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SCO Files For Chapter 11 Bankruptcy - Updated 4Xs
Friday, September 14 2007 @ 03:29 PM EDT

Here's the title of the press release: "The SCO Group Files Chapter 11 to Protect Assets as It Addresses Potential Financial and Legal Challenges", which you can find here. They say reorganization "ensures business as usual." You can find information on Chapter 11 bankruptcy here.

Frank Sorenson has found the filings for us. They filed in US Bankruptcy Court in Delaware. It's Cases 07-11337 and 07-11338, for The SCO Group and SCO Operations, Inc. Here are the documents for SCO Operations, Inc. and I'll put up the filings for SCO Group next:

All PDFs. That last is the long list of all the creditors. The Certification Concerning Creditors, second on the list, is the list of the top 20 creditors. And here's the SCO Group filing:

But you know what I don't see yet? An overall statement of assets and liabilities. I believe that is required, so I'll keep looking. Update: Found it. Page 4 of the SCO Group's Voluntary Petition tells us that the assets are $14,800,000 and the debts are $7,500,000. That's not counting the debt the Utah court ruled Novell is owed, amount to be determined at the now postponed trial. And a note says those are approximate values, based on "the Company's consolidated and unaudited balance sheets as of July 31, 2007". Here's the most recent 10Q from April for comparison. And this is interesting. There are 21,782,164 shares of common stock, owned by only 402 holders. That explains a lot. Here's the name of any person who directly or indirectly owns, controls, or holds, with power to vote, 5% or more of the voting securities of debtor: Cede & Co. and Ralph Yarro.

SCO Operations, Inc., in the Corporate Ownership Statement, says that the debtor, SCO Operations, Inc., "discloses that The SCO Group, Inc. owns 100% of the Debtor's equity interests." I remember now that when S2 signed a contract with SCO, it was with SCO Operations, described as "a Delaware corporation and a subsidiary of The SCO Group, Inc.". And I do see on the form that they list estimated assets at $1,000,000.001 to $100 million. Not too precise. And estimated liabilities are the same.

Update 2: Stephen Shankland reports that this means the trial on Monday is off:

IBM didn't comment, but Novell said it is evaluating its options. "U.S. bankruptcy law automatically stays the court case. We're assessing our options for how to pursue our interests," Novell said.

Novell sure has had to work hard for their money. And now they will have to row the boat that little bit harder. And for those of you who bought airline tickets to go to the trial, get on the phone or online fast and cancel.

Update 3: The media is beginining to report more. Paul Foy of AP, now on Forbes, says:

SCO said the petition was filed electronically in U.S. Bankruptcy Court for Delaware. Copies weren't immediately available online.

Yoo hoo. Yes, they were.

: )

Groklaw. When you want to know more, but don't know where to look.

Here's the docket for the SCO Group filing. We don't have all of them yet, because the court's system seems to be on overload, I'm told, but in time we will fill in the blanks:

09/14/2007 - 1 - Chapter 11 Voluntary Petition of The SCO Group, Inc.. Fee Amount $1039. Filed by The SCO Group, Inc.. (Attachments: # 1 Board Resolutions# 2 Certification and List of 20 Largest Unsecured Creditors# 3 Certification and List of Equity Security Holders# 4 Corporate Ownership Statement# 5 Certification and Creditor Matrix) (Jones, Laura Davis) (Entered: 09/14/2007)

09/14/2007 - Judge Kevin Gross added to case (GVW, ) (Entered: 09/14/2007)

09/14/2007 - 2 - Motion for Joint Administration Debtors' Motion for Order Directing Joint Administration of Related Chapter 11 Cases Filed By The SCO Group, Inc. Hearing scheduled for 9/18/2007 at 09:15 AM at US Bankruptcy Court, 824 Market St., 6th Fl., Courtroom #3, Wilmington, Delaware. (Attachments: # 1 Proposed Form of Order)(O'Neill, James) (Entered: 09/14/2007)

09/14/2007 - 3 - Affidavit in Support Declaration of Darl C. McBride, Chief Executive Officer in Support of First Day Pleadings Filed By The SCO Group, Inc. (O'Neill, James) (Entered: 09/14/2007)

09/14/2007 - 4 - Application to Employ/Retain Debtors' Application, Pursuant to 11 U.S.C. Section 327(a) and Fed. R. Bankr. P. 2014(a) and 2016, for Approval of Employment of Berger Singerman, P.A. as Counsel for Debtors Nunc Pro Tunc to the Petition Date Berger Singerman, P.A. as Counsel for Debtors Filed By The SCO Group, Inc. (Attachments: # 1 Declaration of Arthur J. Spector in Support of# 2 Proposed Form of Order)(O'Neill, James) (Entered: 09/14/2007)

SCO Operations owes the following:

Novell is not listed as a top-20 creditor by SCO Operations, Inc., but Boies Schiller is. Here are the 20 top creditors:

  • Amici LLC ($500,650.73),
  • Boies Schiller (287,256.39),
  • Canopy Group ($139,895.00),
  • Gre Mountain Heights Property ($132,502.00),
  • Microsoft Licensing, Inc. ($125,575.00),
  • Sun Microsystems, Inc. ($50,000.00),
  • Veritas Software ($37,881.33),
  • Intel ($23,302.11),
  • Fujitsu Services ($25,302.11),
  • HP-Nonstop Royalty Accounting ($25,302.11...hmm. exactly the same amount for three entities),
  • Unisys ($25,302.11 - a fourth),
  • KSJ Consulting ($21,781.25),
  • 4Front Technologies ($10,417.50),
  • Silverman Heller Associates ($10,352.35),
  • Madson & Austin ($8,478.32),
  • Randd Strategic ($7,026.79),
  • Sage Forensic Accounting ($6,221.00),
  • Profile Consulting ($5,450.00),
  • Sun Microsystems Inc. Software Royalty Accounting Group ($5,414.40) and
  • AmLaw Discovery ($5,399.57).
You likely recall reading about Amici back in 2005. Here's what happened in 2006, Xerox bought Amici. By then, the Boies children had already divested themselves of their stake.

On the long list, I see they owe at least four of their experts, Christine Botosan, Gary Pisano, Marc Rochkind and Evan Ivie. Wasn't Gary Nutt an expert of theirs too? [Update 4: Actually, the answer is no. You find him listing work as a consulting expert for both Boies Schiller's Robert Silver and Stuart Singer in 2005-6 and for Dorsey & Whitney in 2005, and I would assume but can't prove that was for SCO, but he did not submit an expert report on their behalf.] They owe him, and they owe Darl McBride, Ralph Yarro, Darcy Mott, Bert Young, Jean Acheson, Chris Sontag, Reg Broughton, Sandy Gupta, and Blake Stowell, along with the usuals like the phone company. Oh, and they owe taxes. That's in the US. They owe the Consulate General of India also.

Some of their witnesses are owed money too, like Alok Mohan and Doug Michaels. Also Dave Prosser, Duff Thompson, and Erik Hughes. Also Eric Posner at the U. of Chicago Law School and G2 Computer Intelligence. Hmm. Hans Bayer of Bad Homburg, Germany. I believe I've seen that name somewhere before. And there's another person in Bad Homburg on the list, MSREF Amanda Zwie. I wonder what that is? They owe MySQL. They owe O'Reilly. They owe Pace Law School in White Plains, NY, attention the Assistant Director of Development and Alumni Relations? I see the US Attorney General on the list. What in the world? For that matter, one can't help but notice Shred-PRO on the list.

They do list Novell on the list of lesser debtors, so that has to be for something other than SCOsource licenses they neglected to pay, according to the judge's ruling. And the final irony: they owe IBM. Man. How old must that debt be?

SCO Group owes the following:

Irony here is that SCO says it owes Missile Defense Agency in Alexandria, Va. Uh oh. And Sara Lee Underwear. Could that be the "Got Unix in your Linux?" T-shirts? One hopes. Just joking around. They are probably both folks with a support contract or something perfectly normal.

Here's a paper that says that a study they conducted indicated that firms generally benefit from Chapter 11. Creditors not so much:

We examine a sample of 459 firms filing for Chapter 11 during the period 1991 to 1998 and find that our sample firms experience significant improvements in their operating performance during Chapter 11. Our evidence is consistent with the hypothesis that Chapter 11, if anything, provides net benefits to bankrupt firms. In the cross section, firms with higher debt ratios experience greater improvements in operating performance, and the complexity of the renegotiation process negatively affects the improvement. We find no relationship between Chapter 11 outcome and changes in risk-adjusted firm value in Chapter 11.

The study didn't address what happens to Novell now. The US District Court ruled SCO owes Novell and was about to determine at trial, beginning Monday, precisely how much.

Finally, for the historians, here's the notice of trading halt today of SCO stock. And here's the page that explains trading halt codes. SCO's was a T1, which is: T1 Halt News Pending - Trading is halted pending the release of material news. I'll say.

Update: Darl McBride has posted a letter to customers and partners dated September 14 on the site darlmcbride.com that reads like this:

Letter to Customers and Partners

September 14, 2007

By Darl McBride, CEO and President, The SCO Group

Dear SCO Customers and Partners,

This afternoon we took the extraordinary step of filing for Chapter 11 protection in U.S. Bankruptcy Court to protect assets for our creditors and stockholders and to ensure the continuation of our normal business operations. This decision was not taken without extensive consultation with the board of directors, and many outside experts and legal counsel.

SCO intends to maintain business as usual throughout the Chapter 11 proceedings. Subject to court approval, SCO will use the cash flow from its operations to meet its capital needs throughout the reorganization process.

Other companies such as Delta Airlines, Texaco, Dow Corning, K-Mart, United Airlines, Toys R’ Us, Macy’s Department Stores and others have emerged from Chapter 11 protection after restructuring themselves for success. We intend to do the same.

We value our relationship with you and want to provide the assurance that you can continue to order product, and receive exemplary service and support from us during this restructuring period.

We invite you to consult with your SCO representative if you have any questions or concerns.

Sincerely,

Darl McBride
President & CEO

The text of the press release:

******************************************

The SCO Group Files Chapter 11 to Protect Assets as It
Addresses Potential Financial and Legal Challenges

Friday September 14, 3:21 pm ET

Reorganization ensures business as usual and that assets remain for
continued support of customers and channel partners

LINDON, Utah, Sept. 14 /PRNewswire-FirstCall/ -- The SCO Group, Inc. ("SCO") (Nasdaq: SCOX - News), a leading provider of UNIX® software technology and mobile services, today announced that it filed a voluntary petition for reorganization under Chapter 11 of the United States Bankruptcy Code. SCO's subsidiary, SCO Operations, Inc., has also filed a petition for reorganization. The Board of Directors of The SCO Group have unanimously determined that Chapter 11 reorganization is in the best long-term interest of SCO and its subsidiaries, as well as its customers, shareholders, and employees.

The SCO Group intends to maintain all normal business operations throughout the bankruptcy proceedings. Subject to court approval, SCO and its subsidiaries will use the cash flow from their consolidated operations to meet their capital needs during the reorganization process.

"We want to assure our customers and partners that they can continue to rely on SCO products, support and services for their business critical operations," said Darl McBride, President and CEO, The SCO Group. "Chapter 11 reorganization provides the Company with an opportunity to protect its assets during this time while focusing on building our future plans."

The SCO Group has filed a series of first day motions in the Bankruptcy Court to ensure that it will not have any interruption in maintaining and honoring all of its commitments to its customers. The motions also address SCO's continued ability to pay its vendors, the retention of various professional advisors, and other matters.

About SCO

The SCO Group (Nasdaq: SCOX - News) is a leading provider of UNIX software technology and mobile services. SCO offers UnixWare for enterprise applications and SCO OpenServer for small to medium businesses. SCO's highly innovative and reliable solutions help customers grow their businesses everyday, especially into the emerging mobile market. SCO owns the core UNIX operating system, originally developed by AT&T/Bell Labs and is the exclusive licensor to UNIX-based system software providers. The Me Inc., product line focuses on creating mobile platforms, services and solutions for businesses and enhances the productivity of mobile workers.

Headquartered in Lindon, Utah, SCO has a worldwide network of thousands of resellers and developers. SCO Global Services provides reliable localized support and services to partners and customers. For more information on SCO products and services, visit http://www.sco.com.

SCO and the associated logos are trademarks or registered trademarks of The SCO Group, Inc. in the U.S. and other countries.

Forward Looking Statements

The statements contained in this press release regarding (i) filing for protection under Chapter 11 and our reorganization efforts under Chapter 11 bankruptcy protection, and (ii) other statements that are not historical facts are forward-looking statements and are made under the safe harbor provisions of the Private Securities Litigation Reform Act of 1995. These statements are based on management's current expectations and are subject to risks and uncertainties. We wish to advise readers that a number of important factors could cause actual results to differ materially from historical results or those anticipated in such forward-looking statements. These factors include, but are not limited to the outcomes and developments in our Chapter 11 case, court rulings in the bankruptcy proceedings, the impact of the bankruptcy proceedings on our other pending litigation, our cash balances and available cash, continued competitive pressure on the Company's operating system products, which could impact the Company's results of operations, adverse developments in and increased or unforeseen legal costs related to the Company's litigation, the inability to devote sufficient resources to the development and marketing of the Company's products, including the Me Inc. mobile services and development platform, and the possibility that customers and companies with whom the Company has formed channel partnerships will decide to terminate or reduce their relationships with the company. These and other factors that could cause actual results to differ materially from those anticipated are discussed in more detail in the Company's periodic and current filings with the Securities and Exchange Commission, including the Company's Form 10-K for the fiscal year ended October 31, 2006 and Form 10-Q for the fiscal quarters ended January 31, 2007 and April 30, 2007, and future filings with the SEC. These forward-looking statements speak only as of the date on which such statements are made, and the Company undertakes no obligation to update such statements to reflect events or circumstances arising after such date.

Source: The SCO Group, Inc.


  


SCO Files For Chapter 11 Bankruptcy - Updated 4Xs | 738 comments | Create New Account
Comments belong to whoever posts them. Please notify us of inappropriate comments.
How sad:-)
Authored by: Anonymous on Friday, September 14 2007 @ 03:33 PM EDT
Sad for the poor folk who used to make a decennt living from a reasonable outfit
until the gamblers jumped in anyway.

[ Reply to This | # ]

SCO Files For Chapter 11 Bankruptcy
Authored by: Anonymous on Friday, September 14 2007 @ 03:33 PM EDT
Bet they will try to stall the trial. Try to come up with a "reasonable
number" to force Novell to except. This may not work and next step will
be liquidation.

[ Reply to This | # ]

you guys are quick =) [n/t]
Authored by: sumzero on Friday, September 14 2007 @ 03:33 PM EDT
this text is not here.

sum.zero

---
48. The best book on programming for the layman is "alice in wonderland"; but
that's because it's the best book on anything for the layman.

alan j perlis

[ Reply to This | # ]

Bench trial ramifications?
Authored by: Anonymous on Friday, September 14 2007 @ 03:34 PM EDT
What does this mean for the upcoming trial on Monday?

