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Loki: The human toll

By on April 15, 2002 (8:00:00 AM)

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- Tina Gasperson -
On April 8, the company that was Loki Software gave up the ghost for good; a quiet death after a long, loud and ugly sickness. Like family members who are relieved when the watching and waiting is finally over, no one said anything, no one tried to stop it anymore -- they just turned and walked away, each to face his own share of the destruction and loss. Now, the man behind Loki is talking, but the "family" isn't buying it.
In Norse mythology, Loki is a god of mischief and evil, veiled in beauty but always out to wreak havoc on his fellow gods. It's as if the spirit of Loki rested upon the software company of the same name, stirring up dissension and bitter factions between the founder and those who worked for him. It was this spirit, real or imagined, that eventually caused the downfall of the darling of Linux gamers. There are a lot of stories to be told -- stories about creditors and customers and partners and deals that may or may not have been.

This is the story of the battle between the employer and the employees. It was ended by the court last week, but in the hearts and minds of the participants, it may not be over for a long, long time.

Monday, April 8, was the final hearing for Loki's chapter 7 bankruptcy filing. The company that ported Windows games to Linux had previously filed for chapter 13, which allows for reorganization of the company and for time to develop a plan to pay back creditors. Chapter 7 is different. If you're granted a chapter 7, in the eyes of the law you don't owe anything anymore, to anyone.

That's a big relief for Scott Draeker, the man behind the phenomenon that was Loki Software. "Things were dire at Loki in December 2000," he says. "On January 7, 2001, I emailed all employees that effective immediately we could not guarantee that we would be able to make any future payrolls and that they should all start looking for jobs."

So they did. In the meantime, Draeker says he tried to pay his employees whenever he could. "We did hand out money orders whenever possible, as loans toward unpaid salary." The employees say they didn't know anything about loans.

"We understood that these checks were our salary," says Sam Lantinga, who was the lead programmer at Loki. "In fact, we weren't told that the checks were considered loans until later."

And it wasn't until later the employees also found out their employment status had been changed from W-2 to 1099, they said. W-2 is the norm for employees; the employer automatically deducts social security and income taxes from the gross wage amount. With a 1099 status, the worker is no longer a traditional employee but an independent contractor. The "employer" becomes a customer and is not responsible for deducting or paying any taxes on behalf of the contractor.

Draeker says he had no choice but to change the employees' status to 1099. "Fast forward to 2002 and Loki is submitting tax records. How can we handle the loan payments? They have to be reported, and we learned that any money transferred to employees must fall under either a W-2 or a 1099. Since there were no withholdings from the loan payments, they didn't qualify for W-2."

Lantinga found out from the IRS that the employees didn't have to be saddled with the extra tax burden. "They said that this (being switched from W-2 to 1099) happens fairly often with failed startup companies." He filled out a substitute W-2 with zero withholding, which left him owing, but not nearly as much as he would if he were considered a contractor under the 1099 filing.

Eventually, the employees found other jobs, which led to what Draeker calls the March 31 exodus, when at least five staffers left Loki. In reality, they were just a few of the almost two dozen programmers and support staff who left during the months after the January 7 announcement. "I have heard that the exodus was meant to put Loki out of business," Draeker says. "The fact that it didn't may have further embittered the crew that left." When they left, Loki still owed them salary. But at that point, Draeker says his loyalties had to remain with the business first, and the remaining employees second. "Like any creditors, these guys all wanted to be paid first, immediately and in full. From a debtor's standpoint, however, you can't always just pay everyone immediately. Loki's first priority became staying in business. Our remaining employees were paid first and the former employees second," he says.

Some ex-employees were beginning to think they were never going to be paid. "The 'exodus' was due to not being able to pay our rent," says one former Loki ex-employee who wishes to remain anonymous. "I was tired of sleeping in the Loki offices. No one had seen any money for a long time... Of course we wanted to get paid. We weren't corporations and companies like Activision and Electronic Arts, who would write off the loss. I don't think it's irrational to expect your paycheck."

