Half of SCO's Accountants Quit

Groklaw Reader writes "Apparently, SCO's lawyers were working overtime last Sunday, because they wrote a quick plea to the bankruptcy court for permission to hire accounting temps. Why? Approximately half of SCO's finance department has resigned or been fired. Two who resigned had over ten years of experience each. One can only assume that they know what's about to happen to SCO."

Almost done.

[by Anonymous Coward]

Good!

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

I guess the rats are leaving the ship.

Re:Almost done.

[betterunixthanunix (980855)]

I wonder what would happen if there were no employees left? What would the bankruptcy judge do?

Re:Almost done.

[jcr (53032)]

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

-jcr

Re:Almost done.

[Zeinfeld (263942)]

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

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

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

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

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

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

Re:Almost done.

[Harmonious Botch (921977)]

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

How do we know half the accountants quit?

[by Anonymous Coward]

Who counted them?

Re:Almost done.

[semiotec (948062)]

while I am as glad as most people here about SCO's deserved and inevitable downfall, sometimes I couldn't help thinking whether it would have been better if Novell hadn't stepped into this fight.

Sure, I understand that they are protecting their rights and IP and that they are right to do so. But by pulling the carpet out from under SCO's feet, they also prevented SCO's claims that "millions of lines of codes were copied from UNIX to Linux" being thoroughly tested (and debunked) in court.

I think that it was a good thing that SCO targeted IBM, who 1) had the resources to fight SCO (and their sponsors), and 2) happened to be on the side of Linux developers/users. So it would have been an excellent opportunity to quash this claim once and for all. Despite SCO's bluster and chest-thumping, I think it would have been extremely unlikely for them to be able to convince any person of even limited intelligence of their claims (including Enderle, Didio and O'Gara).

But all we have now is a statement from Novell saying that there is no Unix in Linux. With Novell being so deep in bed with Microsoft, I am slightly nervous with Novell's overall position and and disposition towards Linux.

Re:Almost done.

[thej1nx (763573)]

IIRC, the SCO claims were never going to be tested in court anyways, because from what I understood, the case they actually filed was entirely different from whatever nonsense Darl McBride was spouting.

They may have claimed about millions of lines of codes being copied, but the actual case filed was only regards breach of contract. They claimed that IBM had donated its AIX code to the Linux kernel. Their second argument consisted of "Boohoo, Linux would have been nowhere if not for IBM. IBM created a competitor for us. We hate competition. Boohoo!".

The only piece of code they ever showed as being part of the Linux kernel, turned out to have already been released under a BSD license by the original creators and had already been replaced by better alternatives in the Kernel, which made their whole claim seem to go up in smoke.

All in all, it was just FUD sponsored by possibly an under-the-table deal between Microsoft and Darl McBride, with the aim of stemming the expansion of Linux in the server market, till Microsoft got its slightly-more-stable-than-xp vista OS out. It might be interesting to observe in future, whether any more information regards this possible deal comes out, and whether Microsoft can be sued under another anti-trust, unfair-practices case for its part in generating the controversy.

Re:Almost done.

[burnin1965 (535071)]

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

Actually that is not true. The SCO Groups claims have been thoroughly tested in the court system and The SCO Group are where they are today because the facts discovered in the SCO Group vs IBM case revealed that not only were they lying about finding millions of lines of infringing code but they knew full well they were lying.

Initially they claimed millions of lines of infringed code including line for line copying down to even the comments. When called on that bluff by IBM in the court they produced no evidence and the judge proclaimed an "astonishing lack of evidence" on the part of The SCO Group. Later it was revealed that internal SCO Group e-mails communicated the results of their own investigation of infringement in linux and found "aboslutely nothing" at which point their story changed and it was no longer literal copying but instead obfuscation of copied code. But still when they were compelled to produce the evidence which supported their claims they produce abosutlely nothing and instead changed their story again to claim that somehow they held ownership of "methods and concepts". Unfortunately The SCO Group holds no patents so they have no protected "methods and concepts" either.

This entire debacle was a scam from the beginning and it didn't go to a jury trial because the judge realized that The SCO Group's intention was to baffle the jury with the same bullcrap in hopes of making them believe that some how they must own something in linux when in fact they don't own squat.

