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US Trustee's Objections to SCO's Latest Reorganization "Plan" & more filings |
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Saturday, April 05 2008 @ 12:09 PM EDT
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Here, as text, are two of the U.S. Trustee's Office objections to SCO's now scrapped reorganization plan, including the move to pay the Plan Sponsor. I think you'll see why SCO decided to try, try again after you read them. Our thanks to Steve Martin, once again, for the text. And we also have the most recent filings in the bankruptcy, two notices of withdrawal of the SCO motions regarding the bonuses they wanted to pay themselves that the US Trustee blocked and got modified; and the final bankruptcy filing is a bill from one of SCO's many lawyers, Pachulski, Stang. Those bills are as reliable as the sun coming up each morning. SCO has folded its cards on the latest reorganization plan, as it informed the court at the most recent hearing, and it is supposedly headed back to the drawing board to try to figure out a "better" reorganization plan. I say supposedly, because as far as I can make out, it's premature to file any reorganization plan, in light of the issue that the US Trustee's counsel, Joseph McMahon, once again highlights in the objection to the SCO Disclosure Statement, "how much of the Debtors'
business plan is predicated on the Debtors' use of property which Novell
claims to be its own?" How many times does that have to come up before SCO figures out that it's an unmovable rock in its path?
Until that issue is settled in the trial in Utah that begins at the end of April -- assuming no 11th-hour quick stepping by SCO to delay it again -- how can SCO realistically figure out a way to reorganize? Not that this "plan" is even a plan, as you will see the US Trustee points out, since the money folks didn't sign on the dotted line, in the sense that they can pull out still. In fact, I gather they just did, as far as this plan is concerned. And if no such plan is going to fly until that issue of how much SCO has to pay Novell is settled, what can be the justification for filing yet another prematurely filed reorganization plan, or for all the fees being billed by various advisors to help SCO come up with another premature plan that is certain to be objected to on the same grounds that the others were? Just explaining the word "supposedly". And we also have the latest filings in SCO v. Novell, a proposed witness list listing Andrew Nagle (presumably this Andrew Nagle, SCO's Director of Product Development), and SCO's proposed exhibit list. In the SCO v. Novell filing, SCO lists exactly one witness, but that doesn't mean he's the only one it will use or that the list of exhibits the only ones they'll present. This is a Supplemental Pretrial Disclosure list, and you'll find its first list that it filed back in August of 2007 here; and also notice the phrase regarding exhibits that this is a list of evidence SCO may present at trial "other than solely for impeachment purposes". It's a list, in other words, of what they expect to use to support claims and defenses. Well, in SCO's case I guess only the latter in SCO v. Novell. That's all that's left to SCO in the April trial. Impeachment purposes doesn't mean in this context like impeaching a president, removing from office. Impeachment purposes means evidence presented to prove a witness for the other side is wrong on facts or isn't being truthful or isn't reliable for one or another reason a party might be allowed to mention at trial. If, just as an example, Darl McBride testifies to something Novell wasn't expecting him to say, it can present witnesses or evidence to show that it's not true, even if the witness(es) or evidence isn't on its lists. There might be an opportunity to present some evidence as to character or how the world views his reputation for veracity, etc.