The former staff started filing lawsuits and labor board complaints, according to Draeker. "They had meetings where they passed out forms and instructions for filing labor board complaints. Anyone who was pursuing a settlement with Loki was encouraged not to," says Draeker. In response to this action, which at least one ex-employee disputes, on August 3, 2001 he filed for a chapter 11 bankruptcy reorganization. "Our goal was to stay in business and to treat all our creditors equally." He says that he pursued settlements with those ex-employees who did not file suits or complaints. "The ones who filed suits received nothing, and those are the ones complaining the loudest now."

Lance Colvin thinks he's had a right to complain. He was the vice president of sales and marketing for Loki, having received and accepted an offer letter dated February 9, 1999. "Congratulations," it reads. "It is my privilege to inform you that Loki Entertainment Software has decided to extend this offer of employment as 'Vice President, Sales and Marketing.'" The terms of employment included a $80,000 yearly salary, 100,000 stock options, and six weeks of vacation each year. The rub comes further down in the letter. "Finally, as we discussed, payment of your salary is temporarily suspended. You and I will speak from time to time to determine when the company is financially able to begin payment of your salary."

Draeker maintains that because of Colvin's willingness to forego payment, he wasn't an employee as much as he was an investor in Loki. "Our attorneys spent a fair amount of time arguing over whether this individual could be properly categorized as an employee." He says that Colvin should have known the risks involved with joining a startup as well as the potential rewards. "It's possible [Colvin] never considered that Loki would always be hand-to-mouth." Draeker says Colvin testified that he thought Loki would eventually give him a million dollars.

"This was not, and never has been my understanding," says Colvin, whose responsibilities at Loki included maintaining the company books and making sure the bills were paid. "I believe that when questioned about what I expected, I had cited [a situation] where a friend of mine had been given a million dollars worth of stock when the company he had assisted was sold. I believe I said I was hoping for something similar."

Colvin testified to the labor board that he purchased most of Loki's computer equipment with his own money. He allowed Loki to make charges on his personal credit card, and he loaned cash as well. Even his mother loaned Loki $5,000 to make payroll in December 1999. "[Draker's] idea of scraping together the next payroll was coming to me to see where I could get it -- loan from family, pressure on accounts that owed us money, etc. He told me once that one of the reasons I was at the company was for my ability to get my hands on money."

The transcript of the California labor board hearing records an obvious question from the hearing officer: "Why did you go without payment for so long?"

Colvin's answer: "Because Scott always told me he'd take care of me. I've known him for ten years before we went into business together, before he asked me to work for him and I had faith that the company would make it. And towards the end of 2000 I discovered that -- that basically he lied to me, that he really seemingly didn't have any intention of paying and there were -- I actually made treaties to him throughout the year. I'd send him one email which said, 'I'm broke, I've been living for two months without expenses which -- or with no income into my house' and he ignored that. And also because I have had a substantial interest in the company in the form of equipment that I've purchased on behalf of the company and so on, I was a little bit afraid to leave to be honest. I was afraid I'd never get paid and that's actually what brought up this hearing is because he did refuse to pay me my wages and my expenses."

The creditor filings showed that by the end of Colvin's tenure at Loki, the company owed him almost $350,000 in salary and expenses that were incurred on Colvin's personal credit card. Draeker says that Colvin knew the risk he was taking, and he maintains that Colvin was more of an investor than an employee. "This question was never resolved by the court, but it's clear that this isn't about an employee reimbursement. This was money he invested."

Draeker calls the ex-employee complaints a personal war against Loki and Draeker himself. In his response to the hearing officer's question, he testified, "That was the deal that he made. He was an officer of the company, he is an equity holder of the company, as are members of his family, and he made the informed decision not only because of his position with the company but also because he was keeping the books. He made the informed decision to work at the company in hopes that there would be a payoff in the future. Now that, you know, the company has not to date had that success, he has made a claim trying to retroactively change the terms of the deal he struck because he doesn't like the result."