As I understand it, this causes an immediate halt to these proceedings, is this
true?

How is this handled, I am very interested in how these things are handled by the
court system.

[ Reply to This | # ]

SCO Files For Chapter 11 Bankruptcy
Authored by: zenofjazz on Friday, September 14 2007 @ 03:35 PM EDT
Party Party Party.. where are those dancing shoes... schedule the man to build
the dance floor on their grave!

---
http://www.AllThatsEvil.net/

[ Reply to This | # ]

and I'll bet the stock price goes up
Authored by: Anonymous on Friday, September 14 2007 @ 03:35 PM EDT
how does scox manage to get an increase in their stock price every time there's
bad news? seems like someone's doing something illegal

[ Reply to This | # ]

SCO Files For Chapter 11 Bankruptcy
Authored by: Anonymous on Friday, September 14 2007 @ 03:36 PM EDT
I guess Novell, IBM et al are now "unsecured creditors"?!?!

[ Reply to This | # ]

SCO Files For Chapter 11 Bankruptcy
Authored by: interele on Friday, September 14 2007 @ 03:36 PM EDT
Can someone explain to a Brit what this means
Is it a fiddle to get out of paying Novell
or to get out of going to court next week ?

Does it mean that they are so sure that they will loose in court that they are
technically bankrupt

ta

mal

[ Reply to This | # ]

Corrections Here
Authored by: red floyd on Friday, September 14 2007 @ 03:37 PM EDT
With the correction in the title,

Since everyone else was too busy celebrating :)

---
I am not merely a "consumer" or a "taxpayer". I am a *CITIZEN* of the United
States of America.

[ Reply to This | # ]

SCOG never gives up department
Authored by: DebianUser on Friday, September 14 2007 @ 03:38 PM EDT
From the announcement of bankruptcy:

"SCO owns the core UNIX operating system."

[ Reply to This | # ]

Off Topic
Authored by: feldegast on Friday, September 14 2007 @ 03:38 PM EDT
Please make links clickable.

---
IANAL
My posts are ©2004-2007 and released under the Creative Commons License
Attribution-Noncommercial 2.0
P.J. has permission for commercial use.

[ Reply to This | # ]

SEC?
Authored by: red floyd on Friday, September 14 2007 @ 03:40 PM EDT
Will a Chapter 11 BK draw the attention of the SEC?


---
I am not merely a "consumer" or a "taxpayer". I am a *CITIZEN* of the United
States of America.

[ Reply to This | # ]

SCO Files For Trial Stay???
Authored by: Anonymous on Friday, September 14 2007 @ 03:41 PM EDT

I think we can expect SCOG to file with the court a motion to stay the trial till the whole bankruptcy issue is dealt with.

At least, based on my IANAL opinion and past SCOG behavior.

RAS

[ Reply to This | # ]

It's a Conspiracy I Tell You!
Authored by: Tim Ransom on Friday, September 14 2007 @ 03:43 PM EDT
Is there *anywhere* that the tentacles of the Free Software Journalism Club
don't reach?!!!

---
Thanks again,

[ Reply to This | # ]

Cayman Islands ?
Authored by: Latesigner on Friday, September 14 2007 @ 03:43 PM EDT
It was only a matter of time till this happened but SCO's "books"
should make interesting reading.

---
The only way to have an "ownership" society is to make slaves of the rest of us.

[ Reply to This | # ]

SCO Files For Chapter 11 Bankruptcy
Authored by: rickdallas on Friday, September 14 2007 @ 03:44 PM EDT
I have a number of questions, all of which may be completely off-base. For the
bankruptcy filing, doesn't SCOG have to file a list of assets and liabilities?
If they don't list their liability to Novell in the filings, would a
post-bankruptcy judgment in favor of Novell take precedence over pre-filing
liabilities? Can the filings be additional last-minute evidence in the trial?
Will the trial be postponed?

Just initial wonderings.

[ Reply to This | # ]

Now is the time to look for HIDDEN Sco ASSETS.
Authored by: Anonymous on Friday, September 14 2007 @ 03:44 PM EDT
If you find a hidden asset of SCO's (or their fearless , witless leader ) dont
keep it a secret.
Post it!

[ Reply to This | # ]

SCO Files For Chapter 11 Bankruptcy
Authored by: dlharper on Friday, September 14 2007 @ 03:46 PM EDT
Ok, so what if they aren't really BK yet? It strikes me that they still have
money, up until the Judge rules otherwise. Without that, wouldn't they still
have like 10 million or something hanging around?

[ Reply to This | # ]

So monday?
Authored by: Anonymous on Friday, September 14 2007 @ 03:46 PM EDT
Do the Novell lawyers show up with an application for a constructive trust,
while SCO's lawyers show up with a motion to stay the trial.

I would bet Kimball goes with Novell on this one. Novell can just bring up all
of SCO's arguments from back in the winter and check them off.

[ Reply to This | # ]

SCO Files For Chapter 11 Bankruptcy
Authored by: Nick_UK on Friday, September 14 2007 @ 03:48 PM EDT
I personally would have called this last chapter 'The End', but I guess law and
writing fairy stories are slightly different - or ARE they?

Nick ;-)

[ Reply to This | # ]

How disappointing!
Authored by: Anonymous on Friday, September 14 2007 @ 03:53 PM EDT
So SCO goes out not with a bang, but with a whimper.

I fear this means nothing ever gets settled. In addition pending court cases get
postponed, probably never to be renewed. And then there is a long drawn-out
fight to determine the bankruptcy trustee. What a come down.
IANAL.

[ Reply to This | # ]

What's with SCOX?
Authored by: Jude on Friday, September 14 2007 @ 03:54 PM EDT
The last trade looks like it happened several hours ago. Does trading
automatically get halted when the company files for bankruptcy?

[ Reply to This | # ]

SCO Files For Chapter 11 Bankruptcy
Authored by: Anonymous on Friday, September 14 2007 @ 03:56 PM EDT
Did anyone notice the sharp (by percentages) decline in SCOX stock this morning,
before the announcement was made?

Looks a little unusual to me, given the pattern of the last several days...

[ Reply to This | # ]

SCO Files For Chapter 11 Bankruptcy
Authored by: Anonymous on Friday, September 14 2007 @ 03:56 PM EDT
Wow. Never saw this coming. :-)

Seriously, I have a friend of mine who specializes in turning around bankrupt
companies. I'm sure that there is nothing about this case he hasn't seen
before, including the visibility. I remember one story about a regional
pharmacy chain where the flamboyant CEO spent all kind of company money
doing things you'd rather not want printed in the Wall Stree Journal. By the
time my friend's firm got involved, all the top level execs had either left or
were in prison. Often in these cases temporary management are the execs of
the bankruptcy firm hired to handle the company's situation. All major
decisions will be handled by a judge, right down to who gets paid. The
reasonable stable companies will live to see another day. I doubt SCO will be
one of them. Despite the Chap 11 filing, I see liquidation in their future.

[ Reply to This | # ]

Utah Bankruptcy Court
Authored by: Anonymous on Friday, September 14 2007 @ 03:56 PM EDT
http://www.utb.uscourts.gov/recentFiling.htm

[ Reply to This | # ]

Interesting tidbits from the Bankruptcy Page
Authored by: spambait42c on Friday, September 14 2007 @ 04:01 PM EDT

The page that PJ links to includes the following:

Moreover, the U.S. trustee is required to move for appointment of a trustee if there are reasonable grounds to believe that any of the parties in control of the debtor "participated in actual fraud, dishonesty or criminal conduct in the management of the debtor or the debtor's financial reporting." 11 U.S.C. § 1104(e)

Any predictions on how long it will take for Novell to make this claim, once they have standing?

[ Reply to This | # ]

Hiding any Real Assets
Authored by: Anonymous on Friday, September 14 2007 @ 04:05 PM EDT


My guess is that SCO is going to try and be bankrupt and pay its current
creditors (law firm & allies) to try to avoid Novell. Whatever they can hide
in the hands of allies they will do rather than let Novell have it.

If they get their way they will emerge from Chap 11 with balanced books and no
IP or other semi valuable. Good things will be sold to cover their selected
debts.

Novell gets to sue the remaining shell.


My understanding is that that there was a considerable shell game with DRDos,
(Previously Novell Dos) that the Canopy group was involved with. The parent
company has done it before and they seem unlikely to leave anything of value in
SCO before they face the Novell bill.

[ Reply to This | # ]

Bankruptcy
Authored by: wholeflaffer on Friday, September 14 2007 @ 04:05 PM EDT
Bankruptcy is the ultimate result of failed management.

Any company decisionmaking up until the time of bankruptcy is in the hands of
the owners' management...after bankruptcy (under Chapter 7 or Chapter 11), the
previous managers may still be permitted to "man the helm" for some
period of time. However, until the company exits bankruptcy, either through
liquidation or reorganization, the management privilege is wrested from the
hands of the owners and the power to make decisions (as in the Captaincy of a
ship) is given to the courts (usually via a trustee).

So goes the theory, anyway. As usual, I look forward to sitting back and
discovering how this plays out in the "real world" of the American
legal system.

[ Reply to This | # ]

SCO Files For Chapter 11 Bankruptcy
Authored by: Anonymous on Friday, September 14 2007 @ 04:08 PM EDT
" said Darl McBride, President and CEO, The SCO Group. "Chapter 11
reorganization provides the Company with an opportunity to protect its assets
during this time while focusing on building our future plans." "

Meaning: "We got nothing, except our tickets out of here."

[ Reply to This | # ]

  • Wrong - Authored by: Anonymous on Friday, September 14 2007 @ 05:26 PM EDT
    • Ya .... - Authored by: Anonymous on Friday, September 14 2007 @ 08:06 PM EDT
Are they granted bankruptcy automatically by just filing for it?
Authored by: ilde on Friday, September 14 2007 @ 04:09 PM EDT
Or do they have to comply with some other requisites?

[ Reply to This | # ]

THERE IS A GOD
Authored by: WarpKat on Friday, September 14 2007 @ 04:13 PM EDT
And he/she/it is GREAT!

I honestly don't feel sorry for the people still working at SCO. They made a
conscious decision to remain there under the circumstances that everyone else
knew was bogus.

Even I said they were going to die a slow death and here's effect of the stab in
the face they got during court.

[ Reply to This | # ]

Fiduciary duty, conversion, and bankruptcy?
Authored by: Anonymous on Friday, September 14 2007 @ 04:16 PM EDT
Can someone explain the implications of bankruptcy in this case? If the
conversion is proved - that SCO kept money rightfully belonging to Novell -
shouldn't Novell get status as other than a regular creditor? Novell certainly
didn't extend credit - they were robbed.

This sounds almost like someone robbed a bank, spent lavishly with the proceeds,
and then tries to hide behind bankruptcy to avoid returning the money.

thanks,
Mike

[ Reply to This | # ]

On The Future SVRX Royalties?
Authored by: sk43 on Friday, September 14 2007 @ 04:17 PM EDT
David Bradford and Tor Braham's strategy to protect Novell
is about to be put to the test. We will now have the
opportunity to see which, if either, of

"Buyer only has legal title and not an equitable interest in
such royalties within the meaning of Section 541(d) of the
Bankruptcy Code."

or

"Schedule 1.1(b) Excluded Assets ... V. Intellectual Property ... A. All
copyrights"

is able to protect Novell's stream of future SVRX royalties.

[ Reply to This | # ]

  • Also noted... - Authored by: Wardo on Friday, September 14 2007 @ 05:31 PM EDT
    • Also noted... - Authored by: Anonymous on Friday, September 14 2007 @ 07:58 PM EDT
Can't do both
Authored by: webster on Friday, September 14 2007 @ 04:19 PM EDT
...
....This is an attempt to get away from Kimball. You can't have two judges
deciding on the apportioning of what's left.

The fact that SCO had a fiduciary duty is a factor.

Novell should consider moving the Bankruptcy case back to Kimball. The
Bankruptcy court would be happy to oblige and assist in whatever way it can.

There may be some simultaneous action soon.

---
webster


© 2007 Monopoly Corporation. ALL rights reserved. Yours included.

[ Reply to This | # ]

Can SCO file for bankruptcy, break all contracts, then sell every thing to Microsoft
Authored by: Anonymous on Friday, September 14 2007 @ 04:24 PM EDT
HUH?

[ Reply to This | # ]

What a wonderful business model
Authored by: Anonymous on Friday, September 14 2007 @ 04:25 PM EDT
Sue people (including your customers), Pump and dump, and when you start to
loose the lawsuits you've initiated ... file for Chapter 11

This is obviously an prime example for text books on sharp business practices. I
bet several other companies would love to emulate this.

Lets hope that there is some recourse under law for Novell and IBM to get
recourse for SCO's antics, however now knowing what Chapter 11 etc entail when
someone is loosing a lawsuit they initiated it's hard to comment.

Mind you I think everyone expected SCO to pull this one if they started loosing

[ Reply to This | # ]

Huh? SCOX _owes_ M$ Over $125,000
Authored by: Anonymous on Friday, September 14 2007 @ 04:32 PM EDT
In SCO's bankruptch filing listing the 20 largest unsecured claims, it shows
Microsoft Licensing, Inc, as a creditor owed $125,575.00. (And another $50K
owed to Sun...)

Wazzup with that?

Interestingly, Novell is NOT listed as a creditor.

More interestingly, Darl signed the statement, "under penalty of
perjury".

[ Reply to This | # ]

Investor Lawsuits?
Authored by: UglyGreenTroll on Friday, September 14 2007 @ 04:34 PM EDT
In America, being the litigious place that it is, it's common for investors to
sue management when things go pear shaped. SCO also has a history of being
rather loose with their public announcements, making them vulnerable to such
things.

Question: Is there a chance of an investor lawsuit? Is it even worthwhile for
investors to do so (that is, is there enough money to get at)?

[ Reply to This | # ]

Is this a Red Dress Triggering Event?
Authored by: Anonymous on Friday, September 14 2007 @ 04:35 PM EDT
PJ - Please tell me you got the Red Dress out of the closet today!

Beautiful night for celebrating - being Friday and all.

Or, are you going to be keeping us updated tonight?

Do have some fun, won't you?

Cheers.

[ Reply to This | # ]

Get ready...
Authored by: inode_buddha on Friday, September 14 2007 @ 04:36 PM EDT
Get ready for the slashdotting of a lifetime... it should be an interesting
weekend.

---
-inode_buddha
Copyright info in bio

"When we speak of free software,
we are referring to freedom, not price"
-- Richard M. Stallman

[ Reply to This | # ]

SCO Files For Chapter 11 Bankruptcy
Authored by: Anonymous on Friday, September 14 2007 @ 04:37 PM EDT
Scenario:
State Court- MOTION TO STAY
Fed Court - ORDER STAYING
Fed.Court - APPT. TRUSTEE
Fed.Court - MOTION TO CONSOLIDATE
Fed.Court - Chapter 13
State or Fed. Court - Criminal Charges Filed

[ Reply to This | # ]

SCO goes Chapter 11, when is Chapter 7?
Authored by: Anonymous on Friday, September 14 2007 @ 04:39 PM EDT
Last few steps. They've filed for Chapter 11 (reorganization). How long will
it be until they give up and file for Chapter 7 (disolvement)?