There's a 1922 book available in its entirety on Google Books that explains the subject, A Brief for the Trial of Civil Issues Before a Jury, and the section on impeaching witnesses starts here. Keep in mind the date of the book and the fact that the law never stands still, but it certainly will give you the overarching concepts, if not all the modern details. If you read that chapter in the book, I think you may discern why unscrupulous players might try to smear a person, so as to deliberately damage the person's reputation. For example, suppose a company was worried about potential testimony by someone. If, a year before trial, a friend in the media or a compliant blogger started a campaign to say the person was not truthful or had a reputation for not playing fair in some way, later, at trial, that "evidence" might be introduced to impeach that person's testimony. Dirty, yes. Conceivable? I think so. Anyway, this is a projected list, but it doesn't mean if someone testified in unexpected ways SCO couldn't come up with a new witness not currently on the list. It would just have to have a good reason for doing so. SCO is bound by the list otherwise, but not if there is a good reason to call more people than are on the list to introduce evidence to impeach. What sometimes happens is lawyers try to reveal as little as possible in advance, as you may have noticed, and so there are rules to try to force them. If you are interested in how and why such rules came to be, here's a Fordham Law Review article [PDF],
"Rule 26(a)(2)(B) of the Federal Rules of Civil Procedure: In the Interest of Full Disclosure?" by Katherine A Rocco, that tells the story. It will also help to remember that there are regional differences even between various federal courts, despite all of them using the same rules. Courts are not as predictable as math, as I have often told you. Games are still played by lawyers sometimes, but then the rules can come into play too. It wouldn't amaze me to see something like that happen in SCO v. Novell but even more so in the IBM case. So then what? It can happen that one side or the other can't use a witness or the evidence, if games are played or even if an attorney just doesn't bother to file in advance the way he or she should. Here's a Utah case, Rukavina v. Sprague [PDF] where something like that happened, and the Utah Court of Appeals' decision cites the rule: If a party fails to disclose a witness,
document or other material as required by
Rule 26(a) or Rule[] 26(e)(1), or to amend a
prior response to discovery as required by
Rule 26(e)(2), that party shall not be
permitted to use the witness, document or
other material at any hearing unless the
failure to disclose is harmless or the party
shows good cause for the failure to disclose.
In addition to or in lieu of this sanction,
the court may order any other sanction
. . . .
Id. R. 37(f) (emphasis added). So, that's the rule, and if it's not followed, then sanctions can ensue. One court cited in that ruling described sanctions as appropriate if there are "persistent dilatory tactics
frustrating the judicial process." Sometimes folks gamble and are not caught, which is why it happens despite the rules. But as the decision goes on to note, precluding the presentation of evidence or not letting a new witness testify aren't the only possible sanctions: If a
party fails to obey a scheduling order, see Utah R. Civ. P.
16(d), the trial court may "prohibit[] him from introducing
designated matters in evidence." Id. R. 37(b)(2)(B).
Furthermore, if a party fails to make the disclosures mandated by
rule 26, the trial court is required to exclude the evidence and,
at its discretion, may impose other sanctions in addition to or
instead of exclusion. See id. R. 37(f) (providing that such a
party "shall not be permitted to use the witness, document or
other material" and that "[i]n addition to or in lieu of this
sanction, the court may order any other sanction"). Catch that? "Any other sanction"? In other words, the judge has a great deal of discretion. But, if it's not necessarily a final list, why ask for such witness lists? One good reason is to figure out timing of a trial, and another is to let the other side know what they need to prepare for, but another reason is to be able to find out if any jurors are related to anyone on the list or best buddies, or the like. Of course, SCO v. Novell will be tried without a jury, so it's not relevant here. But I'm explaining it all now, because I expect everything to start moving pretty fast after the Novell trial begins, and I want you to understand as events unfold. Long ago, I mentioned that sanctions against SCO for the discovery games they pulled wouldn't surprise me in the IBM case. Here, then, are the most recent filings in the bankruptcy: 428 - Filed & Entered: 04/03/2008