Oh, this case has been tested, not just beyond a shadow of a doubt but beyond a frickin' eclipse of a doubt. Scumbags and grifters through and through.

Re:Almost done.

[VGPowerlord (621254)]

You are aware that SCO was claiming that IBM stole code from UNIX and put it into Linux? That was the entire basis of their lawsuit.

However, Novell said "Hey, we own UNIX." (paraphrased) A judge agreed. SCO's lawsuit evaporates.

Furthermore, Novell has been fighting SCO [novell.com] on this since 2003.

Novell also purchased SUSE Linux in 2003 and turned it into OpenSUSE [opensuse.org], which it also uses as the base for its commercial Linux products.

Novell has also made significant contributions to XGL, Compiz, and OpenOffice to name a few projects.

Despite the constant FUD since the Novell/Microsoft deal, Novell's business model now revolves around FOSS software, so any attempt to kill it would be cutting their own throat.

Can't pay themselves

[no_pets (881013)]

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

Re:Can't pay themselves

[ackthpt (218170)]

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

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

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

Re:Can't pay themselves

[TheViffer (128272)]

Suppose they could start paying their employees with stock options ...

Oblig. Simpsons quote

[Opportunist (166417)]

"While we're waiting, help yourself to some more stock options"

Crumble Crumble....

[beheaderaswp (549877)]

I think the biggest worry I have now... which may actually be moot- is who ends up with SCO's assets and IP?

Once they hit chapter 7, as the money runs out, the court will dismember them. Hopefully, the assets they do have end up with IBM.

I'm not so sure about Novell's alignment in the open source world yet.

But even better is this:

If one of their accounting people was a CPA- they could be in deep do do if
there are problems found.

I know this, I'm watching a corporation pull the bond out from under a CPA right
now. The liabilities are incredible and the end game is scary.

Maybe an accountant will have damaging information heh?

Re:Crumble Crumble....

[Daimanta (1140543)]

Once they hit chapter 7, as the money runs out, the court will dismember them.

Ouch, please remember me never to get bankrupt.

Re:Crumble Crumble....

[fractoid (1076465)]

Ouch, please remember me never to get bankrupt.

You mean please remind you. Unless you want to be remembered, in the sense of undoing the dismemberment.

SCO's assets and ip

[falconwolf (725481)]

I think the biggest worry I have now... which may actually be moot- is who ends up with SCO's assets and IP?

What assets and ip?

Falcon

Re:SCO's assets and ip

[shadowbearer (554144)]

  There's probably a good number of chairs.

SB

Re:SCO's assets and ip

[TheVoice900 (467327)]

I think there's someone in Redmond who's already called dibs on those.

Re:SCO's assets and ip

[InvalidError (771317)]

According to filings, SCO has a $7.5M outstanding debt and about $15M in cash or other assets.

However, SCO is also illegally holding onto ~$36M of Novell's Unix licensing loyalties.

The one who will get first dibs on SCO will be Novell since that ~$36M is Novell's capital (not a debt/credit) which SCO is trying to convert (fraud) into its own... a detail which SCO apparently conveniently failed to mention to the bankruptcy judge in the first hearing.

Novell licensed its Unix to SCO and asked for a ~95% royalty on sales. SCO sold Unix licenses but never gave any of the money back to Novell. Novell is suing to get this capital back. SCO does not want to be curbed right away so it now attempts to stall by filing for bankruptcy. Tomorrow, Novell, IBM, RedHat and others will surely point out the many faults in Monday's SCO declarations and the judge will very likely order the Novell vs SCO counterclaims suit to proceed in order to establish how much capital SCO owes Novell since settling capital disputes preempts negotiating debts.

By the time chapter 11 proceedings are completed - presumably after Novell is awarded about $20M - SCO will be ripe for chapter 7.

Re:SCO's assets and ip

[Ziest (143204)]

What assets and ip?

The several dozen copies of the Book of Mormon ?

Need to accrue Novell payment?

[seanadams.com (463190)]

Something I have not seen mentioned yet is whether SCO needs to accrue an estimate of what they should be paying Novell - whether they have the cash or not, it needs to go on the books. Their current balance sheet does not reflect it, which is probably one reason why the company is still grossly overvalued at $4.72M.

