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Half of SCO's Accountants Quit
Groklaw Reader writes "Apparently, SCO's lawyers were working overtime last Sunday, because they wrote a quick plea to the bankruptcy court for permission to hire accounting temps. Why? Approximately half of SCO's finance department has resigned or been fired. Two who resigned had over ten years of experience each. One can only assume that they know what's about to happen to SCO."
With no employees, it would be up to the officers of the corporation to execute any orders the judge issued to the corporation.
-jcr
The only title of honor that a tyrant can grant is "Enemy of the State."
They will probably be trying for two things:
- SCO's attempt at chapter 11 gets rejected on the grounds of bad faith. groklaw post
- Even if they don't get chapter 11 pitched, they want the trial in Utah un-stayed.
Given SCO's record, it seems likely that Novell will succeed. Given a checklist for bad faith in bankruptcy, SCO meets most of the criteria.It seems to me that SCO's bankruptcy petition is a bit of a Hail Mary pass attempt. I'm not sure what else they were supposed to do though. Their goose has been cooked for quite a while and they have been doing a masterful job of putting off the final resolution as long as possible.
as proven by the court and who the hell wants a bunch of 2nd hand SCO servers?
Excuse me, but please get off my Pennisetum Clandestinum, eh!
They were trading today. Opened at $0.31 closed at $0.22. So just when were they delisted?
They have applied for Chapter 11 Bankruptcy no more no less. They haven't been delisted and the application for Chapter 11 has not yet been granted.
The SEC responsibility does not end when the company is delisted as it can still be publicly traded in other ways and any action during the period they are publicly traded is the responsibility of the SEC. Even if some idiot bought up SCO and took it private tomorrow all actions up until that point could trigger SEC action. It doesn't stop being a crime just because a company goes bankrupt or is taken private, what happened still happened and if a crime is still eligible to be prosecuted.
According to filings, SCO has a $7.5M outstanding debt and about $15M in cash or other assets.
However, SCO is also illegally holding onto ~$36M of Novell's Unix licensing loyalties.
The one who will get first dibs on SCO will be Novell since that ~$36M is Novell's capital (not a debt/credit) which SCO is trying to convert (fraud) into its own... a detail which SCO apparently conveniently failed to mention to the bankruptcy judge in the first hearing.
Novell licensed its Unix to SCO and asked for a ~95% royalty on sales. SCO sold Unix licenses but never gave any of the money back to Novell. Novell is suing to get this capital back. SCO does not want to be curbed right away so it now attempts to stall by filing for bankruptcy. Tomorrow, Novell, IBM, RedHat and others will surely point out the many faults in Monday's SCO declarations and the judge will very likely order the Novell vs SCO counterclaims suit to proceed in order to establish how much capital SCO owes Novell since settling capital disputes preempts negotiating debts.
By the time chapter 11 proceedings are completed - presumably after Novell is awarded about $20M - SCO will be ripe for chapter 7.
Good point. The "approximately half" comes directly from SCO's actual petition, which seems kinda strange.
I think the biggest worry I have now... which may actually be moot- is who ends up with SCO's assets and IP?
Is that really a problem anymore? The judge has already ruled that Novell owns the copyrights, and Novell has already waived any liabilities Linux may have. Such a waiver does not seem retractible to me.
If somebody bought SCO's rights then they would first have to get that judgment overturned. And then there is the little detail that it turned out that SCO's claims of Unix code in Linux turned out to be a bunch of lies, with the "millions of lines of code" never materializing. It seems unlikely that somebody else would try bringing another trial using the same lies.
They may have claimed about millions of lines of codes being copied, but the actual case filed was only regards breach of contract. They claimed that IBM had donated its AIX code to the Linux kernel. Their second argument consisted of "Boohoo, Linux would have been nowhere if not for IBM. IBM created a competitor for us. We hate competition. Boohoo!".
The only piece of code they ever showed as being part of the Linux kernel, turned out to have already been released under a BSD license by the original creators and had already been replaced by better alternatives in the Kernel, which made their whole claim seem to go up in smoke.
All in all, it was just FUD sponsored by possibly an under-the-table deal between Microsoft and Darl McBride, with the aim of stemming the expansion of Linux in the server market, till Microsoft got its slightly-more-stable-than-xp vista OS out. It might be interesting to observe in future, whether any more information regards this possible deal comes out, and whether Microsoft can be sued under another anti-trust, unfair-practices case for its part in generating the controversy.
Out of curiosity, have you tried running your SCO applications on FreeBSD? It has all sorts of interesting cross-platform binary support, to the extent that Solaris for Linux runs fine on it. It's rumored that the SVR4 compatibility layer can handle SCO as well as Solaris binaries.
Might be worth a shot if you can't get rid of some applications but detest the rest of the system.
Dewey, what part of this looks like authorities should be involved?
I guess a company can still be listed on NASDAQ even though it's bankrupt!
Years ago I worked for a law firm that specialised in things like mergers and acquisitions. They also did a lot of bankruptcy work.
One of their clients was a large company that was mired in Chapter 11 proceedings and was, from the perspective of the general public, doomed to extinction. The attorneys came up with a plan for the company to raise money (and expand their business) by issuing new stock which, unsurprisingly, sounds as bizarre as it is illegal. A few months later (and many letters back and forth from the SEC), the company did just that. They ended up raising just under $40 million, and the law firm earned not only their own extravant fees, but bonuses for arranging that deal and the ones that followed.
The company no longer exists today, but if there's any lesson to be learned from this, it's that the subjects of law and finance are more complex than what you read in the newspapers. If there's money to be made, you can be sure someone will be walking away with some of it, even in SCO's case.