Notice of Withdrawal (B)
Docket Text: Notice of Withdrawal of Debtors' Motion for a Determination that Incentive Bonuses for Quarter Ending October 31, 2007 were Paid in the Ordinary Course of Debtors' Business and for Continuing Authority to Pay Ordinary Course of Business Incentive Bonuses (related document(s)[344] ) Filed by The SCO Group, Inc.. (Attachments: # (1) Certificate of Service and Service List) (Werkheiser, Rachel)
429 - Filed & Entered: 04/03/2008
Notice of Withdrawal (B)
Docket Text: Notice of Withdrawal of Debtors' Motion to Present Evidence and Testimony Related to the Debtors' 2007 Incentive Program Under Seal (related document(s)[345] ) Filed by The SCO Group, Inc.. (Attachments: # (1) Certificate of Service and Service List) (Werkheiser, Rachel)
430 - Filed & Entered: 04/04/2008
Application for Compensation
Docket Text: Monthly Application for Compensation and Reimbursement of Expenses as Co-Counsel to the Debtors and Debtors in Possession for January 2008 Filed by Pachulski Stang Ziehl & Jones LLP. Objections due by 4/24/2008. (Attachments: # (1) Notice # (2) Exhibit A# (3) Certificate of Service and Service List) (O'Neill, James)
And here's the filing in SCO v. Novell by SCO:
508 - Filed & Entered: 03/31/2008
Witness List(Proposed)
Docket Text: Proposed Witness List and Exhibit List (Supplemental) by SCO Group. (Normand, Edward)
And here's the US Trustee's Office at work, first the Objection to the plan to pay the Plan Sponsor (docket #418) and then the Objection to the Disclosure Statement (#419):
***************************************
UNITED STATES BANKRUPTCY COURT
FOR THE DISTRICT OF DELAWARE
In re
THE SCO GROUP, INC., et al.,
Debtors. |
Chapter 11 Case Number 07-11337 (KG)
(Jointly Administered)
Hearing Date: April 2, 2008 at 2:00 P.M. |
OBJECTION OF THE UNITED STATES TRUSTEE TO THE
DEBTORS' MOTION TO APPROVE SETTLEMENT COMPENSATION OR SALE
COMPENSATION AND EXPENSE REIMBURSEMENT TO PLAN SPONSOR
(DOCKET ENTRY # 346)
In support of her objection to the Debtors' motion for approval of settlement compensation
or sale compensation and expense reimbursement to the Plan Sponsor (the "Motion"), Kelly Beaudin
Stapleton, United States Trustee for Region 3 ("U.S. Trustee"), by and through her counsel, avers:
INTRODUCTION
1. Under (i) 28 U.S.C. § 1334, (ii) (an) applicable order(s) of the United States District
Court for the District of Delaware issued pursuant to 28 U.S.C. § 157(a), and (iii) 28 U.S.C. §
157(b)(2), this Court has jurisdiction to hear and determine the Motion.
2. Under 28 U.S.C. § 586, the U.S. Trustee has an overarching responsibility to enforce
the laws as written by Congress and interpreted by the courts. See United States Trustee v.
Columbia Gas Sys., Inc. (In re Columbia Gas Sys., Inc.),33 F.3d 294, 295-96 (3d Cir. 1994) (noting
that U.S. Trustee has "public interest standing" under 11 U.S.C. § 307 which goes beyond mere
pecuniary interest); Morgenstern v. Revco D.S., Inc. (In re Revco D.S., Inc.), 898 F.2d 498, 500 (6th
Cir. 1990) (describing the U.S. Trustee as a "watchdog").
(1)
3. Under 11 U.S.C. § 307, the U.S. Trustee has standing to be heard on the Motion and
the issues raised in this objection.
GROUNDS/BASES FOR RELIEF
4. 11 U.S.C. § 503(b)(1)(A) allows for the payment of certain administrative expenses,
including "the actual, necessary costs and expenses of preserving the estate." 11 U.S.C. §
503(b)(1)(A). Contrary to applicable law, the Plan Sponsor Protections are bonus compensation to
SNCP for providing a financing commitment of questionable value at an above-market cost. In the
Motion, SCO reaffirms its belief that "it has an excellent chance to prevail in the Novell/IBM
Litigation, including potential for an award of potential damages in its favor" (Mot. ¶ 7), yet seeks
to award SNCP one-half of the net proceeds if any of the Litigation Claims are resolved prior to the
Effective Date, regardless of whether the Plan is confirmed. Mot. ¶ 8. Given that the Debtors take
the position that the Litigation Claims are valuable, they do not even attempt to argue that awarding
one-half of the value of those claims to SNCP pursuant to a pre-Effective Date settlement represents
the "actual, necessary cost[s]" of preserving the Debtors' estates under 11 U.S.C. § 503(b)(1)(A).
See Calpine Corp. v. O'Brien Env'tl Energy, Inc. (In re O'Brien Env'tl Energy, Inc.), 181 F.3d 527,
535 (3d Cir. 1999) (noting that break-up fee and expense reimbursement requests are subject to
"general administrative expense jurisprudence"). Cf. Bruce A. Markell, The Case Against Breakup
Fees in Bankruptcy, 66 Am. Bankr. L.J. 349, 369 (1992) ("[T]he maximum breakup fee that a court
should approve is one that offers to repay a bidder's direct costs of preparing and making its bid.
