decoration decoration

When you want to know more...
For layout only
Site Map
About Groklaw
Legal Research
ApplevSamsung p.2
Cast: Lawyers
Comes v. MS
Gordon v MS
IV v. Google
Legal Docs
MS Litigations
News Picks
Novell v. MS
Novell-MS Deal
OOXML Appeals
Quote Database
Red Hat v SCO
Salus Book
SCEA v Hotz
SCO Appeals
SCO Bankruptcy
SCO Financials
SCO Overview
SCO v Novell
Sean Daly
Software Patents
Switch to Linux
Unix Books
Your contributions keep Groklaw going.
To donate to Groklaw 2.0:

Groklaw Gear

Click here to send an email to the editor of this weblog.

To read comments to this article, go here
A Chorus of 'We Object!! ' -- to SCO's Reorganization Plan - Updated 2Xs: The IPO Class Action Complaint
Wednesday, March 26 2008 @ 06:19 PM EDT

A loud chorus of objections have just been filed against SCO in the bankruptcy court in Delaware. I am posting them before I've read them myself, but from the titles, you can see that IBM is objecting to SCO's reorganization plan including the scheme to pay buckets of money to the Plan Sponsor; Al Petrofsky objects to the Disclosure Statement; the Executive Committee in the securities litigation have shown up, at last, and they object to the Disclosure Statement also; and Novell objects to many things -- to the plan to give money to the Plan Sponsor, to SCO paying York, to the motion by SCO to gain approval of scheduling on the confirmation hearing, and pretty much everything having to do with that, including objecting to setting the deadline and procedures for filing objections to confirmation of the plan as proposed by SCO, and to SCO's proposed Disclosure Statement.

Let's get started reading it all, and we can share what we notice.

Here are all the filings:

407 - Filed & Entered: 03/26/2008
Docket Text: Objection to /of International Business Machines Corporation to Debtors Motion to Approve Settlement Compensation or Sale Compensation and Expense Reimbursement to Plan Sponsor (related document(s)[346] ) Filed by IBM Corp. (Attachments: # (1) Exhibit A # (2) Certificate of Service) (MacConaill, Gabriel)

408 - Filed & Entered: 03/26/2008
Docket Text: Objection to /of International Business Machines Corporation to Debtors Motion to Approve Disclosure Statement and Solicitation Procedures (related document(s)[394] ) Filed by IBM Corp. (Attachments: # (1) Exhibit A # (2) Certificate of Service) (MacConaill, Gabriel)

409 - Filed & Entered: 03/26/2008
Docket Text: Objection to Disclosure Statement (related document(s)[370] ) Filed by Plaintiffs' Executive Committee (Attachments: # (1) Exhibit A - proof of claim # (2) Certificate of Service ) (Crow, John)

410 - Filed & Entered: 03/26/2008
Docket Text: Objection to the Debtors' Motion To Approve Settlement Compensation Or Sale Compensation And Expense Reimbursement to Plan Sponsor (related document(s)[346] ) Filed by Novell, Inc. (Greecher, Sean)

411 - Filed & Entered: 03/26/2008
Docket Text: Objection to the Debtors' Motion for Authority to Pay an Expense Reimbursement to York Capital Management (related document(s)[367] ) Filed by Novell, Inc. (Greecher, Sean)

412 - Filed & Entered: 03/26/2008
Docket Text: Objection to the Debtors' Motion to Approve (I) Scheduling the Confirmation Hearing; (II) Approving Form and Contents of Solicitation Package; (III) Approving Form and Manner of Notice of the Confirmation Hearing; (IV) Establishing Record Date and Approving Procedures for Distribution of Solicitation Packages; (V) Approving Forms of Ballot; (VI) Establishing Voting Deadline for Receipt of Ballots; (VII) Approving Procedures for Vote Tabulations; (VIII) Establishing Deadline and Procedures for Filing Objections to Confirmation of the Plan; and (IX) Granting Related Relief (related document(s)[394] ) Filed by Novell, Inc. (Greecher, Sean)

413 - Filed & Entered: 03/26/2008
Docket Text: Objection to the Debtors' Proposed Disclosure Statement (related document(s)[369] ) Filed by Novell, Inc. (Greecher, Sean)

414 - Filed & Entered: 03/26/2008
Docket Text: Objection to Disclosure Statement in Connection with Debtors' Joint Plan of Reorganization (related document(s)[369] ) Filed by Alan P. Petrofsky (Attachments: # (1) Exhibit 1 through 8) (Petrofsky, Alan)

415 - Filed & Entered: 03/26/2008
Certificate of No Objection
Docket Text: Certificate of No Objection (No Order Required) Regarding Fifth Interim Application of Berger Singerman, P.A. for Compensation for Services and Reimbursement of Expenses, as Co-Counsel to the Debtors in Possession for the Period from January 1, 2008 through January 31, 2008 (related document(s)[372] ) Filed by The SCO Group, Inc.. (Attachments: # (1) Certificate of Service and Service List) (Werkheiser, Rachel)

Update: Here's the first thing I notice: we get to see the Consolidated Amended Class Action Complaint for Violations of the Federal Securities Laws, the complaint in the IPO class action. It's #409 Exhibit A, p.5. Here's one paragraph just to give you a taste:

2. In connection with the IPO, the underwriters named as Defendants herein participated in a scheme to improperly enrich themselves through the manipulation of the aftermarket trading in Caldera common stock following the IPO.

