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Mr. Cahn Files a Bond
Monday, September 14 2009 @ 12:07 PM EDT

Edward Cahn, the attorney appointed as Chapter 11 trustee to take over for SCO management, has filed a bond, a requirement under bankruptcy law, and sent notices to the largest SCO creditors and all the attorneys who have ever appeared that in the future all legal notices are to be sent to his attorney. One such notice was sent to SCO's bankruptcy attorneys.

Filing the bond is one of the normal things that happens -- the trustee has authority to act as management, after all, and that means money, and any time money is in the picture and a new stranger walks in to run a company, appointed by the US Trustee's Office, which is part of the DOJ, they want some guarantee that he won't fly to Rio with the cash, and that if he does, the replacement money is already in hand in case someone sues over his decisions and actions. Hey. It happens. The bond is returned when he faithfully has fulfilled his responsibilities, and no, he's not responsible for anything SCO did or does, just his actions. Money clouds people's thinking, my mom told me. "It creates conflicts," is the way she put it. And the SCO saga is nothing if not a monument to the accuracy of her assessment. And what if the old SCOfolk don't like the way he runs the company? You think that's possible? Might they sue? Is the sky blue?

The book, Reorganization under Chapter 11 of the Bankruptcy Code by Richard F. Brooud puts it like this:

The trustee displaces previous management of the debtor and is essentially both the chief operating officer and the chief executive officer of a corporate debtor. The debtor continues to exist and has certain limited powers, including the power to file a plan. The trustee and the debtor are "separate and distinct entities." It has been said that the fiduciary duties of a trustee are to the estate, not to the debtor. Indeed, the Supreme Court has held that a trustee in bankruptcy has the power to waive a corporation's attorney-client privilege.
Yummy. His duty is to the estate, not the debtor. And waiving the attorney-client privilege sounds like a grand idea.

Here's what I'd ask if I were the Chapter 11 trustee. I'd ask them about Microsoft's role in all this, and I'd ask the ex-Novell guys who swore up and down that the copyrights were supposed to transfer what, if anything, they will get out of it if SCO hits the litigation lottery. Are there any oral agreements, like in the Canopy deal? How long ago did the idea to sue IBM over Linux first get mentioned? And why does SCO owe money to the creditors Maureen O'Gara, Alok Mohan, and a private detective? What was that money owed for? Wisely spent? Incidentally, that's where Darl McBride's brother Kevin works now, someone posted anonymously here last week:

Kevin McBride is a member of the California and Utah Bars. He holds a JD degree and BA degree in Economics, magna cum laude, from the University of Utah. After 15 years of civil litigation experience, Mr. McBride moved to a strategic intelligence advisory role with Wayne Black & Associates, assisting corporations and individuals involved in financial litigation, asset recovery and private investigative matters.

Mr. McBride has extensive experience in document analysis and witness interviews related to complex financial and corporate matters. He owns and operates a sophisticated document data center and analysis tools rarely matched by investigative agencies or law firms of any size. He has had extensive experience managing electronic discovery in complex financial cases. When document-intensive cases or investigations are at issue, McBride enables investigative, legal and expert witness teams to effectively collaborate in remote-access document investigation, analysis and sharing.

Mr. McBride is also trained in CQB techniques and assault team tactics. Residing in the Los Angeles area, he has traveled throughout much of the Middle East and maintains contacts in those areas.

J. Gordon Liddy is associated with the firm also.

Speaking of money, how much exactly did Boies Schiller get paid? Grand total. Not the ridiculously low figure they gave the bankruptcy court for the year prior to bankruptcy, but from 2002 onward. What is the grand total? After all, the trustee's job is to ascertain why the bankruptcy happened. What were they told to achieve? Did they warn SCO at any point that going forward could lead to bankruptcy? We at Groklaw tried in 2007 to figure out what the total figure was -- $26 million? 57? -- but in the end, we gave up, because there were pieces missing, like what they were paid in 2002 and who got what from the reimbursed expenses, since the attorneys were pooled under one of the retainers, at least, and Boies Schiller distributed. I never published the article as a result, but I'll let you see our rough draft now, because the raw data is still of some use, perhaps, even if we couldn't make sense of it firmly in the end. So remember, it's just for that purpose. I can't say how much they were paid. But surely at some point someone had to notice that there was a lot of money going out and not much coming in. Did the lawyers ever suggest cutting bait and quitting? If not, why not? What do they get out of it if SCO is sold off? What was SCO's long term business plan? No. Really. I'd like to ask the investors some questions too.