Any additional fee will overcompensate the bidder for its risk in bidding; it pays the bidder for
bidding when it would have bid without the fee."). In fact, the Debtors concede that SNCP's
proposed, pre-Effective Date share of settlement proceeds from Litigation Claims is a windfall.
(2)
Mot. ¶ 12 (describing SNCP's share of settlement proceeds consummated pre-Effective Date as an
"extraordinary share").
5. Second, the Debtors also seek to permit SNCP to "participate directly in any
settlement discussions relating to the Novell/IBM Litigation." Mot. ¶ 8. SNCP is interested in
maximizing its own recovery and minimizing its downside risk, which means that, in light of the
Debtors' dismal operating history, SNCP has every incentive to instruct SCO to adopt a settlement
strategy which favors settlement of its Litigation Claims prior to the Effective Date on terms which
obviate the need for the firm to provide the promised financing (i.e., a settlement involving a sale
of the company), regardless of whether that result aligns with the estates' interests or
Novell's/IBM's interests. Rather than assisting the Debtors' efforts to carry out their fiduciary
duties, the insertion of SNCP into settlement talks complicates the Debtors' efforts to carry out those
duties and potentially puts the Debtors' existing managers in the position of deciding whether they
want to run counter to SNCP in the negotiations, regardless of the personal consequences (i.e.,
eventual loss of employment) which could ultimately follow from taking that position.
6. Third, the Debtors do not justify their proposed $500,000 expense reimbursement
to SNCP (Mot. ¶ 18). Absent the execution and filing of the Definitive Documents (see below), the
U.S. Trustee and other parties in interest cannot complete their evaluation of whether the Debtors'
expense reimbursement request passes muster under 11 U.S.C. § 503(b)(1)(A).
7. In addition to the foregoing, the Debtors agreed to a "no-shop" or a "window-shop"
provision in the MOU (see "Restrictions on Affirmative [sic] Seeking Competitive Transactions,"
pg. 13 of MOU (Ex. A. to the Motion). The "no-shop" or "window-shop" provision is not described
in either the Motion or the proposed form of order as a "Plan Sponsor Protection" (paragraph 2 of
(3)
the proposed form of order). The provision prevents SCO from "solicit[ing] or encourag[ing]
submission of inquiries, proposals or offers from any third parties regarding any potential financing
of a plan of reorganization for SCO" until August 15, 2008 (each such inquiry, etc., a "Competitive
Transaction"). A "determination" by SCO or SCO's board of directors to "pursue" a Competitive
Transaction is grounds for terminating the financing arrangements. There is no discussion of the
justification — factual or legal — for the Debtors' request for approval of this term. See In re
Bidermann Indus. U.S.A., Inc., 203 B.R. 547, 552 (Bankr. S.D.N.Y. 1997) (discussing "window-
shop" provision).
8. Finally, SNCP has not signed the Definitive Documents contemplated by the MOU,
as the firm has a due diligence "out" under the deal which expires at the commencement of the
hearing on the Debtors' motion for approval of its proposed disclosure statement (see "Due
Diligence," page 13). This Court should not even entertain the Motion absent the execution of
Definitive Documents and granting parties in interest a reasonable opportunity to review those
documents. See In re Tiara Motorcoach Corp., 212 B.R. 133 (Bankr. N.D. Ind. 1997) (ruling on
break-up fee request in the absence of definitive documents would be premature).
[Continued on next page — space intentionally left blank]
(4)
CONCLUSION
WHEREFORE the U.S. Trustee requests that this Court issue an order denying the Motion.
Respectfully submitted,
KELLY BEAUDIN STAPLETON
UNITED STATES TRUSTEE
BY: /s/ Joseph J. McMahon, Jr.
