Sunday, September 16, 2007

 

9/20 SNR

Ok, I've fallen way behind here, and I hardly know where to begin. Either SCO chose the worst possible time to file Chapter 11, or my PHBs in RL chose the worst possible time to set a project deadline, take your pick. In any case, I guess I'll start out trying to recap the last few days as best I can. Enough weirdness and excitement has gone down since Friday that I'll surely forget something important. GL's probably got it covered, whatever it might be.

So yesterday we had the initial hearing in the SCO BK case. Yes, a whole new court case has ensued, this time in Delaware, and there's a whole new set of laws and terminology to brush up on. I've never had occasion to learn anything about Federal bankruptcy law, and generally speaking I think that's a positive thing, but I've ended up feeling I'm in a little over my head here. BK court is a whole new ballgame, and there aren't even BK court shows on TV to help you get a feel for how the rules work. Yesterday's hearing dealt with a few motions I understand are routine at the outset of a BK case: Getting permission to keep paying employees, utility bills, taxes, and such, for the most part. I gather those motions are routinely granted, and were in this case, with another hearing scheduled for early October. The judge obviously has a thing or two to learn about SCO.

On the bright side, Judge Gross is about to learn a great deal about the wonderful wacky world of SCO. Seems that on the 13th, the day before the BK filing, SCO's board of directors had a bout of extreme generosity towards the company's general counsel, Ryan Tibbetts. For whatever reason, they suddenly decided he needed a $50k raise and a $50k net bonus. Net, meaning $50k after taxes, so the actual amount of Novell's money SCO expends will be a bit higher than that. Paying bonuses to key people just before a BK so they won't walk is controversial but not that unusual, I understand. What's a little more unusual is not disclosing the big bonus until after the BK judge approved their motion to keep paying employees. Maybe it's just an oversight, a perfectly honest mistake anyone could've made under the circumstances. But it looks awfully suspicious, if you ask me.

So today's fun legal term is "avoidance", in which "avoid" does not mean quite what you think it means. In BK court, an avoidance claim is a creditor's attempt to compel someone associated with the debtor to give back money they shouldn't have received. El Corton explains it all much more cogently than I can, in a great post over on IV.

As others have speculated, this business with Mr. Tibbetts, Esq., and his juicy bonus check might help explain why SCO lost three of its seven accountants on Friday, with two quitting and another being fired. This is just me speculating here, but perhaps they knew it was a dodgy business and didn't want their fingerprints all over it. Which leaves SCO with those remaining four accountants, who apparently didn't see anything unusual or disturbing about the sudden bonus. The main problem I see here is the notion that someone would stick with SCO through 4+ years of legal trouble and general ridicule, and only now quit on principle. I suppose it makes sense if the principle in question is simply keeping oneself out of Club Fed. Until the BK filing, I never really believed anyone might end up in jail because of SCO's escapades. I hoped they might, sure, but I didn't think there was a real chance it might happen. Now I'm not so sure about that. I still think it's an outside chance, but it's a nonzero chance now. Or if not jail, certain individuals may end up considerably poorer as a result of their work for SCO.

The soap opera around Mr. Tibbitts is only one of today's fun stories. The other big deal is a new nastygram from Nasdaq, this time about the BK filing. Under standard Nasdaq practice, if you file Chapter 11, you are expelled from the garden forthwith (i.e. September 27th), and left to wander the barren wastes of the Pink Sheets, with much gnashing of teeth and rending of garments. SCO, being SCO, naturally plans to appeal, and naturally they aren't saying on what grounds they're appealing. Perhaps they think they're smarter than all the Chapter 11 filers who came before them, and they can just stretch the appeals process out indefinitely, like they intend(ed) to do with IBM, Novell, and the others. But, you know, if Enron's execs turned out not to be the smartest guys in the room after all, what do you suppose the odds are for Darl, Ralphie, and friends? I mean, if they're such geniuses, what are they doing in Chapter 11 in the first place?