Who first thought up the idea to sue over Linux? When? If it was supposed to be about copyrights, why was there no attempt by SCO to file for copyright registrations prior to beginning the litigation strategy? If the idea of suing first hit in 2002, prior to setting up the stock sales plans for SCO insiders allegedly in January of 2003, I'd think the trustee would be interested in that. No one seems to have sold in 2002, but in March 2003, it began, four days after SCO sued IBM. How much have insiders made from this saga so far?

Since Caldera/SCO Group never made money as a company, other than the Sun and Microsoft license quarters, what exactly was the business plan? For the company, I mean, not management. For example, since Caldera began as a Linux company, and it stopped offering Linux allegedly until matters could be resolved and offered a SCOSource license to those who wanted to keep running Linux, what was the business plan behind SCO's offer of financial incentives for migration plans from Linux to Microsoft or any proprietary software in 2003?

In the coming months, SCO intends to expand the licensing program to include migration options for those end users who may be looking for alternatives to Linux. Over the past several months, SCO has had discussions with several major companies for the purpose of bolstering SCO’s intellectual property licensing and migration initiative."
I'd love to hear the numbers behind that idea. How would that pay off for a Linux company? For that matter, for a Unix company, if folks migrated to Microsoft? Computer Business Review explicitly mentioned Microsoft:
SCO would probably provide customers with financial incentives and discounts to migrate to SCO Unix, other vendors' Unix, and what he referred to as "other proprietary operating systems" but probably Windows.

"We are offering a migration path to other operating systems that have a stronger IP basis than Linux," the spokesperson said. Incentives will be offered 'in the coming months.

Someone should crunch those numbers. What was the plan, and how would SCO benefit out of it? I mean, how does a Linux company benefit from paying Linux users to stop using Linux? Does that mean SCO *never* intended for the allegedly infringing code to be removed? That it never intended to fix the problem or let anyone else fix it? Isn't that what SCOsource means, if you think deeply about it? And what other companies was SCO talking to about this? What did they offer SCO, if anything? And what was the ultimate goal? To kill off Linux or to get paid from never allowing an alleged infringement to be removed? Did the lawyers tell SCO that could work? What case or cases were they relying on that would allow SCO to charge for alleged copyright infringement -- not patent infringement -- on an ongoing basis, instead of telling what the code allegedly was and letting it be removed, with perhaps damages for past infringement? Remember that SCO asked for an injunction against AutoZone, to shut down their use of Linux, without ever saying where the allegedly infringed code was. So what was the legal underpinning to that?

I'd love to be the Chapter 11 trustee. Wouldn't you? You can probably think up even more questions you'd like to ask. Be my guest.

Here are the filings:

09/11/2009 - 911 - Bond (Notice of Filing of Bond) Filed by United States Trustee. (Attachments: # 1 Exhibit A -- Copy of Bond # 2 Certificate of Service)(McMahon Jr., Joseph) (Entered: 09/11/2009)

You may notice that the statute says the bond should be filed within five days. However, it also says that the US Trustee's Office figures out what the bond should be, so if they take some time figuring out what the amount should be, then you can't file your bond until you have a sum certain. How would you like to have to figure out a bond in a fact pattern like this one?

Update: If you would like to see what a Chapter 11 trustee report looks like, here are some to give you the flavor.


  


Mr. Cahn Files a Bond | 170 comments | Create New Account
Comments belong to whoever posts them. Please notify us of inappropriate comments.
Corrections here.
Authored by: Erwan on Monday, September 14 2009 @ 12:12 PM EDT
If any.

---
Erwan

[ Reply to This | # ]

News picks discussions.
Authored by: Erwan on Monday, September 14 2009 @ 12:12 PM EDT
Please, quote the article's title.