Joseph J. McMahon, Jr., Esquire (# 4819)
Trial Attorney
United States Department of Justice
Office of the United States Trustee
[address]
[phone]
[fax]
Date: March 27, 2008
(5)
********************************************
********************************************
UNITED STATES BANKRUPTCY COURT
FOR THE DISTRICT OF DELAWARE
In re
THE SCO GROUP, INC., et al.,
Debtors. |
Chapter 11 Case Number 07-11337 (KG)
(Jointly Administered)
Hearing Date: April 2, 2008 at 2:00 P.M. |
OBJECTION OF THE UNITED STATES TRUSTEE TO (A) THE DEBTORS'
PROPOSED DISCLOSURE STATEMENT AND (B) THE DEBTORS' MOTION FOR AN
ORDER (I) SCHEDULING THE CONFIRMATION HEARING; (II) APPROVING
FORM AND CONTENTS OF SOLICITATION PACKAGE; (III) APPROVING FORM
AND NOTICE OF THE CONFIRMATION HEARING; (IV) ESTABLISHING RECORD
DATE AND APPROVING PROCEDURES FOR DISTRIBUTION OF SOLICITATION
PACKAGES; (V) APPROVING FORMS OF BALLOT; (VI) ESTABLISHING VOTING
DEADLINE FOR RECEIPT OF BALLOTS; (VII) APPROVING PROCEDURES FOR
VOTE TABULATIONS; (VIII) ESTABLISHING DEADLINE AND PROCEDURES FOR
FILING OBJECTIONS TO CONFIRMATION OF PLAN; AND
(IX) GRANTING RELATED RELIEF
(DOCKET ENTRY # 369, 394)
In support of her objection to (a) the Debtors' proposed disclosure statement and (b) the
Debtors' motion for an order (i) scheduling the confirmation hearing; (ii) approving form and
contents of solicitation package; (iii) approving form and notice of the confirmation hearing; (iv)
establishing record date and approving procedures for distribution of solicitation packages; (v)
approving forms of ballot; (vi) establishing voting deadline for receipt of ballots; (vii) approving
procedures for vote tabulations; (viii) establishing deadline and procedures for filing objections to
confirmation of plan; and (ix) granting related relief, (the "Motion"), Kelly Beaudin Stapleton,
United States Trustee for Region 3 ("U.S. Trustee"), by and through her counsel, avers:
(1)
INTRODUCTION
1. Under 28 U.S.C. § 157(b)(2)(L) and (an) applicable order(s) of the United States
District Court for the District of Delaware, this Court has jurisdiction to hear and determine the
Motion and this objection.
2. Under 28 U.S.C. § 586(a)(3)(B), the U.S. Trustee is charged with monitoring plans
and disclosure statements filed under chapter 11 of title 11 and filing with the court "comments with
respect to such plans and disclosure statements."
3. Under 11 U.S.C. § 307, the U.S. Trustee has standing to be heard with regard to the
Motion and this objection.
GROUNDS/BASIS FOR RELIEF
4. The Disclosure Statement does not contain "adequate information" as required under
11 U.S.C. § 1125 for several reasons, among them the following:
-
The Debtors' disclosure statement does not describe their business plan
and/or financial projections in sufficient detail. Further, the disclosure
statement does not describe the impact that an adverse, final, non-appealable
ruling in one or more of the significant litigation matters it is presently
involved in may have on the Debtors' ability to carry out their business plan
and/or meet those projections — for example, how much of the Debtors'
business plan is predicated on the Debtors' use of property which Novell
claims to be its own? Such information enables interested parties to evaluate,
among other issues, whether confirmation of the plan is or is not likely to be
followed by the liquidation, or the need for further financial reorganization,
of the debtor or any successor to the debtor under the plan, unless such
liquidation or reorganization is proposed in the plan. See 11 U.S.C. §
1129(a)(10).
-
The Debtors' disclosure statement does not contain adequate information
about Stephen Norris Capital Partners, LLC ("SNCP") and/or SNCP's ability
to provide — or procure — the exit funding commitment referenced in the
disclosure statement.
(2)
- The Debtors' disclosure statement does not adequately describe the proposed
directors/officers of the reorganized Debtors, their affiliations and the
compensation proposed to be paid to such persons. See 11 U.S.C. §
1129(a)(5).
The factual and legal bases for the aforementioned concerns (and other objections) are more fully
addressed in the objection of International Business Machines Corporation ("IBM") to the disclosure
statement and the Debtors' proposed solicitation procedures (Docket Entry # 394). For substantially
the same reasons stated in IBM's objection, the U.S. Trustee objects to the proposed disclosure
statement.
