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Berger Singerman's Bill for May Shows One Buyer for SCO - Updated
Tuesday, June 30 2009 @ 03:04 PM EDT

This is very odd. Remember at the last bankruptcy hearing on June 15 SCO represented that there were several different possible purchasers SCO was considering? Both SCO CEO Darl McBride and Frank Caplan, a lawyer for Berger Singerman, testified about that. Caplan mentioned at least four deals. But Berger Singerman has just filed its Interim Application for Compensation [PDF], plus the usual attachments for the month of May, and all I can find is reference to one real deal in the making. McBride did say that the York discussions were in February through April, but where are the rest? And we get a real insight into the legal preparations for the hearing. I find it fascinating, and I'll try to explain to you why.

Here's the filing and its attachments:

06/29/2009 - 820 - Interim Application for Compensation (Twenty First) For Services and Reimbursement Of Expenses, As Co-Counsel To The Debtors In Possession For The Period From May 1, 2009 Through May 31, 2009 Filed by Berger Singerman, P.A.. Objections due by 7/21/2009. (Attachments: # 1 Notice # 2 Exhibit A # 3 Certificate of Service) (Makowski, Kathleen) (Entered: 06/29/2009)

Notice these two entries from Exhibit A:
5/19/2009 - AJS - CONFERENCE CALL WITH D. LAMPERT, F. CAPLAN, R. TIBBITTS, J. HUNSAKER, D. MCBRIDE AND K. NIELSEN REGARDING APA

5/20/2009 - AJS - CONFERENCE CALL WITH BUYER'S LEGAL TEAM AND PRINCIPAL OF BUYER'S GROUP, D. MCBRIDE, R. TIBBITTS, J. HUNSAKER AND F. CAPLAN

For all I can see in this filing, then, there was only one real deal in the works that month, and only one buyer/purchaser team. And yet, on page 2, you can see that most of Berger Singerman's time for the month was spent on "Asset Disposition/Preservaton". They spent more time on that than even Litigation. And if you look at the breakdowns, beginning on p. 6, you'll see that there was at least one transaction mentioned as of May 1st. On May 7, there's a notation about Purchaser, not purchasers, and an email to "Purchaser's Counsel". So at that time, there was one, and since Bryan Cave is mentioned in that notation, it is referencing the final deal.

On page 10, there is a teleconference with Darl McBride "Re Potential Investor" and on that same page on May 27th, we see a teleconference "with Potential Financier for Exit Financing".

And then on May 14, it mentions the one purchaser and "other alternatives re motions to convert", but no additional purchaser activity. On the 18th, they mention "follow up re deal terms in a new contract", so there was a draft of a new contract at that point, and in the next days you see activity on the new language being drafted. But there is still only one deal referenced. On the 20th, there is a notation "Next steps and conference call with potential buyer, Capital Source." I don't know if that means the lender, or if it's talking in a general sense about talking about financing with the potential buyer they were already in negotiations with. But either way, nothing else is ever mentioned on this.

On the 26th there is a note about "possible transactions", but nothing specific, and no further references that I see through the end of the month. That's on page 8. Then on page 9 we find this:

5/27/2009 - FHC - REVIEW BRYAN CAVE CHANGES AGAINST BSPA DRAFT REGARDING WORKING CAPITAL SUPPORT AND MANAGEMENT EQUITY; FOLLOW UP REGARDING COPYRIGHT ISSUE; EMAIL R. FROST REGARDING LETTER OF CREDIT.
So whatever the notation meant, all we see in terms of actual movement is the Bryan Cave deal, and in fact on May 28 there was a conference call with the Board of Directors and with "Purchaser", and the next day there are revisions being made to the APA's exhibits. On the 30th, there's a note about the new draft of the APA being reviewed and the new terms in the APA being emailed to various lawyers the next day.

But let's review what Mr. Caplan said on the witness stand, according to our eyewitness reporter's notes:

Mr. Spector: What were you doing about noon today?

Mr. Caplan: I was in Philadelphia to close the purchase/sale agreement.