---
Erwan

[ Reply to This | # ]

OT, the Off Topic Thread
Authored by: Erwan on Monday, September 14 2009 @ 12:13 PM EDT
As usual...

---
Erwan

[ Reply to This | # ]

Follow the money ...
Authored by: Anonymous on Monday, September 14 2009 @ 12:27 PM EDT
As much as you'd like to ask the trustee a question, don't forget his single
guiding principle:

Q. Will this bring money into the estate.

if the answer is "no" he wont do it. He wont spend the cost of a
single sheet of A4 paper unless he is sure that it will bring in more than it
costs, ( or is someting he has to do to comply with the law)

So, feel free to ask him whatever you like, I doubt any of them will be
answered, probably not even read.

[ Reply to This | # ]

why does SCO owe money to Maureen O'Gara, Alok Mohan, and a private detective?
Authored by: Tim Ransom on Monday, September 14 2009 @ 12:33 PM EDT
Well, in O'Gara's case, I'd wager it's for PR spun as "journalism".

Alok Mohan was CEO of Santa Cruz Operations from '95 to '98. Can't imagine what
they owe him for.

Maybe the private investigator got stiffed for failing to locate... something.

:)

---
Thanks again,

[ Reply to This | # ]

Mr. Cahn Files a Bond
Authored by: newbury on Monday, September 14 2009 @ 12:37 PM EDT
It is probably now time for the creditors, including IBM, etc. to form a
creditors committee. AIUI, the creditors committee can ask the Chapter 11
trustee to investigate certain matters. Also AIUI, the creditors committee (CC)
is entitled to conduct certain sorts of examinations on its own behalf.
For example (and I am assuming that the CC can do this), what if the CC examined
Darl, and requested copies of any Opinion Letters, responses to instructions,
etc. which SCO's various counsel provided to SCO from early 2002, concerning the
'litigation' strategy. Note, that the *trustee* is empowered to waive
attorney-client privilege, if that is raised.

Because a forced adjournment of that examination, under the circumstances which
occurred in the Evergreen Securities chapter 11 proceedings might actually
be....enjoyable. Just substitute your 'favourite' character.

**********
1. Update of recent developments in the Evergreen case including the following:

1. 2004 Examination in Newark, N.J. of James Conroy, Esq.
("Conroy"). After being compelled to testify at an emergency hearing
before Judge Briskman, Conroy appeared for a 2004 examination. He was responsive
to questions and invoked neither the attorney-client nor the Fifth Amendment
privilege against self incrimination. Unfortunately, half way through the
examination Conroy was arrested based on a New York criminal indictment handed
down by a grand jury earlier that day.
******************

Yes there are likely many problems with this, but the trustee cannot cover it
all. He may actually enjoy the in-depth help and focus which a CC (or it's
counsel) could bring to bear on the various games which we suspect (or know)
have been playing out behind the scenery. Bois Schiller's legal bills are only
one example.


[ Reply to This | # ]

Why so long?
Authored by: Anonymous on Monday, September 14 2009 @ 01:24 PM EDT
Things seem to be moving at a snail's pace here. If this is such a normal
occurrence, why wasn't a bond posted the first couple of days? Is Cahn just
getting down to work for the first time?

[ Reply to This | # ]

MOG is a creditor because...
Authored by: Anonymous on Monday, September 14 2009 @ 02:18 PM EDT
SCO is a subscriber to her Client Server News.

[ Reply to This | # ]

Anyone know what's happening in Utah?
Authored by: rsteinmetz70112 on Monday, September 14 2009 @ 02:18 PM EDT
I mean at the SCO offices?
Is still going to work?
Has Judge Cahn actually taken control?

---
Rsteinmetz - IANAL therefore my opinions are illegal.

"I could be wrong now, but I don't think so."
Randy Newman - The Title Theme from Monk

[ Reply to This | # ]

fly to Rio with the cash
Authored by: SpaceLifeForm on Monday, September 14 2009 @ 02:32 PM EDT
Wow, I knew the airline industry was hurting,
but I was not aware rates were that low.