5. Additionally, there are a number of exhibits to the disclosure statement that have yet
to be filed. The U.S. Trustee reserves the right to be heard regarding the adequacy of the Debtors'
disclosure statement after those documents have been filed with the Court.
CONCLUSION
WHEREFORE the U.S. Trustee requests that this Court issue an order/orders denying the
Motion, disapproving the disclosure statement, or granting other relief consistent with this objection.
Respectfully submitted,
KELLY BEAUDIN STAPLETON
UNITED STATES TRUSTEE
BY: /s/ Joseph J. McMahon, Jr.
Joseph J. McMahon, Jr., Esquire (# 4819)
Trial Attorney
United States Department of Justice
Office of the United States Trustee
[address]
[phone]
[fax]
Date: March 27, 2008
(3)
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Authored by: webster on Saturday, April 05 2008 @ 12:12 PM EDT |
. [ Reply to This | # ]
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Authored by: red floyd on Saturday, April 05 2008 @ 12:21 PM EDT |
Please state the nature of the correction in the title
---
I am not merely a "consumer" or a "taxpayer". I am a *CITIZEN* of the United
States of America.
[ Reply to This | # ]
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Authored by: red floyd on Saturday, April 05 2008 @ 12:22 PM EDT |
Read the red, make those clickies!
---
I am not merely a "consumer" or a "taxpayer". I am a *CITIZEN* of the United
States of America.
[ Reply to This | # ]
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- Microsoft $lobby$ efforts with gov., ISO, etc... means we need to join to fight this corruption. - Authored by: Anonymous on Saturday, April 05 2008 @ 12:32 PM EDT
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Authored by: red floyd on Saturday, April 05 2008 @ 12:25 PM EDT |
Please state the newspick in question in your title.
For the TRIFECTA!
---
I am not merely a "consumer" or a "taxpayer". I am a *CITIZEN* of the United
States of America.
[ Reply to This | # ]
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- Suggestion: Monsanto’s Harvest of Fear - Authored by: kh on Saturday, April 05 2008 @ 02:50 PM EDT
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Authored by: The Mad Hatter r on Saturday, April 05 2008 @ 12:44 PM EDT |
There's a 1922 book available in its entirety on Google
Books that explains the subject, A Brief for the Trial of Civil Issues Before a
Jury, and the section on impeaching witnesses starts here. Keep in mind the date
of the book and the fact that the law never stands still, but it certainly will
give you the overarching concepts, if not all the modern details. If you read
that chapter in the book, I think you may discern why unscrupulous players might
try to smear a person, so as to deliberately damage the person's reputation. For
example, suppose a company was worried about potential testimony by someone. If,
a year before trial, a friend in the media or a compliant blogger started a
campaign to say the person was not truthful or had a reputation for not playing
fair in some way, later, at trial, that "evidence" might be introduced to
impeach that person's testimony. Dirty, yes. Conceivable? I think
so.
It's not only conceivable, it's already happening.
Jason Matusow posted, and later retracted the insinuation that Groklaw is an IBM
Front. He was corrected quite nicely by Andy Updegrove, after which he retracted
the statement by using "strike out" on the words. Note that the words are there,
they will still be indexed by any search engines that visit that
page.
Jason originally said that it was OK for him to say this, as it
was his personal opinion. Now Jason has a right to believe that the Earth is
flat. He also has a right to argue this, and to try and convince others. He does
not have a right to conduct a smear campaign against people he disagrees
with.
That being said - the problem really isn't Jason. Where do you
think Jason got this opinion from? Upper Management. He wouldn't be likely to
have believed anyone else. If Upper Management told him that Groklaw was an IBM
front, it is likely they are telling other people this as well. A lot of people
will laugh at them. Can you imagine them approaching someone like Mike Magee
with that line? I can imagine what sort of story Mike would have
written.
There are however some people who either don't know the
situation with Groklaw (like possibly Jason) or have an axe to grind with
Groklaw (Like possibly Management at TSCOG), who are likely to print this and
other baseless assertions, and in a lot of cases these people know that the
assertion is baseless, but smear is what they want to do, and what they will
do.
