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IBM and Novell Move to Convert SCO BK to Chapter 7
Monday, May 11 2009 @ 05:42 PM EDT

Well, well...

IBM and Novell have each filed motions in the SCO bankruptcy to convert the SCO Chapter 11 cases to Chapter 7. That makes three such motions. Here's the US Trustee's motion, if you are new. We're working on text versions. Keep in mind these are motions, not yet granted, and SCO can file objections and/or can still file a plan to try to abort the motions if anyone wishes to give them a truckload of money. Anyone?

Update: This is new: a list [PDF] attached to IBM's filing, of all the equity security holders of SCO Group.

Here's the rule on notices to equity security holders, and you can discern from reading it carefully that this may not be a complete or current list. You can compare it with the list [PDF] SCO filed at the beginning of this Chapter 11 bankruptcy in September 2007.

Here are the filings:

05/11/2009 751 Motion to Convert Chapter 11 Case to a Case Under Chapter 7. Fee Amount $15. Filed by IBM Corp.. Hearing scheduled for 6/12/2009 at 02:00 PM at US Bankruptcy Court, 824 Market St., Wilmington, DE. Objections due by 6/1/2009. (Attachments: # 1 Notice # 2 Exhibit A # 3 Certificate of Service # 4 2002 Service List # 5 Creditor Service List # 6 Equity Security Service List) (MacConaill, Gabriel) (Entered: 05/11/2009)

05/11/2009 752 Receipt of filing fee for Motion to Convert Case 11 to Chapter 7 (B)(07-11337-KG) [motion,mcn11to7] ( 15.00). Receipt Number 3922316, amount $ 15.00. (U.S. Treasury) (Entered: 05/11/2009)

05/11/2009 753 Motion to Convert Chapter 11 Case to a Case Under Chapter 7. Fee Amount $15. Filed by Novell, Inc.. Hearing scheduled for 6/12/2009 at 02:00 PM at US Bankruptcy Court, 824 Market St., 6th Fl., Courtroom #3, Wilmington, Delaware. Objections due by 6/5/2009. (Greecher, Sean) (Entered: 05/11/2009)

05/11/2009 754 Receipt of filing fee for Motion to Convert Case 11 to Chapter 7 (B)(07-11337-KG) [motion,mcn11to7] ( 15.00). Receipt Number 3922350, amount $ 15.00. (U.S. Treasury) (Entered: 05/11/2009)


IBM and Novell Move to Convert SCO BK to Chapter 7 | 214 comments | Create New Account
Comments belong to whoever posts them. Please notify us of inappropriate comments.
Corrections here
Authored by: Erwan on Monday, May 11 2009 @ 05:43 PM EDT
If any.


[ Reply to This | # ]

News picks discussions
Authored by: Erwan on Monday, May 11 2009 @ 05:44 PM EDT
Please, quote the article's title.


[ Reply to This | # ]

OT, the Off Topic thread
Authored by: Erwan on Monday, May 11 2009 @ 05:45 PM EDT
As usual.


[ Reply to This | # ]

A question for the Groklaw 7
Authored by: Erwan on Monday, May 11 2009 @ 05:48 PM EDT
What are your whereabouts on 12-Jun-2009 at 2pm Delaware time?


[ Reply to This | # ]

Now SCO will have to object
Authored by: seanlynch on Monday, May 11 2009 @ 05:52 PM EDT

This could be the moment we've waited for...

SCO will finally produce mountains of evidence in opposition to these motions.

It may be their very last chance!

[ Reply to This | # ]

Authored by: DaveJakeman on Monday, May 11 2009 @ 06:01 PM EDT
I've got two cents, but I'm not sure I'm prepared to lend it to SCO. I might not
get my money back.

Monopolistic Ignominious Corporation Requiring Office $tandard Only For

[ Reply to This | # ]

IBM and Novell Move to Convert SCO BK to Chapter 7
Authored by: Anonymous on Monday, May 11 2009 @ 06:03 PM EDT

SCO: "Right, I'll do you for that!"

IBM/Novell: "What are you gonna do, bleed on me?"

