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SCO's Lawyers Analyzed
byteCoder writes "Today's Wall Street Journal has an article (subscription required) which highlights the arrangement disclosed by this freely available SEC filing made between SCO and its law firm (run by lawyer David Boies) giving the law firm of Boies, Schiller & Flexner LLP 20% of the proceeds from the settlement or of "a sale of SCO during the pendancy of litigation." (Search down for "Arrangement with Counsel".) Apparently, if SCO is taken over while litigation is pending, Mr. Boies' law firm could stand to earn 20% of yesterday's market cap of $247M = $49.4M plus the premium associated with the increase in stock price due to the takeover. Of course, if SCO is successful in getting any part of their requested $3Bn in damages from IBM, the payday to the lawyers would be much greater."
It's always interesting to me that arrangements like this, that are essentially equity, are not considered conflicts of interest--how would a court respond to an attorney owning 20% of one of its clients?
Milo
Note also that they get 20% of any equity financing. They've already gotten 10 million from the $50 million Baystar deal. Hardly working on contingency. I mean, yeah, it's a contingency basis, but with a $10 mill downpayment.
> In addition, this modification may result in the payment to such law firm of up to $1,000,000 and
> the issuance of up to 400,000 shares of SCO's common stock.
Okay.. So, they are paying thier lawyers either 1) 20% of the settlement for what they beleive is their most valuble asset (The Unix IP), 2) 20% of the company value, *and* up to $1M + up to 400K stock shares.
Wouldn't it have been cheaper to buy a few law firms? That is a friggin ton of compensation. And for that (plus the small price of their reputations and soul) they get some really bad legal service.
With management making decisions like that it's no wonder the only asset the company really has anymore is stupid. But at least they have plenty.
As I read the SEC filing, Boies's law firm gets 20% of any new stock offering. This would seem to include the $50 Million recently received from the private investment from BayStar and Royal Bank of Canada.
Thus, the lawyers are no longer working strictly on contingency, they have received a lot of money up front (or, in the middle, anyway.)
thad
I love Mondays. On a Monday, anything is possible.
It is just one more disturbing piece. I'm almost starting to lose sleep over this whole SCO debalacle. From the begining, I actually thought that SCO was put up to this whole thing by an outside source. (MS perhapse) as a way of severly harming the linux/FSF/GPL movement.
:)
Now we see:
1. Novell bought out SuSE. (one down)
2. Redhat won't be messing with the desktop anymore. (twp down.)
3. Sun Microsystems has all but said "Linux is for the birds". The'll ship boxes with it if you want, but don't reccomend it. (Three down.)
And now this thing about the laywers getting a cut if SCO sells out.
Now we must ask, who is right now looking around and buying stuff up: Novell's out, since they just got SuSE. MS's looking for searchengines and feeling the market... So if the "deal" was, if SCO could take out three Linux companies, or at least shift their focus, they'd get bought out.
I just hope it isn't six. If MS buys them out this month, I'll sleep a lot better.
The only Gem in this whole mess is that IBM is staying true and HP is continuing with its Pro linux initiative. I haven't had a driver issue in either windows or linux/Mac OSX since.
Best,
-=fshalor
Let's try again. Despite what SCO says, SCO does not own the rights to UNIX. The term UNIX is trademark The Open Group. UNIX OS certification is available to any vendor who can make a UNIX variant and pays the bucks to get it certified UNIX-compliant.
Hell, even SCO's variant is not certifiable as a modern UNIX.
So, let's confuse the issue even more by saying we're running Linux - the first and only post-UNIX operating system (it's all about positioning and branding. We make it quite clear that Linux is not a modified version of UNIX, but was written from the ground up, AND we make it equally clear that a POS like SCO is ancient history).
Normally, MS cannot get into the unix business due to an agreement they signed when they spun off Xenix to a different company (They agreed that they would not compete against the product line they were selling off to someone else, and thus they would not get involved in the unix market again.) But - here's the interesting thing - what's the company they signed this agreement with? SCO. (Not the current people at SCO, mind you, but I would imagine the company still owns that contract even though none of its members are the same people as back then.) So, the ONLY way Microsoft could get into the Unix business legally would be if SCO ceased to exist (or became a part of Microsoft so that MS would be in charge of both sides of the agreement and thus could nullify it.)
I've sometimes suspected that this is the reason some aspects of Windows that are copies of some unix idea get greatly mutated. They can't just use all of the same technology directly the same way without being in danger of producing a unixy enough system that it might violate that previous agreement. So they make stupid changes perhaps just to cover their ass legally.
Don't label something "offtopic" unless you know the topic well enough to tell what's on topic.
Redhat is focusing on selling products that will make it money. So Redhat won't make boxed sets of their cheapest product anymore, but who were buying them anyway? You've always been able to get it in tons of books, magazines, on the net etc., and Fedora is taking over the mantle. So what you have is a situation where companies still get support if they pay for it, just as before, and consumers get a ditro, just as before, but the name will be different, and they'll have to go to some cheap CD packager to get CD's of it much like most people have been doing anyway.