Re:Need to accrue Novell payment?

[by Anonymous Coward]

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

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

Re:Need to accrue Novell payment?

[HiThere (15173)]

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

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

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

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

Caution: IANAL

Re:Need to accrue Novell payment?

[Ziest (143204)]

Criminal charges for what? Lousy books?

Yes. As corporate officers of a publicly traded company they have a legal obligation to make sure the books are in order. If there is fraud in the books then they face prosecution. Have you been asleep for the last 5 years or so? Do the names Enron, Tyco, or WorldCom ring any bells??

Re:Need to accrue Novell payment?

[dbIII (701233)]

which is probably one reason why the company is still grossly overvalued at $4.72M.

Is that $4.72 Monaco dollars or Moldovian dollars?

In other news...

[nebaz (453974)]

SCO sued Novell, IBM, and Anderson Consulting, declaring that SCO owned the intellectual property entitled "Accountant" and that their proposed licensing scheme of $699 per day, per "accountant", had been rebuffed by said companies. Details to follow.

What about the other half?

[Trillan (597339)]

Seriously, what about the other half? Do they have some sort of personal reality distortion field?

Re:

[ackthpt (218170)]

Seriously, what about the other half? Do they have some sort of personal reality distortion field?

They've either got iron-clad guarantee of compensation or they are afraid to leave, go look for another job, what have you.

Ultimately they will all likely find things do not work out and that Bob is indeed not their uncle.

Pessimist.

[Weaselmancer (533834)]

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

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

Re:Pessimist.

[Weaselmancer (533834)]

Dude, this is the best time to get in on it! It can ONLY GO UP!

Re:

[Trillan (597339)]

The funny part is if it drops a little more, it will be such a bargain that it'll be at least as good a value as a lottery ticket...

Re:What about the other half?

[SpaceLifeForm (228190)]

Translation: Nearly half resigned, and nearly half were fired.

They have no one left to cook.

Half of seven?

[Fred Ferrigno (122319)]

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

Re:Half of seven?

[3vi1 (544505)]

Still... if you have that many accountants with that much experience quit at the same time then either a) It's their educated opinion that the company won't be able to pay them much longer. or b) They've being asked to do something they consider improper/illegal for the bankruptcy proceedings and decided to get out on the best of possible terms (i.e. other companies won't be afraid they're hiring whistleblowers and SCO will still give them good references).

Seven people in accounting?

[DaleGlass (1068434)]

What's there to account at SCO besides the wages? Do they even still sell something?

Re:Seven people in accounting?

[sfonative (1031350)]

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

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

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

He replied, "You're probably right."

Ethics lapses and no pay = grumpy accountants

[christian.einfeldt (874074)]

In the wake of Enron, etc., accountants are looking over their shoulders whenever they are asked to do something unethical. I am betting that not only are the accountants seeing that they might not be paid on time or at all, but they are also seeing that they are being called upon to do something unethical, something that would be a blight on their careers.

You can bet that these accountants were not working for SCO because they loved Daryl. So late or non-existent pay + ethical lapses = hasta la vista, baby.

When the accounts pack up - run!

[flyingfsck (986395)]

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

Novell sends in the big guns

[by Anonymous Coward]

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

They will probably be trying for two things:

1. SCO's attempt at chapter 11 gets rejected on the grounds of bad faith. groklaw post [groklaw.net]
2. Even if they don't get chapter 11 pitched, they want the trial in Utah un-stayed.

Given SCO's record, it seems likely that Novell will succeed. Given a checklist for bad faith in bankruptcy, SCO meets most of the criteria.

It seems to me that SCO's bankruptcy petition is a bit of a Hail Mary pass attempt. I'm not sure what else they were supposed to do though. Their goose has been cooked for quite a while and they have been doing a masterful job of putting off the final resolution as long as possible.