---

You are being MICROattacked, from various angles, in a SOFT manner.

[ Reply to This | # ]

About that document specialist...
Authored by: Anonymous on Monday, September 14 2009 @ 02:50 PM EDT
"Mr. McBride has extensive experience in document analysis and witness
interviews related to complex financial and corporate matters. He owns and
operates a sophisticated document data center and analysis tools rarely matched
by investigative agencies or law firms of any size."

Call this what you will...perhaps it's an aspersion. But two things came
together in my mind concerning Kevin McBride:

1. When amendment 2 to the APA was brought to the attention of Novell by SCO,
Novell said that they didn't have a copy and would like to get a copy of it.
2. If Kevin McBride is that good at analyzing documents, it's not a stretch to
see him create a forgery. And consider the zeal and mythological mania of Darl
McBride, it's certainly conceivable.

Since Novell was a party to the contract, it would be hard to see how they could
fail to get a copy of the Amendment 2 document that is so important to the SCO
case and which involved millions of dollars at hand.

Someone has the original document. And it is quite possible that the original
document was not created by either party, but rather, a proxy. I'm inclined to
think that a fingerprint test of all the original APA 2 documents could show
where they came from.

I am not saying that this is what happened. I'm simply offering it as a possible
lead for investigation.

What do you think?

[ Reply to This | # ]

"he's not responsible for anything SCO did or does"
Authored by: ak on Monday, September 14 2009 @ 03:04 PM EDT
PJ wrote:
he's not responsible for anything SCO did or does, just his actions
SCO currently offers "SCO IP Licenses for Linux" on its website to an international audience and claims that Linux users have to buy such "licenses" from SCO. Let us assume that offering those "licenses" is a crime. In that case Mr. Cahn would risk criminal prosecution if he does not stop these activities ASAP.

[ Reply to This | # ]

Trustee's job?
Authored by: mpg on Monday, September 14 2009 @ 04:06 PM EDT
PJ wrote:

> After all, the trustee's job is to ascertain
> why the bankruptcy happened.

Really? I wonder what that means in practice.

I can easily envision a trustee taking the position that the past is the past
and we don't want to waste money on investigations into stuff that happened in
days gone by -- so let's just fire the execs and abort all the lawsuits and
concentrate on getting the business [whatever that is] running smoothly again.

From a purely economic perspective, that tack seems the best approach, no?

-mpg

[ Reply to This | # ]

J. Gordon Liddy is associated with the firm also?!?!
Authored by: Anonymous on Monday, September 14 2009 @ 04:24 PM EDT
How is that relevant?

[ Reply to This | # ]

Mr. Cahn Files a Bond
Authored by: JamesK on Monday, September 14 2009 @ 04:26 PM EDT
"And why does SCO owe money to the creditors Maureen O'Gara"

To ensure she was "factual" in her articles. ;-)


---
There are 10 kinds of people, those who understand binary and those who don't.

[ Reply to This | # ]

Internet connection, fees, and such
Authored by: brindafella on Monday, September 14 2009 @ 08:13 PM EDT
If I were the Trustee, I'd ask:

* What level of internet connection does the company need?
* What service does it currently have?
* What are the usage figures for the last 12/24/36/48/72/96 months? (pick a
figure)
* Which ISP currently provides the service?
* What is the contracted period, cost, and terms of service?
* Is that service value-for-money?
* What is the currently calculated, and likely, return on investment provided as
a result of that service?
* What other plans are available through this ISP?
* (back to the beginning) What level of internet connection does the company
need?

Oh, and, just generally...
* Is it clear whether the Trustee has visited the offices of SCO?
* Does the Trustee work from the SCO office, an office elsewhere, or from a
laptop somewhere?

[ Reply to This | # ]

Mr. Cahn Files a Bond
Authored by: Sunny Penguin on Monday, September 14 2009 @ 08:21 PM EDT
His first name isn't James; is it?
Cahn, James Cahn....