Oh, and there was a new 10-Q the other day as well, which finally -- finally -- contains the magic words "going concern", which they've studiously avoided up until now. Plenty of boilerplate about tough markets and competitive challenges, but "going concern" is a new one. Perhaps someone of the regulatory persuasion might take an interest in how SCO avoided said phrase right up until they'd already effectively stopped being a going concern.

Oh, let's see, what else is going on out there? Well, MOG is on the warpath again, for one. Here's a piece from a few days back about Kimball denying SCO's last do-over attempt, casting all sorts of wild aspersions at the judge. The judge who wouldn't let her intervene in the IBM case, it should be recalled. The only good part of the article is yet another awful photo of Darl, glowing red eyes and all. I'm serious. Look closer if you don't believe me. And today we got an angry MOG rant about "open source zealots". And she would know all about zealotry, wouldn't she? Actually that link doesn't work anymore. I'll change it if the story reappears at another URL.

The BK filing at least might help explain why MOG's been shilling for SCO all this time. She's a creditor, or rather her G2 operation is. What precisely SCO's been paying her for is undisclosed, as is the amount of money she's still owed. Even if the cash wasn't expressly for writing puff pieces about SCO, or involving herself in the IBM case, or stalking PJ, I still think it helps explain why she's stuck with them after all their other allies ran away. And now, after all she's done for SCO, they don't want to pay up. The ingrates.

Speaking of SCO allies fleeing, here's a mea culpa from Daniel Lyons, in which he actually comes out and says he was wrong about SCO all these years. Which I suppose is better than being paid by SCO all these years, a charge he vehemently denies. Now that he's hit the big time with his Fake Steve gig, there's really no point in his continuing with this SCO business, is there? You know how every big Hollywood actor has an embarrassing early movie or two, back before they were famous? They're embarrassed about these films now, because they can finally afford to be. What we're seeing with Lyons is a lot like that. He can't very well say he's proud of his work on the SCO story, any more than Arnold Schwarzenegger can say he's proud of his work in Hercules in New York. Doing so would raise serious questions about one's judgement.

Not all the news is bad for SCO these days. PCPro Magazine just came out with a very positive review of HipCheck 1.0.3. So it appears they have at least one theoretically valuable asset, if the review is to be believed. That won't be enough to keep SCO's creditors at bay, but it's possible, just maybe, that Me Inc. could see greater success once the BK court finds 'em a new home.


For a more comprehensive treatment of recent events, you can't go wrong with the recent BK-related stories on GL. Although reading them all will take a while, even if you skip the comments.

"The Bankruptcy Docket & All Filings - Hearing on Tuesday in Delaware"
"The Media on SCO Bankruptcy"
"In 'Foxes Petition to Guard the Henhouse' News ..."
"SCO Asks Court to Let it Hire Accounting Temps - Half of its finance dept. fired or quit"
"SCO's Bankruptcy Hearing Tomorrow Changed to 8:30 AM - Updated"
"Looks Like Novell Will Be There Tomorrow - The Fleet Has Arrived"
"Darl's Declaration in Support of 1st Day Pleading, as text; AutoZone, Red Hat courts informed"
"Red Hat Tells the Court All About SCO's Woes"
"SCO 10Q: Doubts It Can Remain a "Going Concern" If It Has to Pay Novell Significant $$"
"First Word From the Bankruptcy Court Hearing - Update 2Xs - Meeting Darl, New Filings"
"More Details On What Happened At the Hearing -- New Filings, New Report"
"SCO Receives Nasdaq Notice Letter, Gives Tibbitts Raise and Bonus 1 Day Before Filing for Bankruptcy"

And while we're at it, a piece on Lamlaw: "Bankruptcy Hearing on Tuesday - updated"

... and now you're up to date, for the moment. There's a bunch of media coverage out there too, as you might expect, but it'll have to wait for the time being.

One interesting bit is in the "First Word From the Bankruptcy Court" story. A GL reader who attended the hearing managed to talk to Darl in the hall, and Darl said something about being surprised at the impact the case has had on his family. Well, he shouldn't be all that surprised. His brother, his wife (via "EdgeClick"), and even a couple of his kids (via their band "Kid Theodore") are all SCO creditors. They're bound to feel a little aggravated about that.

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