SCO’s comeuppance

We love it when Batman defeats the Joker because we love to see the bad guys get their just desserts. But as enjoyable as it is seeing fictional villains lose, it’s far more satisfying when the bad guys get their comeuppance in real life. This is what just happened in a small but hopefully decisive way to the infamous Santa Cruz Operation.

For the last five years SCO has been on a quest to undermine the legal foundations of Linux. Over that period I’ve written about SCO’s progress several times — the last was at the end of October 2007, in a column titled (rather cleverly if I say so myself) “Look out! It’s FrankenSCO!”

Quick joke: Little Jimmy told his father he wanted a cowboy outfit for Christmas so his father bought him SCO.

Anyway, just a month earlier SCO had filed for bankruptcy protection and was running on fumes. Then along came an outfit named York Capital Management (a nom de guerre for JGD Management) that was going to throw SCO a financial life ring to the tune of $36 million.

Alas for SCO that deal was objected to by Novell and IBM (both of which, you will recall, SCO was in litigation with) as well as the Department of Justice’s bankruptcy administration agency. Thus it was that SCO had to back out of the deal, and two days after Christmas ’07 the company was de-listed from the Nasdaq.

When I wrote the FrankenSCO column I marveled at the sheer audacity of York Capital to want to invest in a business that was based on one of the most brazen scams ever seen in the high-tech world. Little did I know that York was not the only potential investor.

Nope, in the middle of February 2008, SCO announced a proposed deal with Stephen Norris Capital Partners (SNCP) that would give SCO up to $100 million, allowing the company to restructure, exit Chapter 11 and go private. In the process SCO would repay all of its creditors including Novell and IBM, but annoyingly a joint SNCP and SCO press release talked of “see[ing] SCO’s legal claims through to their full conclusion.” Curiously SNCP pulled out of that deal in April but then turned around and proposed simply buying SCO’s assets.

On June 19 SCO got yet another extension (until Aug. 11) to file a bankruptcy reorganization plan with the courts (boo), and on July 16 a court found in Novell’s favor and determined that SCO had to cough up $2,547,817 “for unjust enrichment and breach of fiduciary duty.” Hooray! Score one for the good guys.

Perhaps this payment along with SCO’s legal costs will weaken SCO to the point where the company will just fold up its tents and steals away into the night. But wait, what about SNCP? If SNCP acquires SCO’s goods and chattels could it not carry on SCO’s legal quest?

What I can’t figure out is why over the course of the SCO saga so many organizations have signed up or tried to in order to keep the whole scam rolling. In 2003, before York Capital Management got involved there was BayStar Capital and the Royal Bank of Canada, which together invested a total of $50 million.

So we’ve had four serious investment companies — BayStar, the Royal Bank of Canada, York Capital and SNCP — that all apparently thought that SCO looked like a good business bet. That’s despite the majority of the IT industry and the IT press calling BS on SCO’s entire case.

Could someone please explain how these investors could ignore more-or-less an entire market telling them that the case was unethical, unfounded and untenable? It would be like dating someone that everyone tells you is an axe murder and even though there’s blood all over their apartment and an axe in the corner you keep seeing them.

This is a story that we can only hope is near its end and that we’ll see the bad guys lose. If only we had a real Batman to move things along quicker.

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Jim Love, Chief Content Officer, IT World Canada

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