The defendants include Ransom Love, Ralph Yarro, Thomas Raimondi, Alan Hansen, and Ray Noorda, now deceased, as you can see on page 12 of the PDF. The allegations include that they artificially inflated the stock price and then used it for personal gain or for stock-based acquisitions. Here's more on the latter:

(c) The Issuer Defendants were futher motivated by the fact that the issuer's artificially inflated stock price could be utilized as currency in negotiating and/or consummating stock-based acquisitions after the IPO. In this regard, on August 2, 2000, Caldera announced an acquisition of a division of Tarantella, Inc. This acquisition was completed on May 7, 2001 for combination of cash and stock (16 million shares).

That's the tie-in here, the purchase from old SCO, Santa Cruz Operation, later naming itself Tarantella. There are two groups of defendants, Issuer Defendants and Underwriter Defendants, like FleetBoston, and the allegation is that they worked closely together. I assume that's why it's not just against the Underwriter Defendants. And on page 16, it seems that is so:

101. As alleged herein, the Issuer Defendants acted with scienter in that they: (a) knowingly or recklessly engaged in acts and practices and a course of conduct which had the effect of artificially inflating the price of the Issuer's common stock in the aftermarket: (b) knowingly or recklessly disregarding that the Registration Statement/Prospectus as set forth herein was materially false and misleading; and/or (c) knowingly or recklessly disregarded the misconduct of the Underwriter Defendants alleged herein.

Acting with scienter basically just means you knew what you were doing. Here's the complete definition from's dictionary:


n. Latin for "having knowledge." In criminal law, it refers to knowledge by a defendant that his/her acts were illegal or his/her statements were lies and thus fraudulent.

Keep in mind that this is a complaint. That doesn't mean it's true, only that these are the allegations. As you know, in the US, anyone can sue anyone about anything. But they are serious allegations, without a doubt. Here's a bit more, from page 18 of the PDF (note that the pagination is odd, probably because this is an amended complaint) specifically about the Registration Statement/Prospectus:

96. The material misrepresentations and/or omissions were made knowingly or recklessly and for the purpose and effect of, inter alia: (a) securing and concealing the Tie-in Agreements; (b) securing and concealing the Undisclosed Compensation; and/or (c) concealing that certain of the Underwriter Defendants and their analysts who reported on the Issuer's stsock had material conflicts of interest.

And on page 20 you find what they claim the Underwriter Defendants did:

92. The Underwriter Defendants (a) employed devices, schemes, and artifices to defraud; (b) made untrue statements of material fact and/or omitted to state material facts necessary to make the statements not misleading; and (c) engaged in acts, practices and a course of business which operated as a fraud and deceit upon the Plaintiffs and other members of the Class in violation of Section 10(b) of the Exchange Act and Rule 10b-5.

93. During the Class Period, the Underwriter Defendants carried out a plan, scheme and course of conduct which was intended to and, throughout the Class Period, did: (a) deceive the investing public, including Plaintiffs and other members of the Class, as alleged herein; (b) artificially inflate and maintain the market price of and demand for the Issuer's common stock; and (c) induce Plaintiffs and other members of the Class to purchase or otherwise acquire the Issuer's common stock at artificially inflated prices. In furtherance of this unlawful course of conduct, the Underwriter Defendants took the actions set forth herein.

And there's more, detailed allegations regarding the IPO. Then, oh my. Read from page 31 on, beginning with the subhead, "Market Manipulation Through the Use of Analysts." Hmm. Analysts? Using analysts? Having them "issue glowing research reports and positive recommendations" so as to "manipulate" the stock price? Like... um... what was that guy's name again? Say, are these class action guys keeping up-to-date with Caldera in its new name post-IPO, by any chance? I'm getting that deja vu feeling. Or is that song I keep hearing over and over in my mind the sound of ka-ching?

Update 2: Here's what SCO said about this litigation in the most recent 10-K for 2007:

IPO Class Action Matter

We are an issuer defendant in a series of class action lawsuits involving over 300 issuers that have been consolidated under In re Initial Public Offering Securities Litigation, 21 MC 92 (SAS). The consolidated complaint alleges, among other things, certain improprieties regarding the underwriters’ conduct during our initial public offering and the failure to disclose such conduct in the registration statement in violation of the Securities Act of 1933, as amended. Class standing was certified for all of these cases by the district court.

The plaintiffs, the issuers and the insurance companies negotiated and executed an agreement to settle the dispute between the plaintiffs and the issuers. While the settlement agreement was awaiting approval by the district court, the court of appeals overturned the class certification on December 5, 2006. It is unlikely a settlement of a class action can remain effective as the class is de-certified. If the decision by the court of appeals is not reversed, we do not believe the settlement will stand, and it is possible the lawsuit may fragment into individual actions. At this time, we do not know and cannot determine the legal or procedural results of such an action. If the de-certification is reversed, and if thereafter the settlement agreement is approved by the court, and if no cross-claims, counterclaims or third-party claims are later asserted, this action will be dismissed with respect to us and our directors. If the settlement agreement is not approved by the court, the matter will continue unless another settlement agreement is reached. Plaintiffs have filed a second amended complaint and motions to dismiss are pending.

We have notified our underwriters and insurance companies of the existence of the claims. Management presently believes, after consultation with legal counsel, that the ultimate outcome of this matter will not have a material adverse effect on our results of operations or financial position and will not exceed the $200,000 self-insured retention already paid or accrued by us.

  View Printable Version

Groklaw © Copyright 2003-2013 Pamela Jones.
All trademarks and copyrights on this page are owned by their respective owners.
Comments are owned by the individual posters.

PJ's articles are licensed under a Creative Commons License. ( Details )