Colvin counters: "Actually, the labor board found that I was indeed an employee. [They] found from the evidence I presented at the hearing that Loki owed me $100,000 in business expenses." He says that Draeker appealed the decision, claiming again the Colvin was a partner in the company and not an employee.

But Draeker and Colvin both note that Colvin's relationship with Loki was "terminated." Says Draeker, "When the board fired [Colvin] in January 2001 it bruised a very fragile ego."

"How he could terminate a partner, I'm not quite sure," says Colvin. He maintains that Draeker filed bankruptcy in response to the August 6, 2001, labor board appeal. "Scott filed emergency bankruptcy on August 3. If it was clear I was an investor, why did he file bankruptcy?"

Colvin and other ex-employees have said that during the time Loki was having trouble making payroll, the Drakers continued to pull money out of the company. Draeker disputes that. "Although my wife and I were both salaried, we rarely paid ourselves. Loki didn't have the money, and I insisted that payroll for the other employees was the highest priority."

Colvin disagrees. He says Draeker's assertion that he rarely paid himself or his wife is "an out-and-out lie."

"Kayt [Draeker's wife] was paid nearly every payroll period," says Colvin. He showed us a memo Draeker emailed to him on April 17, 2000, about the procedure for paying employees and bills. The relevant portion, where Draeker is outlining the priority of payment:

"Tier 0 -- The first thing we pay always and without exception: Programmer's payroll $26k semi-monthly."

"Tier 1 -- Highest priority payments. These are always paid unless and until some crisis comes along and I am notified first:

"Rent (4,350)
Internet Access (3k month)
Employee benefits (Blue Cross, etc.)
Dennis (10k due)
John Grantham (2,700)
Laurie Hayde (you didn't include her)
Kayt

"Tier 2 -- Paid once obligations from 0 and 1 are taken care of:

Exec payroll (7.5k)
Proforma (15k over 60 and another 11k going over 4/30)
The Kompany.com (56k due)
Equipment purchases
Fedex (16k)

"Tier 3 -- To be paid in the following order of importance. Can in some instances come before a Tier 2 payment. I'd like a calendar date when you anticipate each of these being met:

"Code Sorcery (2,400)
id Software (50k) (forgot that one?)
Bungie (22k)
VA (63k)
Activision (265k)

"BTW: did you pay xxxxx his $5,500 signing bonus? If not, then shouldn't it be listed here?

"BTW: Exec payroll doesn't include Kayt. She's Tier 1."

There is another email in which Draeker chides Colvin for not paying Kayt along with the Tier 0 programmers.

Yet, Draeker says, "After most of the employees quit on March 31 [2001], it became much easier to meet our monthly expenses, including payroll for the few who stayed on, and even some debts. Only then did my wife and I start receiving our salaries."

Now that the chapter 7 bankruptcy hearing is over, the slate has been wiped clean for Draeker. Even though the labor board found in favor of Colvin's claim for business expenses, Draeker is not held responsible in the eyes of the law because of the bankruptcy victory.

And even though Draeker's financial debt has been erased from the law books, there is still a price to be paid by everyone who has been a part of the dream that died.

"Looking back at Loki, we created a brand new industry." -- Draeker

"Companies go out of business all the time. Many do it with more grace and ethics than Loki did." -- Loki ex-employee

"The hard part is moving on with your life. We all read about crimes and random evil in the news. It's disconcerting to be the intentional target of some of that. It's like being pursued by a pack of Ahabs who think you're their white whale. " -- Draeker

"Scott lost his two oldest friends. He left a few people in financial ruin that will take years to undo." -- Colvin

"I've heard there were boasts about taking my house and putting me and my family on the street. It's all bark and no bite, but still stressful for my family to hear. I would ask those folks responsible to at least have the dignity to leave my wife and kids out of this." -- Draeker

"I'm stuck with a real debt of $100,000 -- not counting loans I had to get to pay rent and put food on the table." -- Colvin

"We generated nearly $3 million in revenues over three years, won dozens of awards and accolades, had a huge amount of great press, created jobs and came within spitting distance of making some folks millionaires. The Loki name was known around the world. At one time our revenues were in the same ballpark as Turbolinux and LinuxCare. We created a huge reservoir of Open Source tools and libraries that will be used for years to come. Next time, I think I can do even better." -- Draeker

"I am left poorer, but much wiser." -- Lantinga

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on Loki: The human toll

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Loki sucked...