[ Reply to This | # ]

For the lawyers (and possibly accountants)
Authored by: Anonymous on Friday, September 14 2007 @ 04:44 PM EDT
Am I right in thinking that Novell wouldn't be a normal creditor in this
situation?

Normally a company's creditors are those who have provided services/goods and
have not been paid or have lent money and not been repaid.

Therefore the money that was to be paid to the creditors (and which it no longer
has enough of) was the bankrupt company's originally.

However here it appears that the money SCO collected from the agreements never
belonged to them in the first place - at all times it was the property of
Novell. SCO were merely acting as collection agents.

Therefore, if they are found guilty of conversion ("converting" it to
their own use), the civil equivalent of what in criminal law would be theft, it
would seem unlikely that bankruptcy protection would help them.

Am I somewhere in the ballpark here?

[ Reply to This | # ]

SCO Files For Chapter 11 Bankruptcy
Authored by: Anonymous on Friday, September 14 2007 @ 04:44 PM EDT
Look for a filing from Novell to that bankruptcy court yet today (before
5:00pm). I have a feeling that they've had that filing waiting.

[ Reply to This | # ]

Looks like SCO actually turned into a Caldera !
Authored by: Anonymous on Friday, September 14 2007 @ 04:45 PM EDT
What is a "Caldera": Caldera

Sant a Cruz Operation -> Caldera -> SCO Group -> Caldera (again!)

Only the most unskilled management team could have done this.

[ Reply to This | # ]

Biggest creditors related to legal expenses.
Authored by: rfrazier on Friday, September 14 2007 @ 04:46 PM EDT
AMICI, LLC $500,650.73

BOIES, SCHILLER & FLEXNER, LLP $287,256.39

Of course, this is a drop in the bucket compared to what they've already got.
(At least for Boies, et al. AMICI is a legal services company, I think.)

Best wishes,
Bob


[ Reply to This | # ]

Scoundrels, bankruptcy
Authored by: cmc on Friday, September 14 2007 @ 04:51 PM EDT
While I see no "light at the end of the tunnel" for SCO, there are
some companies that come out of Chapter 11 perfectly fine. One glaring example
is MCI WorldCom. They pulled off one of the biggest financial scams ever, got
caught, filed for Chapter 11, and came out of it with no battle scars. If I
remember correctly, the U.S. government even gave them contracts while they were
under bankruptcy protection.

[ Reply to This | # ]

Stock worth zero?
Authored by: snakebitehurts on Friday, September 14 2007 @ 04:53 PM EDT
In my past I have owned stock in several companies that went into chapter 11
bankruptcy. One of the first things that happened was the stock was declared
worthless. Investors lost it all. Stockholders are unsecured creditors and go
to the very bottom of the list. Seeing the 43% drop in their stock today, it
looks like others have figured it out. Suspect it will be zero shortly.
Remaining investors should get out quick.

[ Reply to This | # ]

20 top debts totall $1.44M
Authored by: John Hasler on Friday, September 14 2007 @ 04:57 PM EDT
I thought they had around $10M left? Did the get rid of most of it, or do they
have thousands of creditors each owned less than $5450? Seems unlikely: they
aren't an airline.

---
IOANAL. Licensed under the GNU General Public License

[ Reply to This | # ]

Novell not listed on the filing
Authored by: rsi on Friday, September 14 2007 @ 04:59 PM EDT
I have to wonder if this might come back to bite them as the Court has already
declared SCO owes money to Novell.

The next few weeks will be interesting!

[ Reply to This | # ]

Apparently they weren't listening
Authored by: chad on Friday, September 14 2007 @ 04:59 PM EDT
SCO owns the core UNIX operating system, originally developed by AT&T/Bell Labs...

No, they don't. They own a license to use the core[yada, yada...]

Perhaps the judge should have spoken slower.

[ Reply to This | # ]

Nasty Situation
Authored by: webster on Friday, September 14 2007 @ 05:05 PM EDT
..
1. BK is not a bowl of cherries. The Fiduciary angle calls for more vigilance
than usual. With no significant profits from operations, an undetermined
adverse judgment a week away, and no ships coming in, the BK Court ought to shut
them down and conserve ASAP, in this uninformed opinion.

2. A nasty search for assets and discovery of all SCOnkers could begin now if
anyone thought there were a stray million or so out there. The Bankruptcy
Trustee needs a fee too.

3. The case was never trial worthy. The documents and witnesses were
hopelessly compromised. SCO employees have had years to prepare for this. They
should be ready. Grinding legal work on the battle issues can easily come to
this - a totally alien source of resolution although realistically anticipated.


4. Shallow pockets made for a worthy Plaintiff who did not have something to
lose. The PIPE Fairy has deep pockets somewhere.

5. SCO waited too long to do this. There is already a Judgment with a
fill-in-the-blanks dollar sign. [$ ??,000,000.00]. They thought Kimball would
leave them something for the jury. They gambled and lost. Since they are doing
this now, the speculation and regret is that they should have done this before
the summary judgments.

6. So are the Defendants all around going to strike back? Will they go after
the SCOnkers as individuals? Fiduciary duties make it easier. It is getting
very nasty and personal, if so. Will the Nazgul pursue the PIPE Fairy, the real
perpetrators? SCO did their job. It just didn't work out they way they
planned. So what is left of the FUD campaign?

---
webster


© 2007 Monopoly Corporation. ALL rights reserved. Yours included.

[ Reply to This | # ]

Bankruptcy might not work.
Authored by: Anonymous on Friday, September 14 2007 @ 05:06 PM EDT
I just did a quick "Google" on fudiciary duty and bankruptcy and found this web site describing a contractor that did not pass through a payment. http://www.constructionweblinks.com/Resources/Industry_Reports__Newsletters/Sept _23_2002/arkansas_contractor.htm (I tried to make it clicky.) It seems that there are conditions where a debt owed under a fudiciary duty may not be discharged in bankruptcy. PJ, Could you or some one else with a better legal brain offer commentary if this is a simular situation as SCO since Judge Kimball ruled a fudiciary duty exists.

[ Reply to This | # ]

SCO Files For Chapter 11 Bankruptcy
Authored by: IMANAL on Friday, September 14 2007 @ 05:07 PM EDT
This risk was recognized early on by belboz here at Groklaw.


Authored by: belboz on Thursday, August 26 2004 @ 07:48 AM EDT

I have a question for you US legal experts.

What happens to the case(s), if the SCOG cash is spent, and the file for bankrupcy?

- Will the case(s) be cancelled, since one of the parties no longer exist as a legal entity (and can't afford lawyer fees)?

- If so, does that save people involved from following suits (purgery, Lanham act, slander, ...), since, as the case is left unfinished, any wrongdoing has not been judged/proved?

There will probably be an investor suit, but that is besides the issue.

Or will free counsil be provided to complete the legal process?





The link contains many answers and discussions of various outcomes, and many more can be found in the Groklaw archives under "Search".



---
--------------------------
IM Absolutely Not A Lawyer

[ Reply to This | # ]

Interesting comment on /.
Authored by: Anonymous on Friday, September 14 2007 @ 05:11 PM EDT
"SCO is doing this to make Novell into a creditor with respect to the money
SCO owes to Novell."

Won't work. Novell's claim isn't as a creditor. Their claim is
"equitable", meaning that SCO is holding theor property ($$$), not
that SCO owes them money. When you go bankrupt, anyone who can show that they
own property you're holding on to can claim it from the trustee.

This happens a lot with vending machines, for example, when a plant goes bust.
The owner proves that the machine is theirs (not leased or anything - it really
is theirs), and they then get to pick it up.

Since Novell already has a judgment saying that SCO is guilty of conversion, and
the question is "how much", they have a prior claim to the property
(money) in question. SCO is dead.
--
Is this so, that this is equitable?

[ Reply to This | # ]

Stay on payments or procedings
Authored by: Wardo on Friday, September 14 2007 @ 05:14 PM EDT
Does the BK filing stop the trial(s), or just the payments that may have to be
made as a result of judgements?

Wardo

---
caveat lector...
Wardo = new user(lawyer = FALSE,badTypist = TRUE,badSpeller = TRUE);

[ Reply to This | # ]

Schroedinger's Royalties
Authored by: overshoot on Friday, September 14 2007 @ 05:15 PM EDT
So, since SCOX has already been found liable for conversion but has (probably forever) stayed the determination of how much Novell has coming to them, the question before the bankruptcy court is:

Where does Novell stand in the line of creditors?

It looks like the wunderkinder at SCOX have lined up a softball list of creditors who are collectively owed less than cash on hand -- if you don't count IBM and Novell. However, that finding of conversion is the elephant in the room.

So -- is the presumption in Bankruptcy Court:

  • Worst case: Novell has about $30 million coming until proven otherwise?
  • Best case: Novell gets bupkis because Judge Kimball is out of the loop?
  • The trustee has the Novell trial run in the interests of judicial economy, since someone has to figure out what's left (if any) for the other creditors.
Now, all of that presupposes that this makes the (rapid) conversion to Chapter Seven. Obviously, the execs at SCOX would prefer to spend a few years in Chapter 11 drawing pay until the cash is all gone; I want to know if their not listing Novell as a creditor was a mistake.

Since there's already a finding of conversion against them, are they doing a no-no on the Bankruptcy Court? Are they leaving an opening for Novell to have the BK Court flip them right back to Judge Kimball's tender mercies?

[ Reply to This | # ]

This is only good news if it doesn't stop *both* trials
Authored by: Anonymous on Friday, September 14 2007 @ 05:15 PM EDT
I really want to see Judge Kimball deliver his final rulings in this case.

But that's nothing to how much I really, really, really want to see the Nazgul
finally go in for the kill in the IBM case.

On the other hand, if the company itself disappears and can no longer be
counter-sued then we can only hope that they'll regroup and concentrate on
"piercing the corporate veil" - so they can go after Darl & Co as
individuals.

The evidence put forward that the individuals in question went ahead with their
copyright threats to corporations and the case against IBM - when they knew they
didn't have the copyrights (having asked Novell for them and been rebuffed) -
should help that I'd think?

[ Reply to This | # ]

SCO still gaming the system
Authored by: Anonymous on Friday, September 14 2007 @ 05:16 PM EDT
Don't go shopping for crimson lingerie just yet. SCO has just dodged a bullet -
they know what would happen in court, same as we do - and is back on the bus to
Delaysville. I've no doubt this was Plan B all along, and as the judge tipped
his hand over the last flurry of filings, it's been quietly promoted all the way
to A.

What happens next? I wish I understood the US justice and financial systems
better. But these are civil cases; they can be stopped by mutual agreement at
any time, and somebody else (as I understand it) is going to be in ultimate
charge at SCO.

The outcome may not be as bloody as some may have wished. But open source won
this one a long time ago, and that's what matters...

[ Reply to This | # ]

I Don't Know Whether to Laugh or Cry
Authored by: DaveJakeman on Friday, September 14 2007 @ 05:16 PM EDT

At any other time than this, I'd have been happy with SCO going Chapter 11.

With the trial due on Monday, they stuff their pension away on Thursday and file Chapter 11 on Friday. The dirty, rotten SCOundrels!!!

This is what you might expect from bully types: all bluff and bluster, but when faced with the prospect of a real fight, they're nowhere to be seen.

This was so obviously timed.

No, I'm definitely not wearing my Red Dress tonight.

:(

---
Monopolistic Ignominious Corporation Requiring Office $tandard Only For Themselves

[ Reply to This | # ]

Whatsoever a man soweth, that shall he also reap.
Authored by: SilverWave on Friday, September 14 2007 @ 05:27 PM EDT
Breaking out the bubbly :)


Darl you were BAD for the company and you are a disgrace.

Bad Darl!

No Cookie!

---
"intellectual property" - a propaganda term designed to confuse patent law with
copyright and other unrelated laws and to muddy the different issues they raise.

[ Reply to This | # ]

  • No Cookie? - Authored by: Ed L. on Friday, September 14 2007 @ 07:15 PM EDT
SCO Files For Chapter 11 Bankruptcy
Authored by: Anonymous on Friday, September 14 2007 @ 05:28 PM EDT
Would SCO try something like this in their Chapter 11 move?
1. Ask Judge Kimball to place all cases on hold pending resolution of the
bankruptcy.
2. Ask the bankruptcy trustee (referee, case manager?) to declare Unix the
property of SCO. (After all, it’s part of the bankruptcy process to look for
additional corporate assets.)
3. Tell Judge Kimball the issue of ownership has already been decided by another
judge.

[ Reply to This | # ]

SCO Files For Chapter 11 Bankruptcy
Authored by: Alan(UK) on Friday, September 14 2007 @ 05:28 PM EDT
SCO, owners of the UNIX and LINUX operating systems and on the verge of winning
a multi-billion lawsuit against IBM, have been forced into Chapter 11 bankruptcy
by IBM lawyers working through the pseudononymous 'Pamela Jones' of Groklaw.

Darl McBride, speaking from a secret location in South America, stated that he
expects a quick reversal of the company's fortunes as soon as revenue starts to
flow from SCOsource Linux Licences.

[Someone will be saying this, so I may as well get in first.]

---
Microsoft is nailing up its own coffin from the inside.

[ Reply to This | # ]

This is financial, right?
Authored by: cjk fossman on Friday, September 14 2007 @ 05:28 PM EDT
We've known they were morally bankrupt for a long time!

[ Reply to This | # ]

I think you're all missing something
Authored by: pantologist on Friday, September 14 2007 @ 05:34 PM EDT
SCOX's market cap is roughly $8million today. They've got about $13mil in cash
on hand and all those debts. Companies like this typically go for between 2X
and 3X revenues, so that puts in the realm of $50 give or take. Minus cash,
they're a friggin' steal.

IBM or Sun will snatch them up as soon as the bankruptcy paperwork is signed.
Either one of those guys would immediately open source all of UNIX and put a
bullet into the whole Unix vs Linux issue. Or, Oracle might buy them just to be
pricks since they seem to enjoy killing companies.

Be on the lookout for a bidding war for these guys in the next few weeks.
They're on the chopping block now.

[ Reply to This | # ]

This is good news
Authored by: Anonymous on Friday, September 14 2007 @ 05:34 PM EDT

While it may delay payment from SCO-the-company to its creditors (Novell first,
plus other creditors--IBM may well have a claim for damages), one thing to
understand about Chapter 11:

* It tries to keep the *company* around as a thriving entity, in the hopes that
creditors will be better satisfied than if the company were simply liquidated.