Sun? Who cares about Sun except Sun itself?
All in all I see the Novell and Redhat events as good - it will likely help both companies, which will only mean better business penetration for Linux, and that will filter down to consumers eventually.
...Could possibly pull that off. I'd sure love to see it though it would be a first. A lot of these exec scumbags and lawyers got off during the dom-com era too.
I'm always reminded of the incompetance/greed of Commodore and their ruling class. Those guys made off big. In their last years, the CEO was making more than IBM's CEO even then the company was losing millions upon millions (he did give some of it back in the last year though - how kind).
Here was a company with great products (well, the Amiga-based stuff anyway) run by people whose only possible thoughts ran to corporate meetings in Bermuda and grabbing all the cash they could before it all went down.
After the liquidation (which was a sad affair I happened to attend in West Chester, PA), a bunch of shareholders got together and decided to sue the former execs for malfeasance. It never went anywhere. Basically, they were outspent before they began. But in the case of SCO, it would indeed be interesting to see if a corporate entity like IBM would get involved in pursuing these guys after it all goes down.
"...Well, there's egg and bacon; egg sausage and bacon; egg and spam; egg bacon and spam; egg bacon sausage and spam..."
Everyone is missing hte REAL point here. As the cartoon "user friendly" ( http://www.userfriendly.org/ ) has implied, SCO is just a sock-puppet for Microsoft. After all, didn't MS take a $39M equity position in SCO *just before* the suit got filed. BUT here's the gag. What if this isn't just an end-around-run by MS trying to gore Linux without looking like a predatory monopoly? What if the rumors are true, and MS has been lowering software development costs by incorporating open-source drivers into Windoze? Aha, suddenly the mists clear and we see what could REALLY be at stake. If SCO is NOT successful at destroying the GPL, Ms might have to OPEN-SOURCE Windows because of the code that they have appropriated. And following that thread, developers which have incorporated MS-supplied class libraries and APIs might also have to open source THEIR code. So the REAL story that newspapers should be covering is not *How will Linux users be indemnified against IP claims* but instead *How will MS indemnify users of Windoze against having to open source their code* when the GPL is UPHELD by the courts.
"Sic Semper Path of Least Resistance"
If IBM buys SCO to shut them up, then all of the FUD about linux in general and the GPL specifically, stays out there without being ruled on. This way, those who want to believe (or exploit) the FUD can put whatever spin they want on it.
If IBM buys them out (or someone else), and the court cases just go away, then the people who want Linux and the GPL to be discredited have won anyway.
I'm not sure how this can be resolved in a good way. We wait for the legal system to rule, it takes years. If IBM buys them out, it's basically paying extortion, sets a _very_ bad precedent, and allows the FUD to remain.
Am I seeing this wrong? Does someone have a realistic positive outcome, and a path to get there?
This is a serious post, so please take it seriously. What, in truth, does anyone do at your company ? I mean , besides Darl & Co. making pronouncement after pronouncement, what do the rank and file employees really do ? Do you write code ? Do you debug existing code ? Are you selling stuff ? What stuff are you selling ? Do you write documentation ? About what ? Are you working support lines ? Seriously, I'm wondering about this because it seems like a crappy job to work for people like Darl. I mean, it's pretty obvious that he doesn't care about SCO's product line (which to us out here seems to consist only of lawsuits). Do you stand to personally make out well financially from an outcome favorable to SCO ? Do you like working at SCO ? Do you feel that you're doing creative and/or useful work there ? Really, does anyone actually work at SCO ?
One of my old consulting customers in the 80s was a company that provided services for lawyers.
..., and bill the legal firm.
They would do depositions, private detective work, pick up and deliver evidence,
Many of the lawyers and legal firms were of the opinion that they didn't have to pay any of the bills for this until the cases were settled.
So that company got into a serious cash flow problem at one point. They had hundreds of thousands of receivables, but not enough cash coming in on them.
At some point, they couldn't make their quarterly tax payments because of the problem. They were audited and the IRS found several thousand more in taxes they owed.
But the company just didn't have the money.
The president/owner of the company told the IRS that he wished he could turn over that much of his receivables to the IRS. The IRS agent replied that they could.
So he spent the weekend pouring over the receivables and identified enough to cover the tax debt of the oldest, most difficult to collect receivables that they never thought they had much of a chance to collect.
The following Monday, he gave the list to the IRS.
The IRS agent started calling the lawyers and law firms.
"Hello. I'd like to confirm that you own XYZ company (some dollar amount). Can you confirm this?"
Lawyers know that if you admit the debt and say you are going to pay it later, you can often put off paying it for years, but if you deny the debt, it becomes a legal matter and they can drag you into court real fast and get a judgement against you. I saw one lawyer who was very wealthy but got ticked off at someone over very late delivery of a $50,000 computer take years to pay the debt just to teach them a lesson.
So they all admitted that they owed the debt.
The IRS agent then said, "I'm Agent (insert name) of the IRS and we've been assigned this debt. I expect you to have the check in the mail by tomorrow morning."
He collected every single penny of every one of those ancient receivables.