Posted by: Anonymous Coward on April 16, 2002 05:28 AM
They were a sham and failure from the start. Nobody bought their games. There simply wasn't the market for it. Nice try and to the employees... tough cookies. That's the risk you take working for a startup.

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Re:Loki sucked...

Posted by: Anonymous Coward on April 16, 2002 05:43 AM
And Draeker was an ass. I did a few deals with Loki and he was impossible to deal with. I'm sorry the whole thing happened.

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RE: Loki sucks -- post is proof positive

Posted by: Anonymous Coward on April 16, 2002 10:35 AM
that being a moron doesn't stop many people from speaking outta their ass.

Obviously you never bought any of their fine work to make such an un-adulterated bullshit and poor taste troll. Loki's developers kicked ass and showed a lot of courage sticking with a vision even though it cost them personally.

I bought three of Loki's games and have enjoyed playing all of them a lot. It's just real sad to see what looked so promising end up being a sour story for so many talented people.

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Re: Loki sucks -- post is proof positive

Posted by: static on April 16, 2002 09:22 PM
I with you. Loki was great, it was just run by a selfish ignoramous (sounds like the originator of this thread - I wonder how many successful apps he's made and distributed worldwide... or even had the courage to consider it given that many linux users are selfish gimmie-gimmies who expect that even their kickass 3D games are free)

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Re: Loki sucks -- post is proof positive

Posted by: Anonymous Coward on April 21, 2002 10:04 AM
First understand that I like Linux.

But the guys original post is correct. Most people who use linux at home don't pay for anything. They also make up less than 2% of the desktop world (estimate but I know I am close). Now out of that 2%, what percentage of that BUYS games? Lets say that 25%. Now out of that .5% of Linux desktop users out that that would pay for a game, what percentage would pay for a Loki game, that is a redone version of a Windows game, that was out a month or two ago??? Hmmm, I would say around ~50% (probably way high). Soooooo you are looking at a market of 0.25% of the desktops in the world.

I am supprised that they lasted this long.

The only way I see good games coming to Linux soon is if coders start developing Java games. In my opinion Java has just recently become a viable platform to start doing this, with JDK 1.4 and Java 3d. Even this will take some time. I do hold out some (little) hope for WINE, but not much.

Last point.
A large percentage of gamers will buy a game the first few days it is out. They don't mind spending $50-$100 for the game. They buy it and play the death out of it for a while and then purchase the next "hot" game. This was the other main flaw in Loki.

Steve Michael
smichael@netcapade.net

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Re: Loki sucks -- post is proof positive

Posted by: Anonymous Coward on April 23, 2002 01:52 AM
I took exception at the particularly poor taste tone and calleousness of the post.

I'm in no position to argue potential market shares and what not. But I will un-equivocaly say that their products did most certainly *not* suck. Further, to say that the company itself 'sucked' is an asinine troll.

I'm glad there are people willing to take a risk for something they believe in, despite what the 'numbers' currently say. Numbers change.

What is sad about Loki is to see how things have ended and how the hindsight-experts are analysing all the mistakes the company made, making what was in my mind a nobal effort into some manner of foolish vain vision.

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Re: Loki sucks -- post is proof positive

Posted by: Anonymous Coward on April 23, 2002 02:51 AM
I'm hoping that the linux port of jdk 1.4 will soon support the fullscreen mode...

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Re:Loki sucked...

