OpenAI Faces IRS Complaint Over CEO's Financial Gains

OpenAI, the prominent artificial intelligence company, has found itself in the midst of a legal storm as a tech watchdog, the Midas Project, has filed a formal complaint with the Internal Revenue Service (IRS) against the company. The complaint alleges that Sam Altman, the CEO of OpenAI, and other board members are positioned to enjoy personal financial gains, which violates U.S. tax laws governing nonprofits. The Midas Project highlights conflicts of interest that prioritize the enrichment of Altman and some key members over the organization’s charitable mission.

The complaint, filed on Thursday, points to Altman’s dual role as the CEO of OpenAI’s for-profit arm and a nonprofit board member as a significant issue. This dual role gives him influence over decisions that could personally benefit him, even at the nonprofit’s expense. The Midas Project warns that if OpenAI is allowed to restructure, it could grant Altman an equity stake worth billions, which may weaken the nonprofit board’s control and undermine its mission to develop AI for public benefit.

The group also accused OpenAI of improperly using nonprofit grants, such as the $50 million NextGenAI Program, to subsidize for-profit customers by demanding that grant recipients use the firm’s tools. Tyler Johnston, executive director of the Midas Project, has called for transparency, stating that OpenAI’s rapid development of controversial AI technology demands adherence to legal and public interest standards.

This latest development comes as OpenAI continues to face scrutiny over its plans to shift from a nonprofit to a for-profit entity. Elon Musk, a co-founder of OpenAI, has been vocal in his opposition to this shift, believing it to be a betrayal of the company’s original mandate. OpenAI has defended the shift, claiming it needs the for-profit structure to keep up with the costly endeavor of building AI infrastructure. However, the company has decided to delay its plans and announced it would only partially convert to a for-profit entity.

Musk’s lawyer, Marc Toberoff, has dismissed the partial conversion as a “sleight of hand” because it fails to address core issues. Musk has not shown that he intends to give up and accept that outcome either. The ongoing feud between Musk and Altman has intensified with legal battles linked to OpenAI’s restructuring plans. OpenAI has now gone on the offensive by filing a complaint with the California Fair Political Practices Commission against nonprofit Californians for Accountability in a New Internet (CANI), alleging that it violated lobbying laws.

CANI is suspected of having links to Musk via a Tesla-related property and has in the past spoken out against OpenAI’s for-profit plans. However, the main reason Altman’s firm is suing is because it alleges CANI played a big role in opposing a California bill (SB 1047) that could have hindered its for-profit plans. OpenAI has reportedly investigated CANI and is now convinced it may be fronting a fake leader, Jeffrey Mark Gardner, and failing to report lobbying payments.

Its investigation into CANI involved extensive efforts to identify Gardner, which revealed a potential link to an entity named Tesla Place, LLC. However, no clear connection to Musk’s Tesla has been confirmed, and CANI spokesperson Becky Warren has also previously denied that the group has any connection to Musk, describing the nonprofit as a grassroots effort. The complaint against CANI, dated Monday, follows OpenAI’s attempt to subpoena the group in May over links it may have to Musk and shows just how far the AI firm is willing to go in its belief that those who oppose its restructuring are secretly linked to its rivals.

It is now up to California’s attorney general to investigate, but as the investigation goes on, OpenAI’s dominance in the AI market will face existential questions, and Altman’s suspected conflict of interest is not helping matters. The ongoing legal battles and scrutiny over OpenAI’s restructuring plans highlight the complex and contentious nature of the company’s transition from a nonprofit to a for-profit entity. The outcome of these legal battles will have significant implications for the future of OpenAI and the broader AI industry.