Re:Novell sends in the big guns

[kilgortrout (674919)]

Motions to dismiss for a bad faith filing are hardly ever granted even in egregious cases and are generally limited improperly filed Ch13 consumer cases. There is no such motion pending so don't expect that to be argued tomorrow. Motions to lift the automatic stay are usually only granted to secured creditors under very specific circumstances. Again, Novell hasn't filed a motion to lift the stay, so, no, that ain't happening tomorrow either. Even so, stay and bad faith litigation require the filing of briefs for and against and an evidentiary hearing, all of which have to be scheduled. None of this has happened.

The main issues in the case will be whether, and to what extent, Novell can grab SCO assets out of the bankruptcy case on the theory that SCO was holding the MS and Sun payments in trust for Novell. You can predict that SCO will argue that the contract with Novell only creates a debtor creditor relationship with Novell and Novell can stand in line with the other creditors.

disambiguation

[buss_error (142273)]

SCOX had seven people in the accounting department. 3 were terminated or resigned. SCOx's problems are obvious enough not to blow this all out of reason and make it sound like a thundering cavalcade ran for the door. The truth about SCOx and Darl is quite bad enough without inflating the facts. That's a SCOx tactic, and one we need not indulge in since SCOx does it so well.

Not that I am a SCOx supporter. Far from it. I think Novel should go after Darl in his own natural person to recover court costs. And if Darl dies while I'm still able to get around, count on it that I'll fly to his grave site to relieve myself on it. Twice. If it's worth doing, it's worth doing well.

A more damming metric would be to quote how many engineers SCO had on staff, vs. how many SCOx retained. Answer: Not many! SCOx has allowed their product to lag behind hardware to the point that the OS is irrelevant on modern hardware. It simply doesn't work on the new stuff, and doesn't support many current technologies. That's a death knell for any OS.

SCOx concentrated on a niche market, and they didn't pick it any too carefully. That SCOx finds themselves bypassed and disfavored is a mark of just how badly they chose to grow. It's never pretty when a technology company chooses to become a litigation company, it's even worse when they choose the wrong technology to litigate against.

We're getting closer

[BanjoBob (686644)]

Maybe this image that I saw on Groklaw will be an indication of things to come....

http://www.yourfilehost.com/media.php?cat=image&file=Darl.jpg [yourfilehost.com]

It may not be what you think...

[Alpha830RulZ (939527)]

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

Re:

[ScrewMaster (602015)]

Well the fact is, the accountants aren't liable for any of SCO's sins.

They would be if any of those sins included some creative accounting, which is certainly a possibility.

Re:explain please,

[AJWM (19027)]

I just happened to pick up other traits geeks don't seem to have.

Sanctimoniousness, for one.

Re:The sad thing really is

[DarkVader (121278)]

Anybody who invests in a company without doing some basic research (I'm not talking hard stuff here, just the first page of google results) is asking to lose their investment.

And SCO is a penny stock at this point, nobody who is sane and worried about their life savings invests in those.

Re:delisting, bankruptcy

[value_added (719364)]

I guess a company can still be listed on NASDAQ even though it's bankrupt!

Years ago I worked for a law firm that specialised in things like mergers and acquisitions. They also did a lot of bankruptcy work.

One of their clients was a large company that was mired in Chapter 11 proceedings and was, from the perspective of the general public, doomed to extinction. The attorneys came up with a plan for the company to raise money (and expand their business) by issuing new stock which, unsurprisingly, sounds as bizarre as it is illegal. A few months later (and many letters back and forth from the SEC), the company did just that. They ended up raising just under $40 million, and the law firm earned not only their own extravant fees, but bonuses for arranging that deal and the ones that followed.

The company no longer exists today, but if there's any lesson to be learned from this, it's that the subjects of law and finance are more complex than what you read in the newspapers. If there's money to be made, you can be sure someone will be walking away with some of it, even in SCO's case.

The exact contrary is the case

[Flying pig (925874)]

A very smart accountant I knew once deliberately left a good job in a successful company to go and work for a company that was in the UK equivalent of Chapter 11 (voluntary arrangement with creditors.) He reckoned that the experience would accelerate his career. How many companies do you think get into trouble every year? How much of a premium do you think they are prepared to pay to accountants who know how to deal with that stuff? When the shit is really deep, that's when you are prepared to pay a lot of money to the guy with big rubber boots and a large pump.