* Chapter 11 bankruptcy can have two causes:
** Balance sheet problems--liabilities exceed assets, and the company has
negative equity. Often times when this occurs and a company goes into chapter
11, the prior shareholders stake becomes worthless, and the creditors end up
owning the newly reorganized company. Often times, the management that caused
the bankruptcy (that would be you, Darl) is ultimately fired--though usually not
until the conclusion of the bankruptcy.
** Cash flow problems. Assets exceed liabilities, but short-term liabilities
exceed cash on hand. Kind of like having positive equity on your house, but not
having a job and being unable to make the mortgage payment. The result of this
is often a restructuring of debt--creditors will agree to a partial payment or a
longer schedule, or will accept a stake in the company in lieu of payment.
Management generally survives in this case, and ownership doesn't change hands.

Not sure which type this is...

[ Reply to This | # ]

Filings DONOT include SCO GROUP
Authored by: Anonymous on Friday, September 14 2007 @ 05:36 PM EDT
The above bankruptcy filings are for SCO Operations NOT SCO Group. The SCO
Group filings would make a whole lot more interesting reading. I wonder where
they are and if they were ever filed.

[ Reply to This | # ]

What a coincidence
Authored by: rsmith on Friday, September 14 2007 @ 05:36 PM EDT
They file for chapter 11 protection the day before the trial begins, after
repeatedly assuring the court that they wouldn't go under. It seems like a
pre-planned move to me, trying to get another delay. You've got to hand it to
SCOG; they really know how to game the system. It's sickening.

It'll be a real perversion of justice if they get away with this.


---
Intellectual Property is an oxymoron.

[ Reply to This | # ]

  • What a coincidence - Authored by: Anonymous on Friday, September 14 2007 @ 08:58 PM EDT
  • What a coincidence - Authored by: Anonymous on Friday, September 14 2007 @ 09:22 PM EDT
    • What a coincidence - Authored by: Anonymous on Friday, September 14 2007 @ 10:13 PM EDT
    • Felonies - Authored by: maz2331 on Saturday, September 15 2007 @ 02:15 AM EDT
  • Pre-planned - Authored by: Anonymous on Saturday, September 15 2007 @ 09:09 AM EDT
I notice that they owe a High School!!!
Authored by: rsi on Friday, September 14 2007 @ 05:39 PM EDT
TIMPANOGOS HIGH SCHOOL
1450 N 200 E
OREM, UT 84057

WHY would they owe a High School, unless they are send Darl back to school,
since he obviously didn't get an education the first time around! ;^)

I wonder how much and for what? If not much, maybe we should pay this one off.
High School students should not be punished for Darl's incompetence!

[ Reply to This | # ]

Utterly predictable
Authored by: Anonymous on Friday, September 14 2007 @ 05:45 PM EDT
Actually, I predicted shortly after the trial dates were announced and everyone
was debating how long the money would last, that SCO would file the week before
trial.

SCO's claims are shot. All that's left are the counterclaims. Despite all the
fancy titles to all the motions, the counterclaims collectively spell F-R-A-U-D.
And as an attorney once laid it out for me, fraud is harder to prove in a
bankruptcy court.

Bankruptcy court has its own rules, which are geared less toward fact finding
and fault, and more toward streamlining the disbursement of remaining assets.
SCO is simply trying to do an end-around past Kimball's inevitable evisceration.
They will attempt to streamline all the cash to partners and friends while
cutting Novell and IBM out of the loop. All while piously deflecting the blame
for the obvious lies and extortion by saying "No more, sorry, we're done.
Its a moot point, go away!"

[ Reply to This | # ]

SCO Files For Chapter 11 Bankruptcy
Authored by: Anonymous on Friday, September 14 2007 @ 05:48 PM EDT
Actually, looking at the long list of creditors, Novell and IBM are on that one,
but with no amount listed. The others on list include several tax collecting
groups (IRS, Utah, VA & GA tax agencies amoung others).

To me it looks like they are playing games, and need to have this dismissed by
the BK judge, or held in abayance until Kimball rules on what is due Novell.

Could this also help unlock Red Hat case?

[ Reply to This | # ]

SCO Files For Chapter 11 Bankruptcy
Authored by: Anonymous on Friday, September 14 2007 @ 05:50 PM EDT
I have only one thing to say.

(Ahem)

HOJOTOHO! HOJOTOHO! HEIAHA! HEIAHA!

(google it if you don't take it ;-)

[ Reply to This | # ]

BK fillings put urgency on case resolution
Authored by: Anonymous on Friday, September 14 2007 @ 05:57 PM EDT
How can SCO expect to file a reasonable reorganization plan without knowing what
amounts if any it owes,
Novell, IBM and RedHat?

Certainly any chapter 11 filing means nothing unless the lawsuits are all
resolved. Especially in Novell's case as the Judge has ruled SCO is holding a
non-zero amount of money due Novell.

No other creditors can be paid until Novell is. Anything else means SCO is using
"converted" money to pay of its debts.

The Novell case now has a clear priority for resolution.

[ Reply to This | # ]

SCO Files For Chapter 11 Bankruptcy
Authored by: Anonymous on Friday, September 14 2007 @ 06:10 PM EDT
Since Novel is not a creditor to SCOX, never been or ever will be, I hope, the
bankruptcy is unlikely to affect them in any way: SCO holds Novel's property, so

to speak, they didn't just "borrow" money from them, they basically
"stole" the
money. I believe that bankruptcy might stop all collection attempts, but if
there's a court ruling - bankruptcy can't protect you from that. Correct me if
I'm
wrong.

Thanks!

[ Reply to This | # ]

How about chapter 7 ???
Authored by: Anonymous on Friday, September 14 2007 @ 06:11 PM EDT
Could Novell or any of the other creditors petition bankruptcy court to move for
a chapter 7 liquidation proceeding? What are the rules for a pubically-traded
company in this instance?

[ Reply to This | # ]

SCO Files For Chapter 11 Bankruptcy
Authored by: Anonymous on Friday, September 14 2007 @ 06:11 PM EDT
This is good for IBM because now the SCO vs. IBM case in in the hands of the
Bankruptcy Trustee. Since it is a bogus case, he should drop it for financial
reasons.

The Novell case should also be the property of the Trustee, what ever asset it
is worth.

SCO would of been wiser by saying nothing, they would still be collecting
illeagal revenue and all would think they owned Unix.

[ Reply to This | # ]

SCOG would KILL for the chance to address a jury
Authored by: Anonymous on Friday, September 14 2007 @ 06:11 PM EDT
Novell has carefully avoided characterizing SCOG's actions as criminal, even
going so far as to drop meritorious claims, in order to keep SCO v. Novell
(counterclaims) in equity court, not law court, thereby avoiding the potential
caprice of a jury.

SCOG desperately needs a jury trial, as their only hope of survival rests on a
fresh naive audience to decieve. SCOG has even gone so far as to object to
Novell dropping certain claims against them, on the grounds that the claims are
a matter of law which would require a jury.

On Monday, Judge Kimball is prepared to decide how much of Novell's money SCOG
is holding, and immediately establish a constructive trust to protect it. The
amount is likely to be more than SCOG has. SCOG faces liquidation.

Now, SCOG forestalls the constructive trust by filing for bankruptcy protection.
SCO v. Novell is adjourned pending SCOG reorganization. Novell may be forced
to line up with other creditors for pennies on the dollar. Naturally, Novell
wants to claim that the withheld revenues are Novell's property that is
wrongfully in SCOG's posession, rather than SCOG's property that is owed to
Novell.

SCOG is going to argue that such a claim is tantamount to charging SCOG with
larceny by conversion. Since this a criminal charge that must be heard in law
court, SCOG is entitled to face a jury.

-Wang-Lo.

[ Reply to This | # ]

I wonder why...
Authored by: Jude on Friday, September 14 2007 @ 06:13 PM EDT
> "We examine a sample of 459 firms filing for Chapter 11
> during the period 1991 to 1998 and find that our sample
> firms experience significant improvements in their operating
> performance during Chapter 11."

Umm, maybe because they ditch the bad management that got them into bankruptcy?

BTW, does anyone know what happens to executive salaries during chapter 11?


[ Reply to This | # ]

  • I wonder why... - Authored by: Anonymous on Friday, September 14 2007 @ 06:45 PM EDT
  • The reason... - Authored by: Anonymous on Saturday, September 15 2007 @ 02:00 AM EDT
Wow! That's one creative way to delay a trial ...
Authored by: Anonymous on Friday, September 14 2007 @ 06:26 PM EDT
Now we can confidently say that Daryl has played every trick in the book to
delay the trial(s).

[ Reply to This | # ]

SCOX - Why did it Trade today ?
Authored by: Anonymous on Friday, September 14 2007 @ 06:28 PM EDT
RESOLUTIONS OF THE BOARD OF DIRECTORS OF SCO OPERATIONS, INC. September 13,2007
[SCO_CH11-1-A.pdf]

The SCO BoD decided on Thursday September 13, 2007 to put the company into Ch.
11, but they let the stock open & trade for a few hours on Friday September
14, 2007 - This is not good.

On a side note - Dang, I wish I was in the room when McBride was signing all
those BK papers! Each copy having the "I declare under penalty of perjury
that the information provided in this petition is true and correct..."

[ Reply to This | # ]

Forward Looking Statements?
Authored by: Anonymous on Friday, September 14 2007 @ 06:31 PM EDT

Har har har! That's the first really good laugh I've had all day.

I expected them to be much shorter, though. The same way that you don't have much time to say anything when you're hurtling down the road at 60 mph and the sign you just passed says "Bridge Out 100 Feet". There just not that much "forward" to look to, is there? :^)

I know it's not (quite) the end of the road for these guys but I'm having a tall one tonight in celebration anyway. It can't be long now.

Once the bankruptcy fiasco is over, I fully expect 'ol Darl to be making some "backward looking statements" on the order of

"I coulda been a contenda... I coulda been somebody."

[ Reply to This | # ]

The 401K payments?
Authored by: Anonymous on Friday, September 14 2007 @ 06:32 PM EDT
was that legal, shovelling a load of money into the pension fund just before
filing for bankruptcy? Surely the creditors can go after it?

[ Reply to This | # ]

So, in typical SCO fashion . . .
Authored by: Anonymous on Friday, September 14 2007 @ 06:38 PM EDT
they wait until the last possible moment on the last possible day and sleeze their way out of having to face the consequences of their own lies in Court. I think I may want to vomit. So what now? Are we ever going to resolve the stink they created? Are we ever going to clear our names? Is Darl and Ralph and the rest of their vile cabal ever going to have to accept any kind of penalty for what they've done?
I mean, so Darl has been pulling down some obscene salary all this time, no doubt, and spewing this libelous garbage about how the Linux community are all a bunch of theves . . . us! I mean, do you know any group of people who value honesty more? Certainly not the Business or Legal community, I should think! Anyway, so Darl's been riding his little sleeze parade for a while now, and it's just going to be "Oops! Sorry guy's, bad break. Protection from creditors, doncha know. Can't touch me now, all law suites are off!"
This wasn't like a company that got out manovered in the marketplace, or lost on gamble on some new technology, or any kind of legetimate business that went under for any of the many reasons that can happen. This was full on attempted extortion, using the expense and hassle of a public lawsuit, no matter how baseless, as a weapon.

[ Reply to This | # ]

Please do not assume there will be no hearing
Authored by: trevmar on Friday, September 14 2007 @ 06:38 PM EDT
PJ, Stephen Shankland's source, in saying that there would be no trial, was SCO
executives. They are hardly reliable.

IMO, IANAL, I would think the decision is still in Novell and the Judge's hands
until it is proven that the defendant has filed for bankruptcy, whereas we have
only seen 'SCO Operations' to this point. I would not put on the red dress until
somebody moves a motion for it to be suspended, with cause duly given. There is
a shell game going on here. I haven't seen the details of the end-game yet. I
suspect the motion to suspend may well be moved verbally on Monday morning, when
everybody gathers, or it may be filed in the normal way, or the hearing may go
on, especially if the shell game has not been executed cleanly.

[ Reply to This | # ]

Attorney General Gonzales is on the list
Authored by: Anonymous on Friday, September 14 2007 @ 06:42 PM EDT
That one is going to leave me scratching my head for a while.

[ Reply to This | # ]

Hay, PJ
Authored by: inode_buddha on Friday, September 14 2007 @ 06:42 PM EDT
If you check google news main page *right now* you'll see all the SCO news
coverage there...

---
-inode_buddha
Copyright info in bio

"When we speak of free software,
we are referring to freedom, not price"
-- Richard M. Stallman

[ Reply to This | # ]

Rejoice? Why can't I?
Authored by: thombone on Friday, September 14 2007 @ 06:48 PM EDT
To me, this seems like an end-run around all of the looming gloom and doom that
SCO has been facing. I see it as a way for Darl and Co. to escape any real
liabilities. I also see it as a way, right on the EVE of the start of the Novell
trial, for SCO to not even list them as a creditor, thus pushing Novell even
further away from the money they are OWED.

Why do I feel sick?

[ Reply to This | # ]

I wonder how many companies have pulled this act before?
Authored by: Anonymous on Friday, September 14 2007 @ 06:49 PM EDT
SCO most likely isn't the first, would be interesting to see other court cases
like this. Or perhaps SCO is the first in history to stay the courts by filing
bankruptcy. SCO is so low. They claim to have money to the end, their
credibility really shines here doesn't it?

[ Reply to This | # ]

More Flawed SCO Group Thinking Perhaps?
Authored by: Anonymous on Friday, September 14 2007 @ 06:49 PM EDT

There is a document on the subject of Chapter 11 bankruptcy here. The section on the automatic stay states:

The automatic stay provides a period of time in which all judgments, collection activities, foreclosures, and repossessions of property are suspended and may not be pursued by the creditors on any debt or claim that arose before the filing of the bankruptcy petition. As with cases under other chapters of the Bankruptcy Code, a stay of creditor actions against the chapter 11 debtor automatically goes into effect when the bankruptcy petition is filed. 11 U.S.C. § 362(a). The filing of a petition, however, does not operate as a stay for certain types of actions listed under 11 U.S.C. § 362(b).

It goes on to suggest that there are circumstances where a secured creditor may ask the court to grant relief from the stay, but does not go into any great detail about what those circumstances may be (it only gives one example). However, what has been pointed out elsewhere is that Novell have not been listed as a creditor, and would therefore follow that they probably would not be allowed to gain such relief.

From the looks of this, I'd say that this is the product of TSG's flawed "we're gonna win this" attitude. I seem to recall a point PJ made, I think it was about the summary judgement filings: IBM and Novell's filings made no assumptions that they would win their other motions and so were argued on their own merit; TSG's motions tended to assume that they would gain positive rulings in their other motions. They have already filed for a final judgement, and they are looking at appealing the judgement that has already been handed down. I suspect that they expect to win on appeal, and are therefore working on the assumption that they already have. So Ch11 stalls the case. Since there is no final ruling and they're going to win the appeal and wind up proving they do not owe Novell any money, Novell cannot be a creditor.

