ChaCha scandal leaves SEC searching for the truth

Indiana University's decision to partner with "human-powered" search engine ChaCha shouldn't have been controversial. ChaCha's based in Indiana and was founded by two IU alumni. Universities often have ties to local startups. Did anyone question Stanford's use of Google, or a professor's investment in the company? No, the controversy comes because no one actually believes that ChaCha is a better search engine than Google, and, more importantly, the partnership conscripts the university's library and IT staff into working for the search engine for free. And it's always the coverup, never the cime. In attempting to downplay university president Michael McRobbie's ties to ChaCha, university officials made the situation much, much worse. Someone's lying. It's just a question of to whom, and when.

When critics observed that McRobbie was a board member of ChaCha, Brad Wheeler, IU's vice president of information technology, claimed McRobbie had resigned his board position on March 1 when he became president-elect to avoid any impropriety.

But three months after McRobbie supposedly resigned, ChaCha filed a Regulation D statement with the Securities & Exchange Commission — a requirement imposed on private companies when they register shares — that stated (PDF) McRobbie was a member of the board as of May 31.

Is Wheeler lying? If so, it's a stupid lie, one easily discovered, and a lie that will only increase scrutiny of the university deal. And it's a lie that does little to change the appearance of conflict, since McRobbie had been working as an executive overseeing IT and research at the university for years — roles which would have been central to any search-engine deal the university struck.

There's another possibility, one far worse for the company than a mere conflict of interest. Wheeler's statement could be accurate, and ChaCha's filing with the SEC could be false. In which case, Dean Burger, ChaCha's CFO and general counsel, would have lied to the SEC when he signed the filing and certified it as factual and true. And that scandal would spread as far as Seattle, since Jeff Bezos is also an investor in the company, and as the CEO of the publicly traded Amazon.com, hardly needs an SEC investigation coming anywhere near him.

And this all reminds us why "human-powered" search engines will never take off. As annoying as Google's robotic algorithms are, they never pull this kind of nonsense on us.