Mr. Spector: What were you doing at 1:00 pm?

Mr. Caplan: I was emailing Brian (cT: I didn't hear the last name) about the deal.) The contract hit about 1:15, maybe 1:10. It was black lined. At about 1:30, we finished the document. (cT: Mr. Kaplan also said that the document was finished about 2:00. I think that was a reference to when it was signed)

Mr. Spector: Let's go back now. Were there other deals you were working on?

Mr. Caplan: Yes. LSC Holders (cT: Holdings?) Between 5 and 6 and one half million dollars for acquisition of a range of equities.

Mr. Spector: Was this considered the “Leading Horse” by BSF and SCO?

Mr. Caplan: Yes.

Mr. Spector: Tell the court about the others.

Mr. Caplan: A third deal, the Hank deal, subscriptions for warrants in SCO. $2.5 million with a share of the litigation proceeds, if any.

Mr. Spector: Did the Hank deal have any face to face (cT: my notes are sparse here, I believe this to mean any face to face meetings involving Mr. Caplan).

Mr. Caplan: 3 occasions. The 4th deal, (cT: this deal was referred to as the Ralph deal. I don't remember who first used that term during the proceedings) It was a bit of a hybrid. One of the directors of SCO would invest new money. Others would make a commitment to invest a minimum of $1 million for warrants similar to the Hank deal, with a share of litigation proceeds, if any.

Three occasions, at least. But where are they in this bill? The June bill should be a fascinating document indeed.

Incidentally, I see a payment on June 15, inside a bill for May, in the amount of $71,714.47. That's on page 10. And on page 11, there is a notation that Ocean Tomo was retained in connection with marketing the patent, so we guessed that part right. They do want to sell it.

Also, note that the spelling F. Caplan indicates that we misspelled his name as Kaplan in our earlier article on the hearing.

To help you search and mesh it all together, here are the Minutes from the hearing:

[813] - 15-Jun-2009 - Minutes of Hearing held on: 15-Jun-2009. Subject: Motion to convert case. (vCal Hearing ID (91961)). Additional attachment(s) added on 19-Jun-2009 [Sign-in Sheet]. (Entered: 19-Jun-2009)
Notice the attendees on the sign-in sheet? I see both Ted Normand and Stuart Singer showed up for a hearing they wouldn't be speaking at. And on page 12 of Exhibit A of Berger Singerman's bill, I see two notations about correspondence regarding "Boies Schiller Claim" and then a telephone conference with R. Tibbitts "regarding claims issues." We see a conference on May 13 between Berger Singerman guys and Normand and Singer, and on the 15th "research regarding 1104 unusual circumstances" begins for a couple of days. I would guess there is a connection, and that the conference was about how to get past the three motions to convert and the statutory deadlines at the June 15th hearing. It probably explains Normand and Singer attending the hearing too. Even if you are not speaking, you can still whisper, write notes, tug on someone's sleeve, and participate in hallway conferences.

On the 21st, there's activity on planning trial strategy with Boies Schiller, followed by a couple of days of further research on Section 11129(b) cases and provisions of Section 101 on page 15. Paul Avron, whoever that is, but listed as a Berger Singerman lawyer, sent them a memo with cases on motions to convert on May 23, found on page 16, followed by more research. Lots more. It's still going on as late as May 31.

This looks like Panicsville, to me. I think they were worried they'd lose, from what I see of their research. And while they told the court that they were losing sleep working on the possible deals up until the very last moment, what we see instead, in this bill anyway, is a lot of strategy and research, an unusual amount, on how to handle the motions to convert so as to avoid Ch. 7. I know most of you are not surprised by this. From the research, they'd settled on pinning their last, best hopes on the unusual circumstances test, and in fact, it worked out for them, probably better than they expected.