So keep your eyes open. I expect an assault on the Groklaw
Wikipedia page is likely, more snide articles by MOG, but the dangerous stuff
will be blog postings on less popular blogs, as they can still do damage with
the search engines, but are hard to find.
--- Wayne
http://sourceforge.net/projects/twgs-toolkit/
[ Reply to This | # ]
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- Smear Campaigns - Authored by: PJ on Saturday, April 05 2008 @ 12:53 PM EDT
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Authored by: Anonymous on Saturday, April 05 2008 @ 01:24 PM EDT |
So at what point does the judge in Delaware tell SCO to stop POURING money into
the schemes until it has factual owned materials to be associating to them?
I mean, I thought he'd have told them to hold off on making any plans involving
ANY assets (especially IP related) until events in Utah had worked themselves
out.
Otherwise, it seems like there's little to stop SCO from leaking money until
there's little to nothing left.[ Reply to This | # ]
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Authored by: Anonymous on Saturday, April 05 2008 @ 01:26 PM EDT |
Courts are not as predictable as math?!
I am positively sure that some branches within math are not as predictable as
Courts! ;)
IMANAL - I'M Absolutely Not A Lawyer (just didn't login)
[ Reply to This | # ]
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Authored by: symbolset on Saturday, April 05 2008 @ 01:36 PM EDT |
It's a stall -- and a successful one. They've succeeded in avoiding the
creditors' reorganization plan until after the trial.[ Reply to This | # ]
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Authored by: kh on Saturday, April 05 2008 @ 02:56 PM EDT |
"how much of the Debtors' business plan is predicated on the
Debtors' use of property which Novell claims to be its own?"
If
the point of Chapter 11 is ultimately to reorganise and the sword of Damocles
hanging over SCO is that it doesn't have enough assets to cover the results of
it's own ill-began litigation, what is the point of it being in Chapter 11?
What are the BK Court's real options in this sort of case when this
becomes clear? [ Reply to This | # ]
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Authored by: bezz on Saturday, April 05 2008 @ 03:17 PM EDT |
I think I see what the US Trustee has in mind here. There are not sufficient
grounds to force SCO into Chapter 7 because it is still solvent -- it has a cash
reserve, although it is dwindling.
There is a PSJ in Utah that states some of SCO's assets belong to Novell and SCO
tried to sell them to York to fund litigation. Next, SCO filed an incomplete
and unacceptable plan to, essentially, continue to "operate" and
litigate using loans from SNCP; the loans were not shown to be funded and the
litigation asset plan going forward was impaired. The Trustee sees that SCO is
really only interested in continuing litigation. While SCO has not explicitly
said so, the deals presented so far suggest it.
The Trustee knows that a motion for Chapter 7 will probably be denied because
SCO is still solvent. However, the Trustee can clearly point out that SCO tried
to sell Novell's assets. Some or all of SCO's money may be Novell's, but SCO
will burn through it before a ruling is issued in Utah.
There is grounds to appoint an independent fiduciary to protect Novell's assets.
At a minimum, that would apply to the UNIX assets and cash flow. It may also
apply to the remaining cash. It depends on what the Trustee requests control
over. If it includes the cash (because Novell's share of the Sun and MS money
was converted), that would leave SCO management to operate using only its own
assets and potentiall cut off some or all of the cash flow from the UNIX
business to be wasted on professional services and funding overseas
subsidiaries.
What would be left of operations and cash flow? That's SCO's problem to figure
out. They are still the DIP and can continue to remain so until they are
insolvent. But without access to cash, they would be insolvent very quickly,
indeed. What is left of Novell's cash and assets is protected from liquidation
under Chapter 7.[ Reply to This | # ]
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Authored by: Anonymous on Saturday, April 05 2008 @ 03:45 PM EDT |
from ZoomInfo -- United Linux, edge click park(SCO) - SCO
http://www.zoominfo.com/Search/PersonDetail.aspx?PersonID=241413374
2005 SCO Forum presentations
http://www.sco.com/2005forum/presentations/
HipCheck reviewer Guide
http://64.233.167.104/search?q=cache:G-KceSQ_0IEJ:scomobile.com/Reviewers%2520gu
ide%2520103FINAL.pdf+Andy+Nagle&hl=en&ct=clnk&cd=8&gl=us&cli
ent=firefox-a[ Reply to This | # ]
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Authored by: Anonymous on Saturday, April 05 2008 @ 05:49 PM EDT |
[ Reply to This | # ]
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- Correction! - Authored by: Anonymous on Saturday, April 05 2008 @ 05:52 PM EDT
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Authored by: bezz on Sunday, April 06 2008 @ 05:28 PM EDT |
It looks like the US Trustee is ready to step into some new
territory in
requesting an independent fiduciary. They are most
commonly used to protect
ERISA (employee retirement) funds from being
used in a DIP's interest and assure
they are used in the best
interest of the employees. But there is more an
independent
fiduciary than that.