Posted by: Anonymous Coward on April 17, 2002 05:42 AM
Sorry, buT I and a loT of my friends boughT almosT all loki's games. They were a greaT company and an even beTTer bunch of developers. Sorry buT my small T issn'T working for some reason. . . .

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Re:Loki sucked...

Posted by: Anonymous Coward on April 20, 2002 10:11 AM
You've got it wrong. I'm looking at my stack Loki games (all but one of their whole catalog). I was looking forward to buying more from them. They had a great idea, and great products, but were killed by mismanagement.

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Draeker's obviously a zero, but...

Posted by: Anonymous Coward on April 16, 2002 09:45 AM
As for Colvin, you can hardly complain if you're foolish enough to sink $350k of your own money into an already failing business. He had to know he might not get paid back. If you choose to roll the dice like that, you can't bitch and whine when it doesn't come up your way.

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Sounds crappy to me

Posted by: RickySilk on April 16, 2002 08:13 PM
If Draeker got his salary then his employees should too. Good leaders know that the employees come first. He shouldn't have withheld from his employees then paid himself and his wife.

I'm a huge Tribes player so when I started making the switch to a linux desktop about a year ago I had planed to buy Loki's version of Tribes when my switch was complete. I'm real curious to see how the game plays under linux.

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Re:Sounds crappy to me

Posted by: rob on April 17, 2002 12:13 AM
FYI Trbes2 runs very well in Linux!!!!!!!!!

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Here's the Entire Interview -- Uncut

Posted by: Scott Draeker on April 17, 2002 03:22 AM
> As I mentioned on the phone, I haven't seen anything other than
> one-sidedness since the announcement that Loki would be closing down,
> and wanted to give you a chance to tell your side of the story.

I've heard the same thing from a number of sources, and appreciate the opportunity to respond. No one benefits from a one sided portrayal of events.

> The story on Linuxandmain.com says that the creditor filings show Loki
> owes a single employee almost $350,000 in salary and expenses incurred
> using the employee's credit card. Is this true? What is your response?

Our attorneys spent a fair amount of time
arguing over whether this individual could be properly categorized as
an employee. This question was never resolved by the court, but it's
clear that this isn't about an employee reimbursement. This was money he invested.

When he first joined Loki as the Vice President of Sales and
Marketing, he agreed to indefinitely suspend his salary, and this is
written in his contract. It turns out that California labor law will
not enforce any agreement between private parties to reduce or
suspend one's salary, but neither of us knew this at the time.

The idea was that Loki was a start-up and that if it were successful,
then he would share in the rewards. He has testified that it was his
understanding that Loki would give him a million dollars. Loki never did have that kind of success. It's
possible he never considered that Loki would always be hand-to-mouth.

When the board fired him in January 2001 it bruised a very fragile
ego. He's been waging a personal war against Loki, me and my family
ever since.

The amount, by the way, is listed on the schedules as 'disputed.' While he did forgo a salary and inject money into Loki (cash and credit card charges) he also paid himself thousands while keeping the books.

In regard to our programmers and administrative staff, Loki owes them generally a few thousand dollars, with the lion's share of that being accrued vacation, penalties and interest.

> Did you change your employees' status to 1099? Why?

Things were dire at Loki in December 2000. Our December 15 payroll
bounced and then we completely missed the December 31 payroll. On
January 7, 2001, I emailed all employees that effective immediately
we could not guarantee that we would be able to make any future
payrolls and that they should all start looking for jobs.

In retrospect, we should have just laid people off. I reasoned at the
time that everyone now knew the situation, and it would be easier for
people to make smooth transitions to new jobs if we let them maintain
the appearance of still being employed at Loki. Of course I also hoped that
things would turn around and that, even if we lost some good people,
others might stick it out.

No one left after the January 7 email, and even though we couldn't
make payroll, we did hand out money orders (checks were bouncing) whenever possible as loans
toward unpaid salary. We were simply trying to do the right thing by
giving what we could whenever we could.