[ Reply to This | # ]

Authored by: FUDbar on Monday, May 11 2009 @ 07:23 PM EDT
Quick question: why is there a mention to "Objections Due by June 1" for the IBM motion? Is that normal procedure? You don't see the same for the other motions, although we get a hearing date. Anyone cares to explain?

Great motions, though. I can see light... at the end...


Numquam ponenda est pluralitas sine necessitate,
or, in my own translation, "Don't make it more complicated than it is!"

[ Reply to This | # ]

Why new motions?
Authored by: Anonymous on Monday, May 11 2009 @ 07:33 PM EDT
Why have they all filed separate motions? Could they not have written memos in

[ Reply to This | # ]

IBM and Novell Move to Convert SCO BK to Chapter 7
Authored by: comms-warrior on Monday, May 11 2009 @ 08:09 PM EDT

In conversion to Chapter 7 bankruptcy, the "secured creditors" or
something similar would have a say to the breakup of the company?

Would this mean that IBM and Novell will have rights to buy the company out and
slam the door on the useless litigation?

This would give Novell and IBM unprecedented access to the companies records,
well the stuff that hasn't been shredded and burnt, so that they could prosecute
Darl "Liar-Liar pants on fire" McBride for something?

The Unix assets sold to SCO would be worth something to Novell - and to IBM.

So how will this play out? Any ideas?

[ Reply to This | # ]

When SCO is converted to Chapter 7
Authored by: Anonymous on Monday, May 11 2009 @ 08:15 PM EDT
can they delay things more with an appeal?

Note that I said when, not if.

[ Reply to This | # ]

Authored by: nola on Monday, May 11 2009 @ 09:38 PM EDT
I've said it before - I'll say it again.

Money now is immaterial.

Access to the records is critical. There must be no way that SCO's details
disappear into the shredder - electronic or otherwise.

[ Reply to This | # ]

Oh my....
Authored by: red floyd on Monday, May 11 2009 @ 10:00 PM EDT
Neither IBM nor Novell is mincing any words in these filings.


In the more than 19 months since the Debtors filed these Chapter 11 cases, they have squandered cash...
In the 19 months since they filed these cases, debtors and debtors in possession The SCO Group, Inc. (“SCO”), and its operating subsidiary, SCO Operations, Inc. (“Operations” and, together with SCO, the “Debtors”), have lost millions of dollars and prejudiced the payment prospects for their creditors by making one ill-considered and futile step after another in their single-minded pursuit of what they believe to be a big payday in litigation against Novell, IBM Corporation (“IBM”) and others. It is time to shut down the Debtors’ highly-unprofitable operations and place a reliable neutral in charge of making thoughtful decisions that are in the best interests of creditors (and even, if there is anything left for them, the Debtors’ shareholders).
Both parties are retaining form, with IBM getting in a few shots sideways, while Novell goes full broadside. In any case, were I Darl, I'd be saying "OUCH!"

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

[ Reply to This | # ]

Groklaw should give them a truckload of money
Authored by: The Mad Hatter r on Monday, May 11 2009 @ 10:04 PM EDT

Monopoly money to be precise.

My thanks to Parker Brothers for an enjoyable game.


[ Reply to This | # ]

Cake or Icing?
Authored by: bezz on Monday, May 11 2009 @ 11:02 PM EDT
Which do you like? I like a well made cake and consider the icing nothing more than sugary sweetness. But they go together sooooo well.

The US Trustee is the cake and Novell / IBM filings are just the complementary icing. IBM and Novell distill SCO's actions down to the essence. Here is the citrus zest in the icing:

The Debtors have managed to keep the litigation alive, it is true, litigation that might some day benefit the creditors (although the Debtors’ loss to Novell at trial bodes ill for them whatever they may say about their hopes on appeal). But the preservation of the litigation could have been done in a chapter 7 case from the outset just as well but without the severe deterioration in the Debtors’ finances that has prevailed in the 19 months of these cases. A chapter 11 case was not essential to the litigation then, and it is even less so now. All the chapter 11 has done is allow the Debtors’ management to keep the Debtors’ in control of the litigation by sacrificing every other prospect of financial benefit for the creditors.

