In mid-2003, Wales set up the Wikimedia Foundation (WMF), a non-profit organization founded in St. Petersburg, Florida and headquartered on the West Coast of the United States, in San Francisco, California. All intellectual property rights and domain names pertaining to Wikipedia were moved to the new foundation, whose purpose is to establish general policy for the encyclopedia and its sister projects. Wales has been a member of the Wikimedia Foundation's Board of Trustees since it was formed and was its official Chairman from 2003 through 2006. From 2006 to date he serves under the honorary title of Chairman Emeritus and holds the board-appointed "community founder" seat. His work for the foundation, including his appearances to promote it at computer and educational conferences, has always been unpaid. Wales has often joked that donating Wikipedia to the foundation was both the "dumbest and the smartest" thing he had done. On the one hand, he estimated that Wikipedia was worth US$3 billion; on the other, he weighed his belief that the donation made possible its success.

Wales' association with the foundation has led to controversy. In March 2008, Wales was accused by former Wikimedia Foundation employee Danny Wool of misusing the foundation's funds for recreational purposes. Wool also stated that Wales had his Wikimedia credit card taken away in part because of his spending habits, a claim Wales denied. Then-chairperson of the foundation Florence Devouard and former foundation interim Executive Director Brad Patrick denied any wrongdoing by Wales or the foundation, saying that Wales accounted for every expense and that, for items for which he lacked receipts, he paid out of his own pocket; in private, Devouard upbraided Wales for "constantly trying to rewrite the past". Later in March 2008, it was claimed by Jeffrey Vernon Merkey that Wales had edited Merkey's Wikipedia entry to make it more favorable in return for donations to the Wikimedia Foundation, an allegation Wales dismissed as "nonsense".

Nupedia and the origins of Wikipedia
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