Now fast forward to 2002 and Loki is submitting tax records. How can
we handle the loan payments? They have to be reported, and we learned
that any money transferred to employees must fall under either a W-2 or a
1099. Since there were no withholdings from the loan payments, they
didn't qualify for W-2, and this left 1099 as our only option.

The biggest irony is that the salvos being fired against me are the
result of my trying to do the 'right thing' to take care of
people. If I'd been hard-line and laid everyone off in January, or
had not paid them anything, there wouldn't be any basis for
complaining to the IRS.

> During the time Loki wasn't able to pay its employees, is it true that
> you and your wife continued to draw money out of the company?

This is backwards.

Although my wife and I were both salaried, we rarely paid ourselves.
Loki didn't have the money, and I insisted that payroll for the other
employees was the highest priority. Loki was almost always in
financial trouble, and sometimes it seemed like all I did was spend 2
weeks scraping together the next payroll for the rest of the team.

In December 2000 we were finally beaten, and in January we told
everyone the situation. After most of the employees quit on March 31,
it became much easier to meet our monthly expenses, including payroll
for the few who stayed on and even some debts. Only then did my wife
and I start receiving our salaries.

Several months later we were forced to declare bankruptcy, at least in part because of the mounting lawsuits from former employees. Our goal with the bankruptcy was to stay in business and to allow us to treat all our creditors equally.

Why the extreme bitterness by the former employees?

I have heard that the March 31 exodus was meant to put Loki out of
business. The fact that it didn't may have further embittered the
crew that left.

Also, like any creditors, these guys all wanted to be paid first,
immediately and in full. From a debtor's standpoint, however, you
can't always just pay everyone immediately. Loki's first priority
became staying in business. If we went out of business, then no one
would get anything. Our remaining employees were paid first, and the
former employees second.

We did pursue settlements with anyone who would listen, but many
started filing lawsuits. They had meetings where they passed out
forms and instructions for filing labor board complaints. Anyone who
was pursuing a settlement with Loki was encouraged not to.

As a side note, everyone who settled did receive something. The ones
who filed suits received nothing, and those are the ones
complaining the loudest now.

> Why don't you want the creditor's committee to take over Loki? They were
> offering to reduce the debts, work on getting the creditors
> satisfied in a timely manner with payment plans, etc, right? Or not?

The creditor's committee didn't formally offer anything.

In December 2001 we asked for a meeting with the creditor's committee. The premise was simply 'Tell us what you want.' We didn't make any promises, but we were ready to lay our cards on the table in order to find out what, if anything, they would agree to.

The creditors committee told us that they would never, under any
circumstances, agree to any plan we would submit. They told us they
planned to oppose anything we did, including whatever plan we might
submit.

Let me explain how this relates to the Chapter 11 process. The
creditors committee is composed of unsecured creditors who volunteer
for the role. They may hire an attorney to represent them at the
debtor's (read: Loki's) expense. Any time we went to court, whether
to argue over a motion or to submit a plan, Loki had to pay the legal
fees for both sides. It is a very efficient way to burn a lot of
money very quickly. What the creditor's committee was saying was that they planned on running up a legal bill that would prevent Loki from ever emerging from bankruptcy.

The creditor's committee knew that Loki could get a plan approved, even if they
objected. So instead of negotiating with us they chose to block any plan through the tactic of simply running up huge legal fees.

We estimated it would cost between $100,000 and $150,000 in legal
fees just to get a plan approved with the committee fighting us every step
of the way. These legal fees would have to be paid before a plan
could even be approved by the court. The committee had seen our financial
statements and knew we didn't have the money.

The committee did make one suggestion. They wanted to convert all of
Loki's unsecured debt into stock and have members of the committee
take over operation of the company. We were floored. The committee has a duty to represent all of the unsecured creditors, not their own personal ambitions.

The creditor's committee had 5 members, 3 of whom were former employees and one, Shawn Gordon of the Kompany, who was a former Loki board member. Some of the issues with Shawn illustrate quite well the problems surrounding simply handing Loki over to the creditors.