There is more discussion of the litigation in IBM and Novell's filings, but that comment is the one that kicks this case out of Chapter 11 into Chapter 7, even if SCO's actions were not enough.

Give the US Trustee and judge a break. SCO has paid its bills and still has cash so there was not a reason to convert them. Novell and IBM are here laying out all the reasons SCO has failed to meet the standards of Chapter 11 and no longer deserve the protection.

Lemon cake meet citrus zest icing.

[ Reply to This | # ]

Ding Dong the Witch is Dead, the Witch is Dead....
Authored by: Anonymous on Monday, May 11 2009 @ 11:09 PM EDT
Like witch on which water was spilled in The Wizard of Oz shrieked, "I'm
melting! I'm melting. I'm mel...... glug."

Wow, this will be a thrilling finish to years of litigation.

[ Reply to This | # ]

Equity Security Holders
Authored by: edfair on Monday, May 11 2009 @ 11:34 PM EDT
Seems to be a rather short list. Surely there have to be more that hold the
stock in their name.

No McBride. No Tibbets. Granted I didn't look too closely but those would have
stood out.

Ed Fair -- the "Over-the-hill" one

[ Reply to This | # ]

IBM and Novell Move to Convert SCO BK to Chapter 7
Authored by: grundy on Monday, May 11 2009 @ 11:49 PM EDT
The Equity Security Service List has 402 entries.

Several Yarros, one Mott, a few Funds, an endowment, a lot of trustees of minors
and other relatives and several non-US residents are included in the list. To me
it appears to be almost all small investors from the general public.

[ Reply to This | # ]

Gross mismanagement of the estate
Authored by: Gringo on Tuesday, May 12 2009 @ 12:12 AM EDT

One key that differentiates Novell's brief from both IBM's and the trustee's is that Novell comes right out and calls SCO's management incompetent, committing "Gross mismanagement of the estate"

"...Debtors are likely to continue to lose money, both because their business is weak and because their management’s judgment is unlikely to improve..."

[ Reply to This | # ]

The bargaining landscape
Authored by: webster on Tuesday, May 12 2009 @ 01:15 AM EDT

Now that SCO has exhausted their exclusivity period, Novell and IBM have finally moved themselves to suggest the obvious --Chapter 7. That's a big step that would change the bargainer for SCO --a bargainer who won't care about FUD. What can this mean?

  1. Is this something SCO and/or the PIPE Fairy feel they have to avoid at great new cost? Will we see an infusion of cash to prevent Chapter 7? Why not? If it was worth so many millions before, why not a few million more now to keep it going, avoid exposure and embarassment? A favorable appeal decision may pop up any day, raising SCO's prospects and price. It's worth some small millions possibly.
  2. The appeal has two faces. SCO sees the threat of a jury trial with Novell. Can a jury really decide what the amendment says better than Judge Kimball or the Appeals panel, or the Appeals Court en banc, or SCOTUS, or SCOTUS en banc? The Novell jury trial will mostly be about copyrights. The best they can conclude is that the parties thought they agreed. SCO won the copyrights that they needed but never specified them. That's as far as the most favorable appellate judge goes. There will be appeals from this trial, too. All that SCO will win in a few more years is a chance to go against IBM with fewer defenses against them. There are still plenty left.
  3. Specificity continues to bedevil SCO. They couldn't specify their proposed deals to the bankruptcy court. They couldn't specify the copyrights they needed for their UNIX business. Indeed, they carried on the business just fine without the copyrights. Indeed specifics hurt them such as the excluded assets of the APA. SCO lawyers know specifically how to acquire and convey copyrights, and this they didn't do. They may get their appeal wish and put the APA as amended before the jury. It still may not win them any copyrights. THey may win just an amended Summary Judgment --interpretation but still no copyrights
  4. Endless litigation costs continue to bedevil Novell and IBM. Maybe they figure if it wasn't SCO, it would just be someone else. The prospect of an adverse appeal guarantees more cost and waiting unless Chapter 7 short circuits it all. They could make a deal with the trustee. He can give them what SCO can't --the benefit of a decision. It would be worth a few million.
  5. The wildcard will be the SCO trustee. Fortunately they only have to know bankruptcy --not the litigation history-- to get the matter settled. He will set a magic number and get it resolved.

