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."

Comments

Almost done.

[Anonymous Coward]

Good!

Half the accountants? How about some of the lawyers too?

I guess the rats are leaving the ship.

Re:Almost done.

[Harmonious Botch]

Lawyers? Not yet. Lawyers leave after the rats. ( Some things, even rats won't do. )

Re:Almost done.

[Zeinfeld]

With no employees, it would be up to the officers of the corporation to execute any orders the judge issued to the corporation.

Or they can apply to put the company into liquidation, that is Chapter 7. At the moment SCO is in chapter 11, that is reorganization. If the company cannot continue to function it is not reorganizing and has to liquidate.

The problem for SCO here is that it can only reorganize in Chapter 11 if it has a good chance of demonstrating that it can secure the agreement of its creditors to the reorganization plan. The current management only have 120 days in which they have the exclusive right to propose a reorganization plan. After that they would have to pursuade the court to extend that right.

The question I would be interesting in knowing the answer to is what the situation is with respect to Novell's claims. Clearly SCO is going into bankruptcy before the bench hearing to determine what SCO owes Novell. Certain types of lawsuit get stayed by bankruptcy but it would seem odd if a case that had been decided on the merits and was only waiting for damages to be determined to be stayed by a voluntary liquidation when the only 'business' the company has is litigation.

The end of SCO does not necessarily mean the end of the case. I seem to remember that Boies and co have a bunch of charges against the assets of the company which allow them to acquire certain SCO assets and continue the litigation. Not that this is necessarily a bad thing, given the amount of time and money that has gone into the case and given that it looks like SCOs case is utterly toast it might well be better for it to at least result in a precedent.

It should not cost $50 million to force a plaintif to state a valid claim. There should be a clear precedent that ugabugah copyright lawsuits where the plaintif fails to state what the allegedly infringing content is get tossed out in future.

Re:Almost done.

[burnin1965]

they also prevented SCO's claims that "millions of lines of codes were copied from UNIX to Linux" being thoroughly tested (and debunked) in court

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.

Can't pay themselves

[no_pets]

Heck, the accountants probably know that there is no money to pay themselves. So, why work?

Re:Can't pay themselves

[ackthpt]

Heck, the accountants probably know that there is no money to pay themselves. So, why work?

Reminds me of a company I once worked for. The accountants (finance people) were sworn to some sort of secrecy not to disclose to other employees what they were doing. Basically only paying accounts when there was dire cause (and in some instances the cheques were immediately pulled from the mail bin and locked in a drawer after the vendor agreed to free things up.) After the fall someone finally told me what was going on. Accountants know the games that are played to keep a semblance of business as usual even when the precipice is looming

Those who stay on risk receiving pay cheques which will not cash.

Re:Crumble Crumble....

[Daimanta]

Once they hit chapter 7, as the money runs out, the court will dismember them. Ouch, please remember me never to get bankrupt.

Pessimist.

[Weaselmancer]

Darl can totally turn this thing around. Just you watch. It's just another minor setback. They'll be vindicated - just you see. Soon as they get over this small bump, they'll start raking in the cash from all those UNIX licenses that they're going to get from every single Linux user out there. Just as soon as...

Ok, a joke's a joke but I can't type anymore. My fingers started spontaneously bleeding.

Half of seven?

[Fred Ferrigno]

Groklaw says they started with seven accountants. "Approximately half" is either 3 or 4, and I'd wager that they would have said "more than half" if it were 4. Two of them were the 10-year veterans who resigned, leaving just one guy who was fired.

Re:Need to accrue Novell payment?

[Anonymous Coward]

At a reasonable guess, the accountants quit/were fired because they refused to sign the financial statements that were submitted with the Chapter 11 filing. Signing those statements would be professional suicide for any accountant. SCO is probably going to find it difficult to hire anyone who has the necessary standing to vouch for the correctness of an out of date balance sheet whose date was changed.

I think we can now expect the FBI will soon start hauling in SCO officers and lawyers on RICO and SEC charges. Fraud doesn't get much more blatant than submitting such obviously bad financials to a bankruptcy court.

Re:Need to accrue Novell payment?

[HiThere]

There's a problem here. Novell's money is Novell's, SCO is just holding it for them.

As such, SCO can't legally use Novell's money to pay it's own debts. "Unfortunately" SCO has been keeping lousy books, and didn't keep straight which money was Novell's. The legal hearing that they've stalled with this bankruptcy plea was to determine the size of the amount of money owed to Novell.

As such, I think any CPA involved in this scam *SHOULD* be in serious trouble. It's not certain that this will pierce the corporate shield, and allow Novell to go after the management & the board's personal assets...but it's also not clear that it won't.

Another interesting question is criminal charges. Clearly several laws have been broken, and felonies have been committed. It's not clear that any charges will be filed. "The corporation did it" is a common defense, even when all acts of the corporation were, in fact, performed by people. Personally I would rephrase "the corporation did it" by "it was a conspiracy", but this doesn't seem to be legal custom.

Caution: IANAL

When the accounts pack up - run!

[flyingfsck]

In my experience, when the accountants pack up their stuff, then you should trample them on the way out, cause you are likely not going to get paid for that month - Better to start your job search early than wait for the bouncing salary cheque...

Novell sends in the big guns

[Anonymous Coward]

Novell is sending five lawyers to tomorrow's hearing. Their resumes are truly impressive. It's all part of the greater scheme to leave a smoking crater in Utah.

They will probably be trying for two things:

1. SCO's attempt at chapter 11 gets rejected on the grounds of bad faith. groklaw post
2. 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.

Re:Seven people in accounting?

[sfonative]

"Do they even still sell something?" ........

I work in IT at a small company that uses SCO unix on some servers. We configured a new server and had to buy another license about six months ago. (Don't shun me. We also have several linux servers, but this one needed SCO.)

I was on the phone with our vendor and said to him, "We may be the last people to ever buy this."

He replied, "You're probably right."

How do we know half the accountants quit?

[Anonymous Coward]

Who counted them?

Re:SCO's assets and ip

[InvalidError]

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.

Re:Crumble Crumble....

[fractoid]

Ouch, please remember me never to get bankrupt. You mean please remind you. Unless you want to be remembered, in the sense of undoing the dismemberment.

It may not be what you think...

[Alpha830RulZ]

Back in the day, my accounting 410 prof told us that it is a common tactic in troubled financial times to fire your accountants, and then have your lawyer hire them back. That way, management's interactions with them become privileged communication, and not admissible in court. Perhaps the Country Lawyer could weigh in on this.