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SCO wants Tanner to do a new job: its tax returns
Wednesday, January 16 2008 @ 10:40 AM EST

Here's the motion:
311 - Filed & Entered: 01/15/2008
Motion to Approve (B)
Docket Text: Motion to Approve the Expansion of the Scope of Retention of Tanner LC to Prepare Tax Returns for the Debtors Nunc Pro Tunc to January 10, 2008 Filed by The SCO Group, Inc.. Hearing scheduled for 2/5/2008 at 10:00 AM at US Bankruptcy Court, 824 Market St., 6th Fl., Courtroom #3, Wilmington, Delaware. Objections due by 1/29/2008. (Attachments: # (1) Notice # (2) Exhibit A # (3) Proposed Form of Order # (4) Certificate of Service and Service List) (Werkheiser, Rachel)

Tanner estimates that it will charge between $36,000 to $38,000 to do the federal and all the state taxes. That's on top of what Tanner has already done for SCO as accountants. It's $500 per additional state, according to the Engagement Letter, Exhibit A, so even with all the states listed, and there are several, it's still the federal that seems to be the costly item. That estimate is if there are no unexpected "issues." If anything unexpected crops up, that might require mo' money.

Note that there will be a hearing on this February 5th at 10 AM, but judging from the way bankruptcy works, I'm guessing it will be rubber stamped.

I'm remembering that at the 341 Creditors Meeting, Jean Acheson said SCO's state obligations were usually low, because they sell through distributors mainly, so that isn't the complex part, one would assume. You'll recall that Tanner was already hired to do the following tasks, as listed in the motion [PDF] to retain them:

Specifically, the Debtors respectfully request entry of an order pursuant to section 327(a) of the Bankruptcy Code approving Tanner to perform an audit of the Debtors' consolidated financial statements as of and for the year ending October 31, 2007, and to assist the Debtors in reviewing their financial statements and other documents in preparation for the necessary submissions to the Securities and Exchange Commission (the "SEC").

Tanner's role was "advisory only". It estimated in the motion that it would charge $196,000 for that job of auditing, $22,500 per 10-Q report, three of them, according to Tanner's third bill [PDF]. All other services billed at the customary rate, plus expenses. The motion was approved [PDF] retroactive to October 2007. Bankruptcy law allows you to hire one accountant, so on what basis would anyone say no?

And the first [PDF], second [PDF] and third Tanner bills duly arrived. The first one was for $28,499 and $450 in expenses. The second was even less, $19,001 plus $1,534 in expenses. No one objected to those interim bills. And the third bill was higher, $65,955 and $1,523 in expenses, and it was all about "audit services". I believe it's still waiting to see if anyone objects. They asked for an interim payment of $52,764 (80% of the allowed fee) and the expenses. Assuming their ability to project is good, we are looking, then, at $196,000 plus $36,000 to $38,000 more. Just trying to keep track of where all the money goes.

If you are curious about why they keep asking for 80%, it's because you don't need an order from the judge. It just sails on through. Of course, as Novell demonstrated recently, these are all interim bills. They can be challenged down the road.

Looking at the exhibits Tanner attached to the bills, where the tasks are broken down in a time sheet, the Exhibit A to the second bill lists the SEC audit, but also items listed as "General Audit", "Tax Accrual", and "Private Company Audit". The Exhibit A on the first bill lists in addition "SEC Reviews" and "Change Order". Presumably these tasks puts Tanner in position to know quite a lot about SCO's tax situation already. I don't know what company's normally pay to have their federal and state taxes prepared, but I hope the projected fee represents less than usual, given that Tanner already knows all SCO's inside financial information, presumably, and isn't starting from scratch. But here's my question. SCO is already off the Nasdaq. So what SEC Audit is this that Tanner's Exhibit A to the third bill shows them still working on in January?

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