It will be a shame if some of it get's back to SCO, even worse if the assets go to some other FUDsters.


Tyrants live their delusions. Beware. Deal with the PIPE Fairy and you will sell your soul.

[ Reply to This | # ]

Missing shareholders.
Authored by: Ian Al on Tuesday, May 12 2009 @ 04:32 AM EDT
The list attached to the IBM motion is incomplete. At the very least it is

Mr. & Mrs. Bagholder of Redmond, WA.

Ian Al

Linux: Viri can't hear you in free space.

[ Reply to This | # ]

A Prediction
Authored by: elderlycynic on Tuesday, May 12 2009 @ 06:16 AM EDT
The main argument that SCO will use is that these motions
should be suspended until the appeal reverses the judgement.

[ Reply to This | # ]

Chapter 11 Trustee
Authored by: DaveJakeman on Tuesday, May 12 2009 @ 06:27 AM EDT
Novell asks for Chapter 7 conversion, or in the alternative, for a Chapter 11
trustee to be appointed.

So Novell are mainly interested in getting the SCO clown management kicked out.
Having a Chapter 11 trustee is an interesting alternative. I wonder what could
be achieved with SCO the company, by capable management with the right attitude?

Monopolistic Ignominious Corporation Requiring Office $tandard Only For

[ Reply to This | # ]

SCO's Middle Name
Authored by: DaveJakeman on Tuesday, May 12 2009 @ 06:51 AM EDT
Novell repeatedly refer to the word "fiasco" -- a word quoted from a
hearing transcript, uttered by SCO's counsel in describing prior SCO failure(s)
in getting a reorganisation plan together. Novell make quite a point of it, but
consistently get the capitalisation wrong.


Lawyer humour is necessarily subtle.

Monopolistic Ignominious Corporation Requiring Office $tandard Only For

[ Reply to This | # ]

A question for you all
Authored by: jrvalverde on Tuesday, May 12 2009 @ 06:59 AM EDT

OK, I have a question for you:

Imagine for one moment you were selected to manage SCO from now on. What kind of plan would you suggest to maximize SCO profits?

Or put another way, should you as creditor get some SCO assets, how would you put them to good use to maximize your profit (minimize your losses)?

Personally, I believe Ransom Love's approach might have worked if it had survived the adverse waves at the beginning of the decade: fully open source SCO UNIX (maybe with a GNU/Linux incompatible open source license to keep differentiation) and build a business off selling support. Existing customers would have been fidelized, you would have attracted more corporate customers, geeks and OS programmers and might still have a chance of survival. It would have open the magic garden for peering by LINUXers, but all the info was out anyway, and if they embraced SCO's technology that would work in SCO's favour: "look LINUX hackers mimic out technology, we are way ahead of them: use our UNIX instead if you want the best. UNIX, when you care to copy the very best ;-)".

Then, I would have invested on L4 and related/like technologies to be able to benefit from LINUX/BSD device drivers, tried to keep ahead of competition on the high end and ally with Linux, BSD and OpenSolaris to fight MS on the lower end.

At the very worst that wouldn't have bleeded the company as the litigation has done, nor would have lost customers as quickly as it has. And it would have a clean image to offer for an uptake (it might have been bought by Oracle a lot cheaper than Sun).

Wait, if they had done this, they would have been a strong ally to undermine MS power. This way they fought their friends and helped their fiend. How queer that MS adviced Baystar to invest in SCO and encouraged their litigation approach...

Jose R. Valverde

[ Reply to This | # ]

SCO are In the Black
Authored by: DaveJakeman on Tuesday, May 12 2009 @ 07:08 AM EDT

From Novell:

22. Astonishingly, the Debtors denied these losses even though the Debtors themselves have reported them in their Monthly Operating Reports (“MOR”). Its counsel claimed that, “I’m assured by Mr. McBride very recently that the company on an operating basis . . .is in the black. It’s the reorganization expenses overlay that makes it a loss.” (3/30/09 Tr. 45:18-21.)
SCO are in the black. What they just don't admit to is that their accountant is colour-blind.