---
EOD is a science of vague assumptions based on debatable data taken from
inconclusive experiments with instruments of problematic accuracy by persons of
questio

[ Reply to This | # ]

Mr. Cahn Files a Bond. Disambiguation. Louisiana?
Authored by: Aladdin Sane on Monday, September 14 2009 @ 09:35 PM EDT
What kind of bond?

IANAL or a fiduciary specialist of any kind.

Per the PDF linked in the article, this is a surety bond for 50 million USD (and no 100ths).

I get confused because there are so many types of bonds. Wikipedia lists over 100 types (I got tired of counting), with 21 being legal/fiduciary types.

Oddly, this bond seems to be from Louisiana, which as I understand it, has a different basis for law than the other 49 states, and occasionally trips us up on our expectations. (For example, I've seen some experts on Internet commerce advise to not buy from a company in Louisiana, because their transport laws vary from the other 49 states when a shipper fails to perform. Sorry, no link, just something I read awhile back.)

Differences still exist between Louisianan civil law and the common law found in the other U.S. states. While some of these differences have been bridged due to the strong influence of common law tradition, [8] it is important to note that the "civilian" tradition is still deeply rooted in most aspects of Louisiana private law. Thus property, contractual, business entities structure, much of civil procedure, and family law, as well as some aspects of criminal law, are still mostly based on traditional Roman legal thinking.
Look, can anybody explain why this bond is from Louisiana? The Bankruptcy court is in Delaware, the Debtor (SCOXQ.PK) is in Utah, the case Trustee (Cahn) is from Pennsylvania, and the Bond company (Liberty Mutual) is from Massachusetts. I've obviously missed something somewhere.

---
For a successful technology, reality must take precedence over public relations, for nature cannot be fooled. --Richard Feynman

[ Reply to This | # ]

freaky
Authored by: Anonymous on Monday, September 14 2009 @ 11:03 PM EDT
Filing #911, filed on 9/11.

Is it a call for help, or an indication that things are about to crash and burn?

[ Reply to This | # ]

  • freaky - Authored by: tiger99 on Tuesday, September 15 2009 @ 02:22 AM EDT
Might they sue?
Authored by: rsmith on Tuesday, September 15 2009 @ 04:19 AM EDT

Can the SCOfolk sue? When they filed for bankrupty protection, they turned themselves over to the judge. He appointed a trustee, booting out the current management. So they cannot sue as debtor-in-posession anymore, can they?

So if they sue, don't they have to do that out of their own pockets? That could become expensive. And looking at the evergreen case, you don't want to anger a trustee, lest he decides to pluck you like a chicken.

On a separate note, What dismays me is that the evergreen case has been dragging on for at least seven years. On the other hand, the trustee in that case tried hard to recover money from involved law firms and executives. Now there's a thought to make you smile. :-)

---
Intellectual Property is an oxymoron.

[ Reply to This | # ]

A question about attorney-client privilege
Authored by: Yossarian on Tuesday, September 15 2009 @ 03:41 PM EDT
"Yummy. His duty is to the estate, not the debtor. And waiving the
attorney-client privilege sounds like a grand idea. "

If the trustee decides, for example, that it is in the estate/
creditors best interest to sell SCO's communication with its
lawyers, can he legally do so?

(My guess is that if IBM will be able to use that to go after
SCO's lawyers, it will pay big $$$$ for that.)

[ Reply to This | # ]

Mr. Cahn Files a Bond
Authored by: Anonymous on Tuesday, September 15 2009 @ 05:17 PM EDT
"SCO would probably provide customers with financial incentives and
discounts to migrate to SCO Unix, other vendors' Unix, and what he referred to
as "other proprietary operating systems" but probably Windows."

Commissions anyone?

[ Reply to This | # ]

K.Mc's CQB experience
Authored by: Anonymous on Thursday, September 17 2009 @ 10:30 AM EDT

<humor>

Mr. McBride is also trained in CQB techniques and assault team tactics.

A quick Googling suggests CQB is the acronym for 'close quarters battle', with an association with forced entry techniques.

Maybe the plan was that he would be SCO's point man for shutting down unlicensed Linux users?

</humor>

[ Reply to This | # ]

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