At the beginning of 2000 Loki contracted with Shawn Gordon and his company, the Kompany, to develop an open source personal finance application based on the GnuCash engine. The Kompany accepted payments totaling over $108,000 for the development, about half the total, before Loki couldn't afford any further development. I spoke to Shawn and we agreed to suspend development until Loki could resume payment. Instead, Shawn continued development in secret. He resigned his board seat on February 5, 2001 and notified us four days later that he was going to began selling the code he had developed for Loki as his own product named "Kapital."

As a member of Loki's board, Shawn had a fiduciary duty to Loki and its shareholders, and that fiduciary duty could not be avoided by resigning. In Loki's bankruptcy schedules we listed as an asset claims against Shawn and the Kompany for copyright infringement, breach of fiduciary duty, conversion, theft of trade secrets and fraud. Obviously if a court were to find in favor of Loki, the resulting damages could represent a significant asset to disperse to Loki's creditors. There are also GPL issues with regard to Kapital, as the code was based on GnuCash and, as far as I am aware, none of the resulting work done by Shawn and the Kompany has been released as required.

We were obviously quite concerned about any proposed 'plan' that had the potential to make significant assets like the claims against Shawn disappear.

> What was the reorganization plan you submitted to the committee? Why do
> you think they didn't go for it?

We never submitted a plan.

Once they committee made it clear they would oppose any plan we
offered, it didn't make any sense to try to negotiate one with them.

> Where were you on the hearing day earlier this month? Has the court said
> they would impose any sanctions on you for not showing up?

I was not available for that meeting. Our attorney had advised me
that the meeting would be automatically continued for 4
weeks. There has not been any talk of sanctions.

> Are you planning any legal retaliation against those who have spoken out
> against you both in public and in the court?

Maybe.

Slander and any damages arising from it are notoriously difficult to
prove. I could spend more money on attorneys for nothing more than
the satisfaction of having won and maybe a retraction in 4 point type
on page E-39.

At this stage I'm primarily interested in seeing some of the claims pursued which
Loki has so that there is something to distribute to creditors.

> What is your response to those who have said you are "screwing your
> employees," "milking every dime you can get out of the company,"
> "closing the company out of spite?"

People say lots of things. Our programmers were almost fanatical in their loyalty to Loki during
its heyday, and this turned to an almost fanatical hatred when the
company fell apart. The only comparison that comes to mind is an
ugly, bitter divorce. Their comments have to be read in that context.

I put everything into Loki, and financially, it's been a huge disaster. In December 2000 I took out a second mortgage on my home to pay Loki bills. As a result I spent most of 2001 in foreclosure. I didn't pay myself for 2 years. I did everything I could to make Loki work.

Do you have any comments about the articles posted at Linuxandmain?

> The author, Dennis Powell, has done three articles so far. The first was at Linux Today where he used to work. The other two have been posted on his own site, Linuxandmain. He's been running a one man smear campaign. The articles are full of suggestions, innuendo, words like 'perhaps' and 'maybe.' There are numerous factual errors. He stoops to personal attacks that have nothing to do with Loki. I think any fair minded person reading his stuff would have to come away feeling dirty. Dennis is a personal friend of Shawn Gordon's. I'll let people reach their own conclusions with regard to his motives.

> Do you feel like you are being treated unfairly by the creditor's
> committee and your ex-employees? Why?

In regard to the former employees, I understand why they are upset,
but bitterness is not an excuse for what has since happened. My
office window was smashed during an attempted break-in. Equipment and
documents were stolen. There were electronic break-ins. My personnel files were stolen and the information used to illegally access bank records. Our former VP was asked about this under oath. His response was to invoke his rights under the Fifth Amendment.

With regard to any legal problems, so far it's all smoke and no fire. When the creditor's committee was formed some members wanted the committee's attorney to pursue the accusations they'd been making (and are still making) in public. The creditor's committee counsel turned them down. So 4 of them hired a second lawyer to make those claims. He agreed to represent them, but declined to pursue those claims. So one of them hired yet another lawyer, someone with no bankruptcy experience, to make those claims. Needless to say, that hasn't gone anywhere either.