IANAL, but I think that there will be a filing from Novell with respect to the bankruptcy. This would suggest how:

The Bankruptcy Code defines a claim as: (1) a right to payment; (2) or a right to an equitable remedy for a failure of performance if the breach gives rise to a right to payment. 11 U.S.C. § 101(5). Generally, any creditor whose claim is not scheduled (i.e., listed by the debtor on the debtor's schedules) or is scheduled as disputed, contingent, or unliquidated must file a proof of claim (and attach evidence documenting the claim) in order to be treated as a creditor for purposes of voting on the plan and distribution under it. Fed. R. Bankr. P. 3003(c)(2).

Novell has a ruling which says that TSG owes them money, they just do not have a ruling which says how much money TSG owes them (is that a legitimate reason to grant Novell relief from the automatic stay: "We're creditors, we just need the judge to tell us how much we're owed"). So Novell could presumably use the existing ruling from the court to file a claim to become a creditor, at which point they gain a say in the reorganisation plan.

Presumably all this is liable to mean a whole load more expense for Novell (and IBM?). My instinct in Novell's position might be to find a way to cut and run from the whole horrid mess. It it were doable, I would say make a deal with TSG to terminate the APA handing back the responsibility of the assets to Novell, grant TSG the necessary license to carry on the rest of their business (if it survives) and walk away from it. Issue some public statements to the effect that there is no UNIX code in Linux, drop the IBM case and then open source the code so no one can pull this crap again. Now that might not sound realistic given the money that IBM and Novell have had to chuck at this, but if Novell were to release that code under a BSD license it would effectively protect IBM's AIX business and the Linux activities of both companies.

Idle speculation, of course. I'm sure Novell and IBM are thinking up their own plans which are probably much better informed and thought out than my ramblings.

[ Reply to This | # ]

SCO website with the release here:
Authored by: bigbert on Friday, September 14 2007 @ 06:52 PM EDT
Link

---
- -------------------------
Surfo, ergo sum.

[ Reply to This | # ]

SCO Filed 2 Bankruptcy Petitions
Authored by: Laomedon on Friday, September 14 2007 @ 06:54 PM EDT
From Press Release

The SCO Group, Inc. .. filed a voluntary petition for reorganization under Chapter 11 of the United States Bankruptcy Code.

SCO's subsidiary, SCO Operations, Inc., has also filed a petition for reorganization.

[ Reply to This | # ]

CEO gave misleading information?
Authored by: Anonymous on Friday, September 14 2007 @ 07:03 PM EDT
Investors should study McBride's recent interview very carefully. I think he
may have misled potential investors about the financial viability of the firm.

[ Reply to This | # ]

SCO Files For Chapter 11 Bankruptcy
Authored by: Anonymous on Friday, September 14 2007 @ 07:08 PM EDT
I do not understand

According to the top 20 debtors list they
have debts of about 1.5 million.

According to their filing, they
have at least 1 million in assets.

The company has several million in revenue every
quarter.

How can they claim bankrupcy?

[ Reply to This | # ]

Will Judge Kimball be consulted or involved
Authored by: Anonymous on Friday, September 14 2007 @ 07:11 PM EDT
It seems like he might have some valuable insights into the circumstances that brought SCO to this unfortunate situation. When a company goes into Chapter 11 under circumstances such as this, where they are involved in multiple lawsuits which are possibly contributing to the unenvious financial position in which they now find themselves, is it typical for the Court to be consulted on these issues?

And in particular, might he have some say in whether or not a particular lawsuit or lawsuits might be allowed to proceed, even under Chapter 11 protection? And how might this affect any summary judgment motions that might be ready to be resolved in those lawsuits?

[ Reply to This | # ]

Contempt? Question for PJ
Authored by: Anonymous on Friday, September 14 2007 @ 07:24 PM EDT
Given that SCO represented to the Court that they weren't contemplating
bankruptcy, can Kimball (who now has 4 days of time that he didn't expect) haul

SCO & BSF into his courtroom and ask them why he shouldn't hold them in
contempt of court?

[ Reply to This | # ]

Top 20 Creditors
Authored by: Anonymous on Friday, September 14 2007 @ 07:36 PM EDT
The top 20 creditors classified by industry are:

Lawyers and Other Legal

  • Amici LLC - $500,650.73
  • Boies Schiller, - $287,256.39
  • Silverman Heller Associates - $10,352.35
  • Madson & Austin - $8,478.32
  • Randd Strategic - $7,026.79
  • Sage Forensic Accounting - $6,221.00
  • AmLaw Discovery - $5,399.57
Total to lawyers - $825,385.15

IT Industry Companies

  • Microsoft Licensing, Inc. - $125,575.00
  • Sun Microsystems, Inc. - $50,000.00
  • Veritas Software - $37,881.33
  • Unisys - $25,302.11
  • Fujitsu Services - $25,302.11
  • HP-Nonstop Royalty Accounting - $25,302.11
  • Intel - $23,302.11
  • 4Front Technologies - $10,417.50
  • Sun Microsystems Inc. Software Royalty Accounting Group - $5,414.40
Total to companies in the IT industry - $328,496.67

Miscellaneous

  • Canopy Group - $139,895.00
  • Gre Mountain Heights Property - $132,502.00
  • KSJ Consulting - $21,781.25
  • Profile Consulting - $5,450.00

Total to Misc - $299,628.25

This means that 57% of their debts to their biggest creditors are debts to their lawyers and legal consultants. The biggest debt (over a third of the debt listed above) is to Amici, who specialise in storing records for litigation purposes.

Interestingly, isn't Amici the company that had a connection to Boise (through his children), but was sold to Xerox last year? Now this company has ended up as the biggest bag holder in this bankruptcy. Wouldn't you expect the records management company to get paid on a regular basis? After all, they provide a fairly simple service, so they ought to be able to provide an up to date bill at least every month. Is Xerox going to ask how they ended up holding this very empty bag?

[ Reply to This | # ]

SCO Group vs SCO Operations
Authored by: Anonymous on Friday, September 14 2007 @ 07:36 PM EDT
If this is just a subsidiary of SCO group, SCO Operations, that's filing for
bankrupcy, does this stop the trial at all? I always thought that the combabants
in the trial(s) were SCO Group. I don't see that a susbidiary filing for chapter
11 should freeze court proceedings involving the holding group.

Should Novell's lawyers be turning up on Monday after all? It's be a shame to
miss the trial.

Hmm. Maybe I shouldn't read Groklaw and watch horror movies at the same time.

[ Reply to This | # ]

"ensures business as usual"
Authored by: jfw25 on Friday, September 14 2007 @ 07:41 PM EDT
And boy does it ever: a bunch of crooks gaming the legal system to obtain, or
hang onto, money which isn't rightfully theirs.

[ Reply to This | # ]

Filing for protection
Authored by: Anonymous on Friday, September 14 2007 @ 07:46 PM EDT
IANAL - But, I believe if they do not list the monies owed to Novel, and Novel
files the BK court, and the court finds that it has already been settled by
another court that they misappropriated the money from Novel, and did not list
it it their filings they could be in big trouble.

The BK filing could be turned down, and no protection for the Utah boys.

[ Reply to This | # ]

Missing SCO Group Filing
Authored by: John Hasler on Friday, September 14 2007 @ 07:47 PM EDT
The press release says SCO Group is filing but so far we have only docs for the
SCO Operations subsiduary. Could someone with PACER access try to look it up?

Seems to me that if SCO Group has not actually filed by Monday morning Novell
could insist that the trial go ahead.

---
IOANAL. Licensed under the GNU General Public License

[ Reply to This | # ]

Mark Rochkind
Authored by: tiger99 on Friday, September 14 2007 @ 07:48 PM EDT
On the long list, I see they owe at least four of their experts, Christine Botosan, Gary Pisano, Marc Rochkind and Evan Ivie.

I seem to remember him posting here a while back, very bravely if I may say so. He did indicate that one of his motives for being an expert in this case was financial. Well, he has not yet had his money and it does not look as if he will ever get any more than a small proportion of it.

Maybe he will be a lot more careful about where he provides his "expert" opinions in future.

[ Reply to This | # ]

SCO Files For Chapter 11 Bankruptcy
Authored by: Anonymous on Friday, September 14 2007 @ 07:52 PM EDT
Just thinking in a VERY evil way now...

Could SCO admit that they owe Novel $200,000,000.... get the debt wiped out
by bankruptcy protection, and demand their 5% administrative fee from Novel,
giving them a $10,000,000 pile of cash?

[ Reply to This | # ]

overall statement of assets and liabilities
Authored by: Laomedon on Friday, September 14 2007 @ 07:58 PM EDT
on page 4 of voluntary petition (SCO Group)

as of Sep 10, 07:

Total assets: $14.8 million

Total liabilities $7.5 million

Clearly, that does not include what Novell is asking for.

[ Reply to This | # ]

    It's Official -- The Trial Is Vacated (and ...)
    Authored by: Steve Martin on Friday, September 14 2007 @ 08:00 PM EDT

    From PACER:

    Deadlines/Hearings terminated: Bench trial set for 9/17/2007 is vacated due to the notice of bankruptcy filing. (kmj) (Entered: 09/14/2007)
    HOWEVER — it's not all bad news. Also from PACER, docket 469 --- ORDER denying 419 Motion for Reconsideration or Clarification. Signed by Judge Dale A. Kimball on 9-14-07. (sih) (Entered: 09/14/2007)
    Although Rule 54(b) allows a court to revisit any order that rules on less than all of the claims in a case, a motion to reconsider is not appropriate when it merely restates the party’s position taken in the initial motion. A motion for reconsideration is an “inappropriate vehicle to reargue an issue previously addressed by the court when the motion merely advances new 3 arguments, or supporting facts which were available at the time of the original motion. Absent extraordinary circumstances, . . . the basis for the second motion must not have been available at the time the first motion was filed.” Servants of the Paracletes v. Does, 204 F.3d 1005, 1012 (10 Cir. 2000). A motion to reconsider must be made upon grounds th rounds other than a mere disagreement with the court’s decision and must do more than rehash a party’s former arguments that were rejected by the court.

    [...]

    While a motion for reconsideration should be granted to correct manifest errors of law, see Phelps v. Hamilton, 122 F.3d 1309, 1324 (10 th Cir. 1997), neither SCO’s arguments nor the court’s review of its prior order convinces the court that the analysis in its prior order contains manifest errors of law. SCO also states that insofar as it has misapprehended the court’s ruling on this issue, its motion should be considered a request for clarification. The briefing on this motion and other pretrial motions demonstrates that SCO has not misapprehended the court’s ruling. Therefore, no clarification is necessary.
    BAM!

    ---
    "When I say something, I put my name next to it." -- Isaac Jaffee, "Sports Night"

    [ Reply to This | # ]

    Some really funny math here.
    Authored by: Anonymous on Friday, September 14 2007 @ 08:03 PM EDT
    I see someone already crunched the numbers, but let's think about the math a
    little more.

    The top twenty creditors are owed 1.5M (a hair less, actually) in total.

    The 20th largest creditor is owed around 5k.

    I got to the creditor matrix page before PJ (quite properly) pulled the link to
    it. It's a very strange list, but more to the point there are 24 pages of
    creditors at 30 per page for a total of 720 creditors.

    700 * 5k = 3.5M. Of course their actual debt to these people (not counting
    Novell, which IS listed and potentially IBM who is NOT listed) should be
    considerably lower. Given the statistical distribution of the upper end of
    their debts, this could potentially be as low as 1M.

    But let's not quibble about lower bounds here. By SCO's accounting, the upper
    bound of their debts is $5 million.

    What do we know about SCO's assets? (To be sure, I'm not good at reading
    financial statements. But. I'll try.)

    By the April 10Q, which is the most recent one showing in the SCO Financials
    section here at Groklaw, they have nearly $7.8 million in cash or cash
    equivalents.

    Now, maybe they blew some of that off in the last quarter or so, but this all
    looks very weird to me. Are you really allowed to declare bankruptcy when you
    could simply pay off your creditors out of pocket? If so, why isn't everyone
    doing this?

    ...this looks like really bad lawyering to me. It doesn't pass the common sense
    smell test (yeah, I know, but in the end you have to admit the judges so far
    have used their noses), and I look forward to Novell's countermaneuvers in
    response. Even better than IBM, they've managed to shred SCO in court, and I
    think that SCO is putting its own foot into the woodchipper for them on this
    one.

    -Ked

    [ Reply to This | # ]

    McBride gets his parachute bonus before Novell's Debt
    Authored by: JR on Friday, September 14 2007 @ 08:05 PM EDT
    Ok, so if SCO owes McBride his platinum parachute bonus, then he is in line
    before Novell and IBM?

    [ Reply to This | # ]

    What can we expect??
    Authored by: Anonymous on Friday, September 14 2007 @ 08:08 PM EDT
    While I see a lot of gleefull shouting I don't understand what is going on. Are
    we dealing assumptions or reality?

    1. Is the trial before Judge Kimball postponed or does it get held anyway to
    set the scope of Novell's share?

    2. How will the Bankruptcy Court be inclined to handle the Conversion issue?

    3. Is any of this likely to open a crack into the 401K funds or Daryl and his
    cohorts personal wealth?

    [ Reply to This | # ]

    Strange Identity
    Authored by: John Hasler on Friday, September 14 2007 @ 08:10 PM EDT
    They list exactly the same amounts owed to exactly the same people on both
    top-twenty creditor lists.

    ---
    IOANAL. Licensed under the GNU General Public License

    [ Reply to This | # ]

    Wouldn't Novell and IBM see this possibility?
    Authored by: rfrazier on Friday, September 14 2007 @ 08:13 PM EDT
    The Novell lawyers have been on the ball, pretty much providing a counter to
    each of SCO's moves, probably seeing them before they occur. Wouldn't they have
    seen this as a strong possibility? Of course, even given that, options for
    response may be pretty thin on the ground.

    Of course SCO made a big mistake in not doing this before the summary rulings
    came down. (Hubris, no doubt. And, I suspect, that will come back to haunt
    them.)

    Do the "stays" in Chapter 11 include appeals? I.e., since the court
    hasn't given a final order, or whatever, is it the case that they have to play
    out the trial, whenever that is, before SCO can appeal?

    Best wishes,
    Bob

    [ Reply to This | # ]

    Mobius strip in the law court
    Authored by: Anonymous on Friday, September 14 2007 @ 08:22 PM EDT
    OK, so SCO has more assets than liabilities, so they have no need to file for BK
    protection, except that Kimball is about to rule that they owe more money than
    they have to Novell. So they file for bankruptcy. This means that they don't
    have to go to court (yet, I assume) for the trial, which means that Kimball
    doesn't decide how much money they owe Novell. (Note the absense of any
    declaration of that amount on the list of their liabilities.) But that means
    that they aren't actually insolvent yet, so (at least according to the papers
    filed with the BK court) they have no need to declare bankruptcy at all. But
    that means that their petition for BK protection should be denied. But that
    means the Novell trial can go forward, at which point SCO will be bankrupt...