Actually that is not true. The SCO Groups claims have been thoroughly tested in the court system and The SCO Group are where they are today because the facts discovered in the SCO Group vs IBM case revealed that not only were they lying about finding millions of lines of infringing code but they knew full well they were lying.
Initially they claimed millions of lines of infringed code including line for line copying down to even the comments. When called on that bluff by IBM in the court they produced no evidence and the judge proclaimed an "astonishing lack of evidence" on the part of The SCO Group. Later it was revealed that internal SCO Group e-mails communicated the results of their own investigation of infringement in linux and found "aboslutely nothing" at which point their story changed and it was no longer literal copying but instead obfuscation of copied code. But still when they were compelled to produce the evidence which supported their claims they produce abosutlely nothing and instead changed their story again to claim that somehow they held ownership of "methods and concepts". Unfortunately The SCO Group holds no patents so they have no protected "methods and concepts" either.
This entire debacle was a scam from the beginning and it didn't go to a jury trial because the judge realized that The SCO Group's intention was to baffle the jury with the same bullcrap in hopes of making them believe that some how they must own something in linux when in fact they don't own squat.
Oh, this case has been tested, not just beyond a shadow of a doubt but beyond a frickin' eclipse of a doubt. Scumbags and grifters through and through.
When a company goes into bankruptcy, the ticker symbol has a "Q" added at the end. So "SCOX" will change to "SCOXQ" shortly, probably on Wednesday.
The order of debt satisfaction is: UCC secured creditors (people who leased SCO their cubes/chairs/appliances and filed a UCC section 9 lien with Utah sec. of state), Judgment holders (Novell, IBM, etc.), unsecured creditors, a whole bunch of other people, employees owed salary, shareholders (get whatever is left over).
So if SCO leased their office equipment there may be even less left to satisfy any judgments.
Of course, SCO sued Novell because Novell said "We own UNIX." It turns out the judge agreed with Novell.
GLaDOS for President 2016! "Well here we are again. It's always such a pleasure." -- GLaDOS, 2011
There's a problem here. Novell's money is Novell's, SCO is just holding it for them.
This concept is a trust, and in particular in this case, a constructive trust. Good eye and intuition, if I may say so.
The key point in this is: Under Chapter 7 (liquidation; should they get there) debts are prioritized, and trust priority is different than a general judgment award priority. Assets deemed to have been held in trust may (though not necessarily in this case) be considered a secured debt (which may have, I vaguely recall, a super-priority over everything except debt-administration and counsel fees), and consequently Novell may be entitled to full reimbursement of the assets SCO held in trust, ahead of payouts to any other creditors. Novell may even have priority over employees.
You're also right that SCO couldn't legitimately use funds deemed to have been held in trust for Novell to pay SCO's own debts. This would fall under the the cliché nomenclature breach of trust (vis-à-vis the tort of breach of fiduciary duty).
Criminal charges for what? Lousy books?
Yes. As corporate officers of a publicly traded company they have a legal obligation to make sure the books are in order. If there is fraud in the books then they face prosecution. Have you been asleep for the last 5 years or so? Do the names Enron, Tyco, or WorldCom ring any bells??
Another day closer to redwood heaven
If you steal a car and then go bankrupt, your creditors can't fight over who gets the car: it's not yours, so it's not an asset in bankruptcy, and it goes to whoever holds title. Same here.
ian
You are aware that SCO was claiming that IBM stole code from UNIX and put it into Linux? That was the entire basis of their lawsuit.
However, Novell said "Hey, we own UNIX." (paraphrased) A judge agreed. SCO's lawsuit evaporates.
Furthermore, Novell has been fighting SCO on this since 2003.
Novell also purchased SUSE Linux in 2003 and turned it into OpenSUSE, which it also uses as the base for its commercial Linux products.
Novell has also made significant contributions to XGL, Compiz, and OpenOffice to name a few projects.
Despite the constant FUD since the Novell/Microsoft deal, Novell's business model now revolves around FOSS software, so any attempt to kill it would be cutting their own throat.
GLaDOS for President 2016! "Well here we are again. It's always such a pleasure." -- GLaDOS, 2011
The best bet here is that the Novell monies (per the court judgement, this is money belonging to Novell and illegally "converted" [i.e., stolen] by SCO) are not subject to the bankruptcy process; instead, Novell gets to recover that amount before the Chapter 11 reorganization. It seems logical for the bankruptcy judge to either allow the Utah court to establish the amount of that judgement, or simply declare "It all belongs to Novell," before proceeding with a reorganization, given that the Novell judgement is what tips SCO into the bin.
So, my $.02 is on Novell being unconditionally awarded the judgement in the amount determined Real Soon Now by one of the two courts ahead of the Chapter 11 process, and there being nothing left for SCO and its other creditors but scorchmarks.
"My strength is as the strength of ten men, for I am wired to the eyeballs on espresso."
Basic business or accounting classes will teach you that accountants are only liable if they are cooking the books on their own volition, rather than on the instruction of their superiors. This is why many accountants keep a separate and private ledger - that way if something like this hits the fan they have a record of, "This is what it should have been, but when I told so-and-so, they told me to do it this other way."
And in that situation, the CPA is actually fine; it's the corporate execs who decide to fudge it or 'ignore problems' who are in trouble. That is what happened with Enron - the accountants knew the problems, but were instructed to obfuscate it. I suspect, given that the accountants were alternately 'fired' or 'resigning' that some accountant hit a legal wall, wouldn't go any further, was fired, and the rest knew that was the straw that broke the camels back and took off. Given the severe risk an accountant carries by being a CPA, and their significantly lessened protection (compared to an exec), I doubt many would actually put their neck out that far for a company unless they were already somehow complicit.
[Ego]out