
USCF might benefit from discontinuing or not advertising internet memberships
until the contract expires!
Does the second clause mean that if
USCF membership income skyrockets for a
reason unrelated to online play, such as a USCF dues increase, a major new
sponsor, a media breakthrough, or an American player winning a world title, a
percentage of this additional income goes to Games Parlor? If this percentage is
more than a token amount, this clause seems highly irresponsible.
It sounds as though, as unfavorable as
the previous Games Parlor contract was for
the Federation, the new one may be far worse! Why was the Board majority in
such a hurry to tie the hands of the Delegates and the new Board by locking in
such unfavorable terms for so long a period?
Now that the contract has been signed,
USCF can no longer hide behind "closed
session" secrecy. The managers of the federation, the Board of Delegates, are
entitled to see this contract, which is rumored to contain additional "sweetheart"
provisions in favor of Games Parlor. If the contract is overwhelmingly against the
interests of USCF, as appears likely, an investigation of the events leading to its
signing may be appropriate, possibly followed by some type of legal action.