    My head hurts.

    MSS2

    [ Reply to This | # ]

    The law firm's not going to like this, Yogi...
    Authored by: Anonymous on Friday, September 14 2007 @ 08:25 PM EDT
    Bankruptcy means that the creditors aren't getting paid. That includes BSF.
    BSF hasn't been getting paid for their time for quite a while now, and now they
    aren't getting paid for their expenses either.

    That might mean less enthusiasm for this farce on their part...

    MSS2

    [ Reply to This | # ]

    Bankruptcy tricks
    Authored by: jws on Friday, September 14 2007 @ 08:30 PM EDT
    The last thing that we need is a bankrupt zombie with $10m in remaining assets,
    and Debtor in Posession. I hope there is a reciever appointed, or that either
    Novell or IBM or someone who can at least put a cork in the FUD gets into the BK
    court and has standing to make some difference there.

    It's a totally different world over in Federal Bankruptcy court, and with the
    right judge and circumstances, fraud that might slide by as just a
    "business mistake" can get people 10 or 20 years in the federal prison
    there.

    Hiding assets is a quick ticket to prison. Lying about where the assets came
    from is, which should prove interesting if someone forces SCO to disclose
    information that might go back to groups who were rumored to be mischief makers
    in the past, but could not be flushed out there.

    I see this as a reaction to the failure to get the appeal fast tracked. I don't
    see it as well reasoned, as all the prepaid lawyer talent they have are in Utah
    doing the SCO vs. world litigation, and they'll have to hire at least as
    talented specialist in Delaware now to handle this maneuver.

    Interestingly I just got my first call from someone for a SCO Openserver today.
    They'll be really thrilled by this I'm sure. And conversion to Linux in the
    near term isn't an option. All special custom hardware with SCo in the middle
    of the mess.

    [ Reply to This | # ]

    This is depressing....
    Authored by: tiger99 on Friday, September 14 2007 @ 08:34 PM EDT
    .... but perhaps not unexpected, as it was obvious from past performance that the only thing that SCO needed was delay and more delay. Being not very knowledgable about US law, I was guessing that towards the end of next week would be the time for bankrupcy, but instead of that they have managed to file earlier than necessary and so generate a huge, and as yet unknown, amount of delay to the several trials.

    Hopefully Novell or IBM will be able to get the bankrupcy court to refuse Chapter 11, and force Chapter 7, because otherwise this may go on for several more years.

    What we have not yet seen is the truly enormous scam that the Puppetmaster is going to perpetrate on the world, for which they still need lots of delay and FUD. There is no other apparent reason for SCO to continue to exist, and in the circumstances, Chapter 7 would have been far more reasonable if SCO existed as a genuine business, not as a tool of the Monopoly.

    My guess is that their latest scam will be to try to get OOXML (Objectionally Obtuse XML) to be enshrined in international law as the only such format to be allowed, if and when it gains ISO approval. If they get away with that one, it will give them world-wide, perpetual vendor lock-in, and a license to print as much money as they like, while continuing to deprive the world of software of acceptable quality. Their bargaining power with governments will be to allow their security services to have access to the secret back-doors that undoubtedly exist in their vile bloatware.

    But if Linux, ODF (ISO 26300), and other major parts of the alternative set of possibilities, not all necessarily free, get on to sufficient desktops, especially in government offices, that will be impossible to achieve.

    Now is the time to push Linux (or even xBSD or Solaris), OpenOffice, and whatever applications fit your particular needs best, harder than ever. And, of course, keep up the battle against OOXML, and the corruption of the standards process. Gates and Ballmer have not won yet, and hopefully never will. Judging by the general uselessness of Vista, the replacement for Gates must be about equally incompetent. The FOSS community can win on technical competence, if they don't get embroiled in in-fighting.

    [ Reply to This | # ]

    Business as usual, if a trustee takes over?
    Authored by: Anonymous on Friday, September 14 2007 @ 08:34 PM EDT

    Business as usual. Now there's a loaded term. Wonder what
    SCO thinks that means, vs. what other people think it means?

    Also, I hardly think it will be business as usual if a trustee runs
    the company. I can't imagine SCO would be left a debtor in
    possession. Court supervision is not business as usual.

    Also, the bankruptcy judge, as I understand it, can cancel
    last-minute SCO transactions if they were made in bad faith,
    especially transfers of cash or other assets. There's a time
    frame for this in the bankruptcy statute, but I can't recall it.

    Also, the Bankruptcy Court is under no obligation to accept
    the case. The judge can dismiss the petition on a number of
    grounds.

    Finally, the judge can allow other proceedings to, well, proceed
    under some circumstances. So, he can allow the IBM trial to,
    well, proceed. Other proceedings can proceed if the bankruptcy
    judge allows it.

    [ Reply to This | # ]

    MSREF Amanda Essen Zwei GmbH
    Authored by: Anonymous on Friday, September 14 2007 @ 08:36 PM EDT
    Real estate leasing.

    [ Reply to This | # ]

    SCO Book
    Authored by: Anonymous on Friday, September 14 2007 @ 08:37 PM EDT
    If someone ever writes about SCO, they *so* have to make either the chapter 7 or
    chapter 11 title "Bankruptcy" :-)

    I say that because of the hope that this chapter 11 will get turned into chapter
    7 very soon now. After which, we can watch them chase down Darl & the
    executives who actually performed that conversion of Novell assets into
    executive bonuses and futile lawsuits, among other things ...

    [ Reply to This | # ]

    This should be interesting...
    Authored by: The Mad Hatter r on Friday, September 14 2007 @ 08:43 PM EDT

    First, some of what I read doesn't make sense. I suspect that there are
    additional documents to be filed which will fill in the blanks.

    Second, Novell may not be a creditor in this case, due to the nature of the
    contract. If I give Fred money to pay Stan, and Fred doesn't pay Stan, but
    instead spends the money, and then goes bankrupt trying to claim the money as
    his, it won't work, the money is still Fred's.

    This should be interesting though. Can you imagine the look on the bankruptcy
    judge's face when a bunch of geeks attend the hearings? I suspect that most
    judges wish there was a greater interest in the law and it's effects, and
    they'll get that in this case.

    And of course there's management. Will the bankruptcy trustee leave current
    management in place? Don't forget that Novell's legal team are going to be all
    over this. And as we've seen they are VERY competent.

    This was a defensive move. If they can convince the bankruptcy judge that Novell
    is a normal creditor it's one thing, if they can't, all hell breaks loose. Still
    it probably looked better than being handed their heads on a platter at the end
    of next week.


    ---
    Wayne

    http://sourceforge.net/projects/twgs-toolkit/

    [ Reply to This | # ]

    The Yahoo Message Board is already GONE!
    Authored by: thombone on Friday, September 14 2007 @ 08:50 PM EDT
    Wow, that was fast!

    I hope someone somewhere archived that thing. Would be a lot of history lost
    (not that Groklaw didn't cover this thing well, the Yahoo boards still have
    their historical value just the same, you know?)

    [ Reply to This | # ]

    SCO Files For Chapter 11 Bankruptcy - Updated
    Authored by: wvhillbilly on Friday, September 14 2007 @ 09:00 PM EDT
    Now that SCO has filed for bankruptcy, does this mean Darl, Ralph, et al, are
    out of the management loop and bankruptcy referees (or whatever they're called)
    take over?

    And what happens to the trial and Judge Kimball's ruling that they owe Novell
    all those SVRx revenues they converted to their own use? It would be sad seeing
    these SCOundrels using bankruptcy as a "get out of jail free" card.

    ---
    What goes around comes around, and the longer it goes the bigger it grows.

    [ Reply to This | # ]

    Unfairness of Bankruptcy
    Authored by: snakebitehurts on Friday, September 14 2007 @ 09:03 PM EDT
    We knew this was coming, but it has a bitter taste. The U.S. Congress changed
    the laws on personal bankruptcy a few years ago. If you, as an individaul, can
    pay off your debt in the future; well, you will - even if it takes a gazzillion
    years

    Corporations on the other hand have carte blanche. Declare bankruptcy, stiff
    all your debtors and give them pennies on the dollar, if anything. Stockholders
    lose everything.

    They issue new stock and move on.

    What SCOX has done is played the system perfectly. While they have stayed their
    "we want our day in court", it does not appear to me that they have
    liabilities in excess of their assets - as of now.

    So we'll see how this plays out. I hope PJ or one of the lawyers here can speak
    to what this all means.

    IMHO, it appears to me they may have done this too soon. They may have needed
    to wait for the trial to award $$$ to Novell that exceed their assets. Looks to
    me like they can pay their bills at the moment. They stayed the trial.

    I wonder if a RICO suit could be brought against them for trying to scam the
    world and then using the system to declare bankruptcy when it looks like the
    scam won't work.

    SCO's lawyers are not dumb. This looks like a well thought out plan, and it is
    not fair. (I wanted to say something beside "not fair" but in
    consideration of PJ's policies on profanity .....")

    aaarrrggghhh!

    [ Reply to This | # ]

    Maureen O'Gara?
    Authored by: Jaywalk on Friday, September 14 2007 @ 09:05 PM EDT
    Gee, G2 Computer Intelligence is Maureen O'Gara's rag and it's on the list of SCO's creditors. So I guess it's official; MOG is not a neutral journalist, but SCO's paid mouthpiece. It's nice to have confirmation on these things.

    So I wonder how those who've been shelling out nearly $600 a year to hear her learned opinions feel now that they find out she's on SCO's payroll.

    ---
    ===== Murphy's Law is recursive. =====

    [ Reply to This | # ]

    What happens in Bankruptcy now?
    Authored by: Anonymous on Friday, September 14 2007 @ 09:07 PM EDT
    Don't the companies owed debt get a say on whether they will accept
    reorganization, and would this not be based on their portion of what is owed
    -- and for this would they not have to settle with Novell/IBM etc. before they
    can figure this out?

    Can the creditors force it into Chapter 7? (the one where it is no longer a
    going concern).

    Would the auditor not bring in his own lawyers and accountants to review all
    liabilities (including lawsuits)?

    Man, everything was clear to me -- NOW I am totally lost.

    [ Reply to This | # ]

    • But ? - Authored by: Anonymous on Sunday, September 16 2007 @ 12:31 PM EDT
    Bad Faith Filings...
    Authored by: maz2331 on Friday, September 14 2007 @ 09:21 PM EDT
    I did a quick Google of "bad faith" in regards to bankruptcy filings,
    and there is apparently precident regarding exactly the same situation as SCO is
    in.

    Using bankruptcy just as a tool to thwart other litigation is apparently a BIG
    no-no. From a non-authoritative source:

    http://touchngo.com/lglcntr/usdc/bnkrptcy/briefs/bnk45.htm

    "One area ripe for a bad faith dismissal is when the debtor is using a
    bankruptcy filing as a litigation tactic to either forestall litigation or seek
    a forum perceived to be more friendly. In Marsch, the court upheld a 'bad faith'
    dismissal where the chapter 11 petition was filed solely to delay collection of
    a judgment and avoid posting an appeal bond where the debtor had the financial
    means to pay the judgment."

    Also, in addition to dismissing the bankruptcy case, the bankruptcy courts may
    well impose the "nuclear" sanction - barring SCO from asserting
    another bankruptcy claim in the future. This would leave them totally exposed
    to the full wieght of any other judgements, with no way out at all - not even
    Chapter 7 liquidation. In other words... "you're on your own,
    Darl..."

    Is anyone with any expertise in bankruptcy proceedings around to help the
    community figure out exactly how this works?

    Something tells me the bankruptcy filing is not going to fly for long, but may
    expose SCO's legal team to some serious malpractice liability.

    And... maybe after this little road bump is resolved we'll finally see Kimball
    bring some real sacnctions down on the SCO side too.

    This is just getting beyond ridiculous.

    [ Reply to This | # ]

    I do not understand
    Authored by: Anonymous on Friday, September 14 2007 @ 09:22 PM EDT
    why this would halt the Novell trial. All that will determine is how much their
    payment to Novell should be. Doesn't the bankruptcy court need to know that?

    Furthermore, it doesn't seem fair to Novell as the money they are after isn't a
    debt that SCO owes them but rather, how much of Novell's money they haven't
    returned.

    This is precisely why Novell wanted a trust fund set up.

    [ Reply to This | # ]

    How Safe are the Auditors?
    Authored by: ChasF on Friday, September 14 2007 @ 09:26 PM EDT

    In UK and European company law, the audited company accounts must include "Contingent Liabilities" - i.e. debts that the company might have to pay with a statement clarifying/quantifying the likely payout. For example, look at British Airways and the "price-fixing cartel" issue - there was a provision in the accounts significantly before the judgements were announced.

    This raises questions about SCO's auditors - what checks and analyses did they carry out to make sure that the opinions given by the SCO Directors were certain or very probable? A person who bought shares after the last year end; Novell; or ordinary creditors might well have a good claim here. [I seem to remember that Andersen's had a wee problem with this ...]

    Non-factual bit that I can't be bothered to research: Didn't SCO change its auditors recently?

    Disclaimer: IANAL; I have no knowledge of the US accountancy rules; and I was last a bean-counter 20 years ago in England.

    [ Reply to This | # ]

    SCO Files For Chapter 11 Bankruptcy - Updated
    Authored by: Viv on Friday, September 14 2007 @ 09:29 PM EDT
    Been waiting a long time for this but thought they would hold out a while longer

    yet.

    Still they never did a thing that made sense in the first place so why start
    now.

    Viv

    ---
    Is it me or what!

    [ Reply to This | # ]

    Puts new light on the request for early appeals.
    Authored by: Anonymous on Friday, September 14 2007 @ 09:30 PM EDT
    If the judge had allowed the early appeals. If the judge had allowed that SCO
    could be appealing those rulings, with the rest of the trial delayed from the
    bankruptcy.

    [ Reply to This | # ]

    SCO Files Overlength Yet Again
    Authored by: Newsome on Friday, September 14 2007 @ 09:44 PM EDT
    Knowing SCO, they really filed Chapter 7 Bankruptcy, but it was overlength, and
    got mistaken for Chapter 11.

    ---
    Frank Sorenson

    [ Reply to This | # ]

    What happens to IBM's PSJs?
    Authored by: Anonymous on Friday, September 14 2007 @ 09:58 PM EDT
    So SCOX got Novell trial to stall, but IBM's PSJ motions are fully briefed. Will
    the judge rule on them or do they have to stall as well? Common sense would say
    no, but I don't know what the rules are.

    [ Reply to This | # ]

    Another Novell twist
    Authored by: Anonymous on Friday, September 14 2007 @ 10:05 PM EDT
    Can Novell notify it's former Srvx clients to stop paying SCO dn pay them
    directly? I seem to recall that the agreement allowed Novell to revoke SCO's
    right to collect royalties if there was a problem.

    [ Reply to This | # ]

    Money trail? Illegal trading?
    Authored by: Anonymous on Friday, September 14 2007 @ 10:19 PM EDT
    Does the bankruptcy proceedings include a review of when the decision was made
    with regard to the stock trades made by the insiders before the announcement?