Monopolistic Ignominious Corporation Requiring Office $tandard Only For Themselves

[ Reply to This | # ]

What's Wrong With This?
Authored by: DaveJakeman on Tuesday, May 12 2009 @ 08:03 AM EDT
Novell's arguments are all very plausible, suggesting that Chapter 7 conversion,
or at least the appointment of a Chapter 11 trustee is inevitable for SCO, but
what's wrong with this?

In the first instance, SCO used voluntary Chapter 11 protection to escape their
"Day in Court" before Kimball and have since been allowed to drag out
their bankruptcy protection -- which they have been using and abusing -- for 19
months before Novell filed this motion. Many of Novell's arguments would have
equally applied six months or a year ago. I'm sure Novell haven't filed
"late", but have filed for conversion at the earliest opportunity they
felt their motion would fly. So what's wrong with this?

There is a common thread we've seen from the outset of SCO's litigation campaign
in various courtrooms: too much rope.

Monopolistic Ignominious Corporation Requiring Office $tandard Only For

[ Reply to This | # ]

Shareholders of note
Authored by: Anonymous on Tuesday, May 12 2009 @ 08:08 AM EDT

The shareholder list has 402 names. Most of these are individuals whom I won't list here. Some names are listed more than once under different addresses, so there are somewhat less than 400 unique shareholders. The names of interest are:

Institutional Investors:

  • Goldman Sachs & Co FBO Amtrust International Insurance.
  • Chesapeake Partners International Ltd
  • Chesapeake Partners Limited Partnership
  • Eton Park Fund LP C/O Eton Park Capital Management LP
  • Eton Park Master Fund Ltd C/O Citco Fund Services (Cayman Islands) Limited
  • Guggenheim Portfolio Company VII LLC
  • Jet Capital Investors LP
  • Scoggin Capital Management LP II
  • Scoggin International Fund Ltd C/O Swiss Financial Services

That is a total of half a dozen institutional investors. There is no indication of how many shares they hold.

Other Investors of Note:

  • Boy Scouts of America Ut National Prks Council Endow Fu
  • Alan Petrofsky
  • Sophos Inc

Sophos is a software company that sells anti-virus and other security software, although they have other products as well. It is possible that they have a minor shareholding due to some business deal with SCO in the past.

Alan Petrofsky is a shareholder.

I would not be surprised if "Boy Scouts of America" received their shares as a donation. Someone may have decided this was a good way to dispose of a bad investment.

SCO Insiders:

  • Ralf J Yarro (three different addresses)
  • The SCO Group Treasury Account

The SCO Group has shares in its treasury account, which is normal. The only SCO insider name on the list that I recognised was Ralf Yarro. No one else. You would think that if Darl McBride and the other managers really had faith in SCO's future, they would be buying up shares by the bucket full while they could get them cheap. Perhaps they know something that the other shareholders don't.

[ Reply to This | # ]

Prom queens
Authored by: IMANAL_TOO on Tuesday, May 12 2009 @ 08:14 AM EDT
:) From document 753:

And we promise -- we promise we won’t file it in pieces anymore.” (4/2/08 Tr. 9:2-5 (emphasis added).) The Debtors repeated this commitment at the third exclusivity motion hearing a half year later, stating, “We promised Your Honor that we wouldn’t come in again with a half-baked or quarter-baked plan. We would make sure everything is there.” (Transcript of September 16, 2008 (“9/16/08 Tr.”) 96:24-97:1 (emphasis added).)"

I promise you, I smiled when I read that. Promising prom queens or fully-fledged divas?




[ Reply to This | # ]

Equity Security Holders
Authored by: Anonymous on Tuesday, May 12 2009 @ 11:54 AM EDT
I noticed a considerable number of errors in the list. Midland, Italy, I
suspect its Milano. Swedan instead of Sweden, Sheldon instead of Sheatland
amongst many others. It seems to me more than simply random. If this were
intentional would anybody care to guess who benefits from this?

[ Reply to This | # ]

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