You don't see research like this from so many lawyers unless there is money in the picture or ideology, in my experience. Research is costly. Maybe if you worked nervously for the Mob you'd work this hard not to lose. Whatever the reasons, these lawyers fought like pit bulls to avoid Chapter 7. And forgive me if I conclude, as I do, that it looks more like structuring an unusual circumstance to fit the need for there to be one, rather than just having it happen spontaneously at the last minute and then telling the court about it. There was a lot of research and planning in this bill.

And that's why SCO is still here, still clinging to a thread. Not done. Not yet. And the next hearing is July 27. Stay tuned.

Incidentally, we are still working on the exhibits to the new APA, although we are close to being finished, so if you can lend a hand so I can be done with it, I'd be grateful. Look for bracketed notes throughout that say page or pages such-and-so to be provided, and that's what's left to do. Please don't let your bogometers prevent you. Mine is ringing off the hook, but it wasn't until I looked closely at the details that it became clear to me what is happening in this picture. That alone is worth the effort. Thank you if you can help.

Also if anyone has time to look through the February through May bills and see if the other deals show up, you'll be doing what I'm doing next myself.

Update: Wow. Want to throw up? Look at these entries on page 10 of the Exhibit:

5/29/2009 - AJS - TELEPHONE CALL TO E. SPANGENBERG; TELECONFERENCE WITH M. WEISS - 0.10

5/30/2009 - AJS - TELECONFERENCE WITH E. SPANGENBERG - 0.20

That's 30 minutes with this guy, I assume, Erich Spangenberg. Who is that? The Prior Art describes his business like this:
Spangenberg and her husband Erich already sit atop a sizable fortune, won through intellectual property litigation. Since 2004, the Spangenbergs have moved patents purchased from various sources—including Firepond—through a complex network of shell companies set up in the small town of Marshall, Texas. In the last five years, these companies have filed dozens of patent lawsuits against hundreds of companies, most of them in Marshall or neighboring towns in the Eastern District of Texas, a venue considered friendly to patent plaintiffs—the same venue for the new class-action trademark suit.
Perfect. Who else would SCO call to try to sell a patent to, if not a company that would use it just like SCO dreams of doing? About a year ago, Spangenberg was in a bit of a sticky wicket for suing DaimlerChrysler. Again. And Again. And again, under various company names. Again, I'll let Joe Mullin of Prior Art describe Mr. Spangenberg, and I think you'll see that in all the world of what have been called patent trolls, Mr. Spector chose the very best:
Erich Spangenberg and his lawyer David Pridham are at the heart of a massive empire of patent-holding companies named after stars, including Taurus IP, Gemini IP, Caelum IP, Phoenix IP, Orion IP, Constellation IP. At the head of them all is Plutus, named after the Greek god of wealth.

Of all the large networks of patent-holding companies, the Plutus IP group is the most mysterious. Spangenberg doesn't talk to the press. (But John Letzing of Marketwatch wrote a good profile of Plutus IP back in September.)

Now it looks like Spangenberg has suffered a serious blow in Wisconsin. He's at risk of having to pay up to $4 million in attorneys' fees to DaimlerChrysler's legal team from Kilpatrick Stockton LLP.

How did this happen? Well, Chrysler had already paid Spangenberg off—$2.3 million in 2006. That was supposed to get the companies a broadly construed "no-more-lawsuits" agreement. But then Spangenberg shuffled around some patents to different shell companies and sued DaimlerChrysler not once but three more times.

A prince among men, in short, and Spector called the owner of a patent litigation company named after the Greek god of wealth to try to sell him SCO's patent. Could they be more evil in their quest for second homes in Spain if they really tried just a bit harder? I can't see how.

Psst. I'll whisper this, so the kids can't hear it:

Just so ya know, SCO. There is no real Greek god of wealth. It's a myth.
And if I were the sort to pray to mythical Greek gods, my prayer would be this: that SCO might fly too close to the sun, whereupon the sun's rays would melt all its wings' wax off, whereupon SCO and its dreams would fall into the sea.

Um. Could eagles pick their eyeballs out too, or is that a Bible metaphor, not Greek mythology? Whatever. It's my bedtime story, and I want eagles.

Harpies will do.


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