    If the bankruptcy court decides that this is a bad faith filing simply to avoid
    the trial, and that the executives used the delay in filing to dump thier stock
    and get more money, are the executives Criminally Liable?

    Do the two judges get to talk to one another regarding the circumstances
    surrounding the filing and SCO's legal history of delays by any means possible.

    Can the bank accounts of the executives be frozen and examined for fraudulent
    transactions?

    Can thier passports be revoked/held?

    [ Reply to This | # ]

    SCO Files For Chapter 11 Bankruptcy - Updated
    Authored by: Anonymous on Friday, September 14 2007 @ 10:31 PM EDT
    This is a bad move on SCO's part. First of all it has to get past Novell
    pointing out that at this point in time a) SCO has more assets than debts and
    cash flow is apparently not a problem. Also that SCO has submitted to a court
    under oath that bankruptcy was not imminent and as such this appears a bad faith
    application. b) SCO cannot say how much of the money it is allowed to keep from
    the Sun and Microsoft licence deals. It *could* be everything, *could* be
    nothing or *could* be somewhere in between (After this move, if it was me it
    would be nothing and then some. I expect Judge Kimball will be a lot more
    objective and unbiased). The fact that SCO cannot tell with any accuracy what
    assets it has and cannot because of the petition for Chapter 11 protection would
    also imply bad faith.

    Give the quality and preparedness of Novell's lawyers I would be expecting them
    to be telling their excellent paralegals to dig out the SCO Chapter 11
    contingency documents and fine tune the language.

    Expect motions to fly on Monday, together with a memo from Novell to Judge
    Kimball, as a matter of courtesy, explaining that they will be opposing the
    Chapter 11 petition.

    [ Reply to This | # ]

    Tricks
    Authored by: Anonymous on Friday, September 14 2007 @ 11:01 PM EDT
    When does the trial get stayed? What if SCO did this just to keep Novell from
    showing up on Monday in front of Kimball but SCO shows up alone? Has Kimball
    announced the vacation of Monday's trial?

    [ Reply to This | # ]

    SCO Files For Chapter 11 Bankruptcy - Updated
    Authored by: schestowitz on Friday, September 14 2007 @ 11:38 PM EDT
    You win.

    :-)

    ---
    Roy S. Schestowitz, Ph.D. Candidate in Medical Biophysics
    http://Schestowitz.com | GNU/Linux | PGP-Key: 0x74572E8E

    [ Reply to This | # ]

    SCO Files For Chapter 11 Bankruptcy - Updated
    Authored by: Anonymous on Friday, September 14 2007 @ 11:39 PM EDT
    Shouldn't BSF's continuing obligation to carry on litigating for SCO be listed
    as a SCO asset with a multi-million dollar figure? and can't BSF be forced to
    caugh-up all that cash as belonging to Novell?

    [ Reply to This | # ]

    Error, Error, Error
    Authored by: Anonymous on Friday, September 14 2007 @ 11:48 PM EDT
    Isn't this bankruptcy filing a little premature?

    SCO claims that their assets are almost double their liabilities. At their historical burn rate they should be able to continue operations for months.

    It is important to remember that the amount of money they may have to remit to Novell has yet to be determined. Certainly, if they are found to be in possession of the amount of Novell's money that we think they are then they would be insolvent, but that hasn't happened yet.

    Instead of talking about them moving to Chapter 7, shouldn't we be talking about how to prevent them from fraudulently entering Chapter 11?

    [ Reply to This | # ]

    SCO - Major Shareholders by Value
    Authored by: Anonymous on Saturday, September 15 2007 @ 12:36 AM EDT
    The following are the major shareholders as listed in the bankruptcy documents. Listed are all shareholders with more than 5000 shares (note, Yarrow is listed twice, so his seconds small shareholding is also shown). Shareholdings are shown as (number of shares) [value of shares at $0.37]. Unfortunately, the comment system does not allow tables, so the formatting is not as clear as it otherwise could have been.

    1. CEDE & CO – BOWLING GREEN STATION - NEW YORK, NY: (14,286,457) [$5,285,989.09]
    2. RALPH Y ARRO – PROVO, UT: (5,492,834) [$2,032,348.58]
    3. THE SCO GROUP TREASURY ACCOUNT – LINDON, UT: (297,409) [$110,041.33]
    4. JET CAPITAL INVESTORS LP – NEW YORK, NY: (285,714) [$105,714.18]
    5. GOLDMAN SACHS & CO FBO AMTRUST INTERNATI – OWINGS MILLS, MD: (242,857) [$89,857.09]
    6. SCOGGIN INTERNATIONAL FUND LTO – NASSAU BAHAMAS: (187,000) [$69,190.00]
    7. SCOGGIN CAPITAL MANAGEMENT LP II – NEW YORK, NY: (187,000) [$69,190.00]
    8. ETON PARK MASTER FUND LTD – GRAND CAYMAN CAYMAN ISL: (182,705) [$67,600.85]
    9. CHESAPEAKE PARTNERS LIMITED PARTNERSHIP – BALTIMORE, MD: (148,215) [$54,839.55]
    10. CHESAPEAKE PARTNERS INTERNATIONAL BALTIMORE, MD: (148,215) [$54,839.55]
    11. ETON PARK FUND LP – NEW YORK, NY: (98,380) [$36,400.60]
    12. GUGGENHEIM PORTFOLIO COMPANY VII LLC – NEW YORK, NY: (56,000) [$20,720.00]
    13. DARCY G MOTT – ALPINE, UT: (51,020) [$18,877.40]
    14. EDWARD E IACOBUCCI – DELRAY BEACH, FL: (36,923) [$13,661.51]
    15. CLEMONS F WALKER & LESLIE A WALKER TTEES – HENDERSON, NV: (10,000) [$3,700.00]
    16. TY MATTINGLY – BOSTON, MA: (9,541) [$3,530.17]
    17. BRUCE GRANT – PLEASANT GROVE, UT: (7,856) [$2,906.72]
    18. CHARLES FIFE – DENVER, CO: (5,901) [$2,183.37]
    19. R J Y ARRO & L L Y ARRO JTWROS – OREM, UT: (3,000) [$1,110.00]

    Total Share Market Value: $8,042,699.99
    This is the total does not include individual shareholdings of less than 5,000 shares.

    Note that "CEDE & CO" is not a real company. It is stock market jargon for a central depository where stock is held by the brokers for clearing. In other words, if it is registered in the name of "CEDE & CO", it is very difficult to trace who actually owns the shares. In other words, we don't know who actually owns most of the shares.

    Oh, something else worth noting is that Darl's name is not on the list of shareholders (not even one share). Either his shares are held in someone else's name, or else he doesn't own any.

    [ Reply to This | # ]

    Hey Class I thought the Final Exam was coming ...
    Authored by: Anonymous on Saturday, September 15 2007 @ 12:51 AM EDT
    Just when we thought the semester was ending now we get to learn Bankruptcy law.
    What an education! And tuition for this class is really cheap, just some
    sleepless nights!

    Copyright Law, Contract Law, Patent Law, ethics, how not to act in front of a
    judge, how not to sue the world, discovery, summary judgement, Federal Civil
    Procedure rules, now Bankruptcy Law!

    Thanks SCO! Your millions have paided for the legal education of thousands of
    ordinary people.

    Sorry it cost DC, IBM, NOVL, AZ, and RedHat so much money though. But they will
    make it up in free advertising!

    [ Reply to This | # ]

    SCO Files For Chapter 11 Bankruptcy - Updated
    Authored by: Anonymous on Saturday, September 15 2007 @ 02:00 AM EDT
    Nice picture of Darl McBridge here:
    http://blog.wired.com/27bstroke6/2007/09/battered-sco-fi.html

    [ Reply to This | # ]

    Distribution of Shareholdings
    Authored by: Anonymous on Saturday, September 15 2007 @ 02:12 AM EDT
    The following is an analysis of the list of named shareholders listed in the bankruptcy documents. The first below shows the number of shareholders who hold a particular range of shares. This is shown as "number of shares" (number of shareholders) "percent of shareholders". For example, the first record shows that 95 shareholders hold less than 10 shares, and these shareholders total 23.81% of the total number of shareholders.


    Number of Shares per Shareholder Versus Number of Shareholders in that Class
    • less than 10 (95) 23.81%
    • between 10 and 100 (193) 48.37%
    • between 100 and 500 (79) 19.80%
    • between 500 and 1000 (8) 2.01%
    • between 1000 and 5000 (5) 1.25%
    • between 5000 and 10,000 (5) 1.25%
    • between 10,000 and 5,000,000 (12) 3.01%
    • between 5,000,000 and 10,000,000 (1) 0.25%
    • more than 10,000,000 (1) 0.25%

    We can see that 91.98% of the shareholders own fewer than 500 shares. 500 shares at today's price of $0.37 per share is $185.00. In fact, nearly three quarters of the shareholders own less than 100 shares, which have a value of $37.00 at today's price.

    The next list shows how many shares are held by each range of shareholders. This is shown as "number of shares" (number of shares) "percent of shares". For example, the second record shows that shareholders who own between 10 and 100 shares hold 7,775 shares, or 0.04% of the total.


    Number of Shares per Shareholder Versus Number of Shares Owned by That Class of Shareholder
    • less than 10 (485) 0.00%
    • between 10 and 100 (7775) 0.04%
    • between 100 and 500 (15415) 0.07%
    • between 500 and 1000 (6113) 0.03%
    • between 1000 and 5000 (8732) 0.04%
    • between 5000 and 10,000 (42913) 0.20%
    • between 10,000 and 5,000,000 (1921437) 8.82%
    • between 5,000,000 and 10,000,000 (5492834) 25.22%
    • more than 10,000,000 (14286457) 65.59%

    Ralf Yarrow owns the 25.22% holding. A dozen others own 8.82% between them. Another 385 shareholders own 0.37% between them. The bulk of the shareholdings though are hidden behind the anonymous "CEDE & CO" registration (see the above piece on major shareholders). This means we don't know who really owns most of SCO.

    From this we can see that all except about a dozen of the identified shareholders don't own enough shares for their opinions to matter. If we assume the people registered under "CEDE & CO" will remain out of the picture (they may be just speculators who will take no active role in the company), then Darl has to listen to at most a dozen or so shareholders with total shareholdings of 34% of the shares.

    Of these, Ralf Yarrow holds 25%, or three quarters of the shareholdings of this group. In other words, it appears that Ralf Yarrow's 25% holding gives him effective control of the company and there are no other shareholders or combination of shareholders who can overrule him.

    [ Reply to This | # ]

    SCOG goes to Delayware
    Authored by: grouch on Saturday, September 15 2007 @ 02:31 AM EDT
    Ah, Delaware. The place where litigation is left to slowly rust away, pending the outcome of something or other that seems to involve similar names.

    So, in the year 2525, if man is still alive, Delayware may notice that SCOG filed bankruptcy on the eve of trial in which it would be determined just how many dollars they grabbed by "breach of fiduciary duty, conversion, unjust enrichment, and breach of express contract." [See Memorandum Decision and Order 2007-09-10]. Leave a note in a 'time capsule' for your ancestors alerting them to watch for some courtly activity regarding a novel little case in their ancient history.

    I wonder if much will come of APA §1.2(b) where it says, "not equitable interest in such royalties within the meaning of Section 541(d) of the Bankruptcy Code." Will Delayware decide that such things need not be bothered with until after, say, the Daimler case finishes?

    SCOG sure knows how to game a system. Reminds me of someone else, somehow.

    ---
    -- grouch

    "People aren't as dumb as Microsoft needs them to be."
    --PJ, May 2007

    [ Reply to This | # ]

    Posible Reversal of APA in Lieu?
    Authored by: Anonymous on Saturday, September 15 2007 @ 03:14 AM EDT
    Question for the more experienced:

    Is it possible when it is found that SCO holds more of Novell's money than they
    can pay without asset liquidation, that in essence the APA be annulled and all
    it covered reverted back to Novell in Lieu of cash payment - or are those assets
    worth more than what is owed?

    [ Reply to This | # ]

    Many questions -- Answers next week or later...
    Authored by: mtew on Saturday, September 15 2007 @ 03:24 AM EDT
    NOT A LAWER!

    Will the SCO vs Novell trial be stayed?

    1) The start of the trial on Monday has been 'vacated'.
    2) 'Vacated' is not the same as 'stayed' but I don't know what the difference is
    or what that implies.
    3) The bankrupcy filling changes things enough so that the judge and Novell need
    time to react. In other words, the delay may not be due to the rules of
    bankruptcy.
    4) The court is closed for the weekend. More information will not be available
    until Monday.

    Will the bankruptcy prevent the various trials?

    1) Several issues on trial do not involve money. These will probably continue
    in spite of the bankrupcy filing.
    2) The SCO vs Novell trial will only add to tSCOg's debt incidently. The
    'equity' vs whatever issue hinged on that difference. Judge Kimball and the
    bankruptcy court will probably have a consultation on the issue before SCO vs
    Novell proceeds.
    3) The Redhat vs SCO case is not about money. The copyright questions in Utah
    have been decided so there is no reason this can not proceed. This wasn't due
    to come up until the end of the month anyway.
    4) Autozone and others (if any): Your guess is probably better than my guess.

    Are Darl, Ralph and so on going to jail?

    1) The bankrupcy does increase their risk but it's still an open question.
    Don't expect resolution until next year. (In my opinion Darl is just a scape
    goat. The one that deserves the big sentence is Ralph. Scape goats also need
    to be locked up but they are dumb beasts and do not really understand what is
    going on.)

    ---
    MTEW

    [ Reply to This | # ]

    SCO Files For Chapter 11 Bankruptcy - Updated
    Authored by: Anonymous on Saturday, September 15 2007 @ 04:10 AM EDT
    Non-Dischargeable Debts

    There are certain non-dischargeable debts which a bankruptcy petition cannot
    eliminate and remain legally enforceable. One such non-dischargable debt is a
    debt incurred by fraud, false pretenses, false statement in writing, fraud
    committed while serving in a fiduciary capacity including embezzlement and
    larceny, and other false acts.

    The U.S. District Court has already ruled that tSCOG breached its fiduciary
    obligations by unlawfully converting Novell's monies to its won use. Does this
    finding of unlawful conversion perhaps satisfy the criteria for fraud, false
    pretenses, and so forth needed to classify the debt owed to Novell as a debt
    which is non-dischargeable in a Chapter 11 bankruptcy?

    [ Reply to This | # ]

    What is Novells status now?
    Authored by: drh on Saturday, September 15 2007 @ 04:24 AM EDT
    I know, applying logic to a legal case...

    The summary judgement issued by Judge Kimball has declared that SCO
    "converted" monies due to Novell. SCO is therefore illegally in
    possession of these funds, and there is also the matter of intent.

    This means that the list of SCOs assets is incorrect because some or all of
    those assets belong to Novell. Novell is not technically a creditor, they did
    not give this money to SCO in offer of repayment, the money was taken from
    them.