In a 1999 reprint of a 1988 article
Bankruptcy Independent
Fiduciary,
a fairly detailed explanation is provided. The burden of proof
is on
the movant (i.e. the US Trustee). The DIP is obligated to comply
with
three areas:
Continue the day-to-day operation of
the business
for the benefit of the creditors;
Comply with the extensive
information
producing and disclosure provisions of the Code; and
Formulate and file a plan of
reorganization consistent with the
requirements of section 1129.
SCO appears vulnerable in a few
areas.
In the area of information production, it has complied with
the
standards for financials, operations, etc.
Under reorganization,
the Trustee will likely point out the
inability or unwillingness to file a
reorganization plan as grounds.
SCO has filed two incomplete asset sale plans.
SCO even had the
audacity to appear in court and request an emergency approval
for the
incomplete York plan, while still working on it in front of the
judge.
Second, there was the collapse of the incomplete SNCP deal in
front of the
judge. I haven't found any cases that go into this
area, but the Trustee seemed
to highlight these failures as grounds
for an independent fiduciary.
SCO
is also vulnerable under the standard of dishonest or
fraudulent conduct. It is
their duty to continue operating in the
best interests of the debtors. Novell
certainly has a case here as
Mr. Spector stated that it was OK to sell off
Novell's property to
York in order obtain money to continue litigation against
Novell.
IBM's and the US Trustee's objections to the original SNCP plan
also
fall under the realm of failing to act in the best interest of the
estate
and creditors.
The Trustee has to provide proof of repeated misconduct; a
sense
of urgency or sense the the DIP is "floundering" and unable to
reorganize
are also generally needed. The court then has a lot of
flexibility if it
decides to appoint an independent fiduciary. It
may be in the form of oversight
only all the way to taking over
operations.
SCO's actions, Mr.
Spector's words and the desperation displayed
in court are going to haunt them
in this case if SCO doesn't come up
with something acceptable and complete this
time.
In the not necessarily germane to SCO department, Congress
made
additions to the Bankruptcy Code in 2005, including modifications to
the
independent fiduciary section. The change had the effect that if
a company
cleaned house -- replaced management -- before filing for
Chapter 11, the new
management could be considered to be independent
and unconnected to fraud
perpetrated by previous management.
In a 2007 appeal ruling, an independent
fiduciary was appointed for The 1031 Tax Group on the grounds
of fraud and
urgency due to lack of funds; it maintained other people's money in compliance
with a real estate capital gains provision and its manager siphined off the
monet for his own use. There is a considerable
amount of information concerning
In Re The 1031 Tax Group, LLP, but
SCO did not clean house and it does not
apply.
New
Management
Fraud
Charges
However, it is interesting in
light of the SNCP plan's
specification that CEO Darl McBride would be
removed. Could there be internal
SCO concern of criminal fraud
liability and the need to clean house? It is
normally assumed, under Chapter 11, that existing management is most familiar
with the business and best capable of guiding it forward. It is curious SNCP
would specify Darl must go in order to complete the deal. It suggests they
consider him at least not sufficiently competent to move forward, but in light
of all the shenanigans in court, maybe there is something more to it. [ Reply to This | # ]
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Authored by: Anonymous on Monday, April 07 2008 @ 07:26 PM EDT |
In addition to the witness list, SCO lists only ONE document for evidence, dated
May 23, 1996.
Is it this nearly context-free letter?
http://www.sco.com/company/legal/update/Novell_Sunsoft.pdf[ Reply to This | # ]
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