Always Check The Small Print…or not.

In 1997 I started my first company together with two friends. It was one of the first redirect services where you could get a short URL which would redirect to your homepage or website. It became pretty big pretty fast.

The original code was done by someone else and I did the design. When we went live someone suggesting adding some ‘Terms and Conditions” to the site to make it look more serious and make sure we weren’t liable for stuff. Of course, with no funding in place, we couldn’t afford a lawyer to draft something for us.

So I improvised. I went to Hotmail.com, copied their Terms and Conditions file and did a search for “Hotmail” and replaced it with “V3 Redirect Services”.

Done. (here is a copy, courtesy of the Internet Archive)

Two years later, in 1999, I sold the service to Fortunecity for a small fortune, which was paid in shares. The shares tanked and by 2001 I was back where I started, financially at least. Then, in 2002 the Dutch Tax offices wanted to have a word with me. They had looked into my case and had decided that I had incorporated my company too late so they were going to tax me for the small fortune in private. We estimated I would have to pay somewhere close to EUR 3 million if they would be proven right. Ouch.

Of course I didn’t agree and I also explained to them that there was no small fortune so I would never be able to pay the 50% taxes on the small fortune I ended up never making. Their reply: “that isn’t our problem”.

So we started gathering evidence to prove that we had incorporated in time and there was no basis for their assumptions. It took a lot of time and money to get all our stuff ready and in the process my lawyer told me that even in the best case scenario I would have to prepare to pay at least a substantial fine. Any fine would have meant personal bankruptcy, I was about to lose everything I owned, so you can imagine it was a stressful time.

One day we had another meeting with the investigators of the tax offices. We were going to look over some of the ‘evidence’ they collected. We sat there and listened to what they brought to the table. The first documents they showed weren’t very impressive but it was clear they were working up to something. Then one of the investigators turned to me and asked me “When did you start the company, really?”. I replied “Somewhere in 1997. I can look up the exact month if you want”. He said that wasn’t necessary but he wanted to remind me that everything I said was on the record. Then he asked me again “I want to ask you again to make sure we all hear you correctly: what year, exactly, did you start the company?”.

By now I was starting to get worried. What were they up to? I was pretty sure I knew when I started the company. I repeated the year we founded the company: “I’m pretty sure we started the company in 1997”. The investigators looked at each other, smiled and then the head investigator reached into his bag and produced a document. It looked familiar. He held it up and said “We have proof that you actually started this company in 1996 and have been lying to us, on the record, all this time and even today”.

I was puzzled. It just didn’t make sense. I knew when I had started the company. I reached over and took the papers to read them. It was a printed copy of our original “Terms and Conditions”. The one I stole from Hotmail. At the bottom of the document it said:

“All rights reserved  | V3 redirect Services | Copyright 1996 – 1997”.

That copyright notice was their proof that I must have started the company in 1996. It was one of the most important pieces of evidence in their case against me.

I read the whole document for a while until I came to the last paragraph. It was titled “LAWS” and contained the following sentence:

“The TS shall be governed by and construed in accordance with the laws of the state of California, excluding its conflict of law provisions. Member and V3 Redirect Services agree to submit to the exclusive jurisdiction of the courts of the state of California.”

When I did the find and replace I forgot to change “the state of California” to “The Netherlands” where we were based. I looked at the main investigator and told him “If you really want to use this document I suggest we move the whole case over to California as that is what this seems to apply to”. Then I went on to explain that these were simply Hotmail’s terms of service and how they got there.

The document disappeared from the table into the briefcase and wasn’t mentioned again. Three months later I got a letter that my income for 1999 was permanently set at EUR 0,-. At first I didn’t even get what that meant. Then my accountant called and asked me whether I was drinking champagne. I asked “Why should I?” and he explained “That letter is the tax offices way of saying that the case is closed. This is the last thing you will ever hear about it”.

The moral of this story? We will never know how serious that single document was in their case and I still don’t know if it saved me or caused my predicament in the first place. Either way, when you do a find and replace, better be thorough, and always check the small print…