    The judgement was released before the bankruptcy filing and is binding upon
    those proceedings. Novells request for a constructive trust was also filed prior
    to the bankruptcy and may also be binding. Technically these funds are not
    actually available to SCO upon entering into Chapter 11.

    In light of the conversion judgement, what is Novells standing in the bankruptcy
    proceedings? How do they go about getting their money (what little is left)?

    As mentioned above in another post, SCO may have filed for Chapter 11, but the
    court is not obligated to accept. There are a range of people/companies who can
    file objections to the acceptance including creditors, shareholders,
    leinholders, etc. These same entities can also, if the court accepts the
    application, file for relief outside the normal proceedings.

    If accepted, SCO is placed into an "estate" that is governed by the
    bankruptcy court and its appointee(s). This estate I believe is legally
    obligated to settle all outstanding matters, including court cases. Cases
    involving non-monetary matters should be allowed to proceed (REDHAT, portions of
    IBM). I don't think the bankruptcy court can take precedence over these types of
    cases. Monetary cases can and will be delayed, settled, allowed to continue, or
    denied as the appointed trustee sees fit with court approval.

    I think the Novell trial must be allowed to proceed because it is crucial to the
    actual determination of SCOs assets prior to entering Chapter 11.

    And SCO has achieved another delay. But at this stage of the game, what are they
    achieving by delay? The money is gone...


    ---
    Just another day...

    [ Reply to This | # ]

    Hans Bayer, Bad Homburg, Germany
    Authored by: Anonymous on Saturday, September 15 2007 @ 05:25 AM EDT
    Please note that the named Hans Bayer from Bad Homburg, Germany is most likely
    the CEO of The SCO Group GmbH, Norsk-Data-Straße 3, 61352 Bad Homburg.

    [ Reply to This | # ]

    History repeats itself?
    Authored by: Vaino Vaher on Saturday, September 15 2007 @ 05:41 AM EDT
    Istn't this similar to how Microsoft mutilated and sarcrificed Sendo in its fight for mobile phone market share? Did they use the same plan for both operations? Will both operations fail (leaving only a trail of unhappy investors and unemployed staff)? And why do we not see the press shading light on this?
    (In my opinion these stories are just as juicy as Watergate. But again, I read groklaw every day and my wife does not understand a thing of what I'm ranting about).

    [ Reply to This | # ]

    SCO Files For Chapter 11 Bankruptcy - Updated
    Authored by: Toon Moene on Saturday, September 15 2007 @ 05:48 AM EDT
    > Groklaw. When you want to know more, but don't know where
    > to look.

    Groklaw: Everything you wanted to know about law, but were afraid to ask.

    ---
    Toon Moene (A GNU Fortran maintainer and physicist at large)

    [ Reply to This | # ]

    SCO Files For Chapter 11 Bankruptcy - Updated
    Authored by: Anonymous on Saturday, September 15 2007 @ 07:27 AM EDT
    Novell can now tell SCO, that since SCO is not paying anything on their contract
    with Novell, that Novell revokes SCO's right to sell any Unix since they've
    defaulted on the Novell SCO contract.

    That puts out of any business with UNIX.

    [ Reply to This | # ]

    List of equity holders sorted by first name.
    Authored by: rfrazier on Saturday, September 15 2007 @ 08:10 AM EDT
    I thought that they were in Utah, not California.

    Best wishes,
    Bob

    [ Reply to This | # ]

    SCO will never come out of Bankruptcy
    Authored by: Anonymous on Saturday, September 15 2007 @ 08:30 AM EDT
    To come out of bankruptcy, they have to settle with Novell, IBM and Red Hat. At
    least one of them will insist on a lot of money. Since SCO's revenues have been
    going down and it doesn't look like the trend will change in the near future,
    they will not have the money to pay the amount needed. At some point, a trustee
    will be convinced that the operation cannot be salvaged and convert the
    Bankruptcy from 11 and 7.

    [ Reply to This | # ]

    SCO Stock now at T3
    Authored by: dobbo on Saturday, September 15 2007 @ 08:35 AM EDT

    I just clicked on the Nasdaq link in the main article and the code against SCO's name has now gone to T3.

    T3: Halt - Resumption Times
    The news has been fully disseminated through a Regulation FD compliant method(s); or NASDAQ has determined either that system misuse or malfunction that caused extraordinary market activity will no longer have a material effect on the market for the security or that system misuse or malfunction is not the cause of the extraordinary market activity; or NASDAQ has determined the conditions which led to a halt in an Exchange-Traded Fund are no longer present. Two times will be displayed: (1) the time when market participants can enter quotations, followed by (2) the time the security will be released for trading. All trade halt and resumption times will be posted in HH:MM:SS format.

    [ Reply to This | # ]

    abuse of process?
    Authored by: Anonymous on Saturday, September 15 2007 @ 08:40 AM EDT
    Seems to me there should be some way to point out and address this obvious abuse
    of process. Is there anything thta can be done?

    [ Reply to This | # ]

    Are support contracts voided now?
    Authored by: om1er on Saturday, September 15 2007 @ 08:58 AM EDT
    In the list of creditors, there appear to be companies and organizations that could only be affiliated with SCOG because they have purchased support contracts. PJ says:
    Irony here is that SCO says it owes Missile Defense Agency in Alexandria, Va. Uh oh. And Sara Lee Underwear.... They are probably both folks with a support contract or something perfectly normal.
    From the SCOG Press Release:
    Reorganization ensures business as usual and that assets remain for continued support of customers and channel partners

    ...

    "We want to assure our customers and partners that they can continue to rely on SCO products, support and services for their business critical operations," said Darl McBride, President and CEO, The SCO Group. "Chapter 11 reorganization provides the Company with an opportunity to protect its assets during this time while focusing on building our future plans."

    I have a question about those support contracts. Does filing Chapter 11 relieve SCOG from providing support for the remainder of the support contracts? If customers with support contracts are listed as creditors, and the creditors get less than they are owed, then that would seem to be the case. But that is not what the SCOG press release says.

    ---
    August 10, 2007 - The FUD went thud.

    [ Reply to This | # ]

    SCO Files For Chapter 11 Bankruptcy - Updated
    Authored by: Anonymous on Saturday, September 15 2007 @ 09:00 AM EDT
    As SCO made the deals with Microsoft and SUN there should have been outstanding
    debts somewhere in SCOs financial statement for the fees SCO has to pay to
    Novell.

    The last chance to do that, should have been as Novell filed SCO for paying the
    license fees. These (uncertain?) debts should have been somewhere in the
    financial statement. Has anyone seen them? And if SCO has to pay the license
    fees, the old statements are simply wrong.

    As Novell isn't listed in the dept list. Who is in charge that the license debts
    have not been considered in the financial statements?

    [ Reply to This | # ]

    Why assume that SCO has a plan at all?
    Authored by: rfrazier on Saturday, September 15 2007 @ 09:17 AM EDT

    Doesn't this have the characteristics of a "Hail Mary" pass? They are already in a world of hurt, and this puts off the day of reckoning for a bit longer. (And makes things even more costly for others.)

    Well, regarding SCO not having a plan, perhaps the DAUPHIN in Henry V got it right when he said the following.

    But though we think it so, it is no matter:
    In cases of defence 'tis best to weigh
    The enemy more mighty than he seems:
    So the proportions of defence are fill'd;
    Which of a weak or niggardly projection
    Doth, like a miser, spoil his coat with scanting
    A little cloth.

    Best wishes,
    Bob

    [ Reply to This | # ]

    Missing from the list of Equity Security Holders
    Authored by: Anonymous on Saturday, September 15 2007 @ 11:21 AM EDT
    It is interesting that absent from the list of Equity Security Holders of the
    SCO
    Group is the Chief Executive Officer of the company, Mr. McBride. Usually
    corporations like to have senior management hold some stock in the
    company under the theory that decisions affecting the company should also
    affect the fortunes of those making the decisions.

    From further inspection of the list of Equity Security Holders, it appears that

    none of the corporation executives (Messers McBride, Young, Hunsaker,
    Bayer, Sontag, Tibbitts, and Gupta) and none of the senior managers (Messers
    Olson, Perkins, Raymond, Hughes, and Bushman) listed on the SCO web site
    appear to hold stock in the company. In addition, only Board of Director
    members Messers Yarro and Mott are listed as holding equity securities while
    Messers McBride, Thompson, Millington, and Leeman do not hold any shares.
    While it is possible that some shares may be held in accounts not listed in
    SCO books and records, one would think that holdings of the senior
    executives, managers, and board members would be the most likely shares to
    be known by the corporation, especially since the CEO had to declare under
    penalty of perjury that the Equity Security Holding information is true and
    correct.

    One wonders whether these individuals have owned company stock in the
    past, and if they did, when they sold it.

    [ Reply to This | # ]

    German SCO lawsuits - Hans Bayer from Bad Homburg, Germany
    Authored by: Anonymous on Saturday, September 15 2007 @ 12:16 PM EDT
    use babelfish to have a look at:
    http://www.heise.de/newsticker/meldung/45047

    where he indeed is using lawsuits like his US mothership to fight against
    developers.

    I cannot find if he's a remnant of Caldera days, or indeed
    just one of the new trolls.

    [ Reply to This | # ]

    SCO Files For Chapter 11 Bankruptcy - Updated
    Authored by: Anonymous on Saturday, September 15 2007 @ 12:37 PM EDT
    Thank you PJ for all you've done.

    Rick & Sydney

    [ Reply to This | # ]

    SCO's Bankrupt
    Authored by: Anonymous on Saturday, September 15 2007 @ 12:59 PM EDT
    SCO has regained their balance:

    They were already morally bankrupt - now their financials match.

    [ Reply to This | # ]

    I see Yarros hand in this
    Authored by: Anonymous on Saturday, September 15 2007 @ 03:29 PM EDT
    Looks a lot like the Lineo debacle - investors, employees, and vendors ripped
    off but then CEO Sparks (?) left to do the dirty work. Maybe Yarro graduated
    from Microsoft ScrewU?

    But I have a much bigger question: Judge Kimball has ALREADY ruled that the
    revenues etc are SVRx - so WHY ISN'T NOVELL IN AT THE VERY TOP OF THE LIST OF
    CREDITORS? Even if SCOG felt the percentages should be reversed with only 5% to
    Novell, that would make Novell the largest of all the creditors. FRAUD AND LIES
    AGAIN? Darl signed it "under penalty of perjury"!

    One other thing - these trade amounts are unbelievably puny. SCOG really was a
    company with nothing to offer. "Trade debt" of a few hundred $K?
    I've spent far more than that just on a small department!

    The folks at Franklin Covey must be laughing now. Screw Up McBride and his
    partner Yarro throw another business into the toilet. One things for sure -
    they'll have jobs at Micrsoft. It's pretty clear that the only company on the
    planet with the ability to hide a pair of business misfits like D & R. And
    the stomach for legal hijinx. At least the people of Utah will benefit - with
    these cretins out of the local gene pool maybe tech business in Utah can finally
    flourish again.

    GL is proven right again - we all knew they were a bunch of lying thieves. This
    pretty well ices the cake.

    [ Reply to This | # ]

    PJ notes the interesting bit...
    Authored by: Anonymous on Saturday, September 15 2007 @ 07:17 PM EDT
    ...which is that this has been under consideration for quite awhile. Which is
    important, because IMO this petition is a dollar short and a day late.

    Had SCO filed for Chapter 11 prior to the Aug 10th ruling, they'd be in a MUCH
    better position legally--the case would be stayed, and they could report it to
    the bankruptcy court as a contract dispute that should be stayed. Might not
    have won, but would have had an argument.

    Post-August 10th, it seems too late for this to save them. Why? A court of
    competent jurisdiction has ruled, as a matter of law, that SCO has illegally
    withheld funds that belong to Novell, and that as a matter of law Novell is
    entitled to a constructive trust.

    Novell can't unring that bell. The bankruptcy court is bound by law to respect
    Judge Kimball's ruling. That's how the constitution works. Otherwise, someone
    who loses a case in one state that can claim jurisdiction over a claim could
    refile in another jurisdiction.

    This means the bankruptcy court will almost certainly be forced to let Novell
    have their day in court, and a determination of the amount of the trust. Should
    Novell win for the full amount claimed, that will probably force SCO into
    chapter 7 bankruptcy--they'd take $7 million of SCO's last $11 million.

    I don't see any way that, post-August 10th, SCO can avoid a hearing on the
    amount they owe Novell. On August 9th, they might have had a shot...

    [ Reply to This | # ]

    Novell
    Authored by: Anonymous on Sunday, September 16 2007 @ 04:19 PM EDT
    It really depends on how much they owe Novell, when they owe(d) it, and what
    conditions they can get from their other creditors. Delaware bankruptcy courts
    usually allow any deal that a company can make with the holders of the majority
    of its debt to go through - even one patently unfair to other debt holders. If
    Novell holds a minority of that debt, and SCO can register all of that debt as
    "old" debt, and they can come to terms with all their other creditors,
    they might get away with paying Novell relatively little (likely a few percent
    of the debt).

    On the other hand, if the rest of their debt is under 8 million (as it appears)
    and they owe Novell over 8 million, then any deal they have will have to include
    Novell, in which case Novell will get a significant percentage back. And, of
    course, if Novell's debt were "new debt" (which I suspect some of this
    case may fall under), then Novell will get all its money in that category, or
    SCO will have to come to some non-court enforced deal with it, or SCO will be
    liquidated.

    Frankly, with assets that small, and looking at the Novell, IBM, and Red Hat
    lawsuits, I think the question is not if SCO will be liquidated, but when, and
    who gets what pieces.

    Zimbel

    [ Reply to This | # ]

    • Correction - Authored by: Anonymous on Sunday, September 16 2007 @ 04:53 PM EDT
    SCO assets ?
    Authored by: Anonymous on Monday, September 17 2007 @ 03:18 AM EDT
    > assets are $14,800,000

    Surely that is fraud. Some, all, or more, of that is Novell's assets that
    haven't yet been passed to them.

    [ Reply to This | # ]

    SCO Files For Chapter 11 Bankruptcy - Updated
    Authored by: Anonymous on Monday, September 17 2007 @ 10:30 AM EDT
    So they big question is: Does this terminate the APA? I would think that them
    declaring BK would trigger a clause somewhere that totally invalidates any
    rights to license, sublicense, enter into new licenses, receive royalty/license
    payments for any current licenses, etc... Essentially completely gutting their
    "UNIX" business.

    So how does that effect their estimated income stream from their Unix business?

    [ Reply to This | # ]

    Perjury?
    Authored by: Anonymous on Tuesday, September 18 2007 @ 09:02 AM EDT
    Hold on, didn't the SCO directors testify in court that there was no chance of
    SCO declaring bankruptcy, so the trust that Novell wanted need not be set up. So
    should the police not now be investigating those directors for perjury - a
    criminal offence?

    [ Reply to This | # ]

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