One individual, immediately after he was fired, lodged a complaint with the state that Loki didn't have worker's compensation insurance. If you don't have insurance they can levy a hefty fine and even shut you down. This guy knew that the policy had lapsed because it had been his job to pay the bill. It hadn't been paid and the policy was cancelled. He even asked me to confirm that the policy had lapsed during his exit interview. Anyway, the state sent someone to check and by that time we had gotten a new policy so it amounted to nothing.

That's been the big lie from the beginning. People were told that all of the attacks against Loki were just to pressure us into 'doing the right thing.' But setting us up to be fined by the state is not exactly the best way to get paid. In essence some former employees were screwed twice. First when Loki didn't pay them, and the second time when they were talked into helping push Loki into bankruptcy. No wonder they're bitter.

> These financial difficulties and the tremendous adversity you are
> undergoing must have had an effect on your family. How are you coping
> with this upheaval? What repercussions is your family suffering?

It's trying. I've heard there were boasts about taking my house and
putting me and my family on the street. It's all bark and no
bite, but still stressful for my family to hear. I would ask those
folks responsible to at least have the dignity to leave my wife and kids out of
this.

> Assuming that you and your reputation can make a timely recovery from
> this unfortunate disaster, what are you planning on doing once the dust
> settles?

Loki was a great experience in many ways. I view it as a second
graduate degree, both in terms of time and money involved. I've
learned a great deal--arguably more than I would have if Loki had
been a financial success. In fact Loki was a huge success, not
financially, but in just about every other category.

Obviously the hard part is moving on with your life. We all read
about crimes and random evil in the news. It's disconcerting to be
the intentional target of some of that. It's like being pursued by a
pack of Ahabs who think you're their white whale.

I'm actually working on a couple of other projects. I like being an
entrepreneur. It's a wonderful, creative experience. Looking back at
Loki, we created a brand new industry. We generated nearly $3M in
revenues over 3 years, won dozens of award and accolades, had a huge
amount of great press, created jobs and came within spitting distance
of making some folks millionaires. The Loki name was known around the
world. At one time our revenues were in the same ballpark as
TurboLinux and LinuxCare. We created a huge reservoir of open source
tools and libraries that will be used for years to come. Next time, I
think I can do even better.

#

Re:Here's the Entire Interview -- Uncut

Posted by: Dennis E. Powell on April 17, 2002 05:37 AM
Mr. Draeker: You allege errors of fact in the articles I have published in connection with your company. If you specify them, Linux and Main will make all appropriate corrections.

dep

#

Re:Here's the Entire Interview -- Uncut

Posted by: tina on April 17, 2002 07:34 AM
BTW, I never asked Scott Draeker the question about Linux and Main and Dennis Powell. He added that in himself - in fact, today he emailed me to see when the article here at Newsforge was going to be published, and he included the following:

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From: "Scott Draeker" <scott@draeker.com>
To: "Tina Gasperson" <tinahdee@tampabay.rr.com>
Subject: Status
Date: Tue, 16 Apr 2002 09:38:33 -0700
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Tina:

I hope things are well with you. Just wanted to check on the status of the
article you're working on. Linuxandmain got another article up last week,
and I would love to see some balance. I've also prepared a brief response to
place near the end of the interview:

Q: Do you have any comments about the articles posted at Linuxandmain?

A: The author, Dennis Powell, has done three articles so far. The first was
at Linux Today where he used to work. The other two have been posted on his
own site, Linuxandmain. He's been running a one man smear campaign. The
articles are full of suggestions, innuendo, words like 'perhaps' and
'maybe.' There are numerous factual errors. He stoops to personal attacks
that have nothing to do with Loki. I think any fair minded person reading
his stuff would have to come away feeling dirty. Dennis is a personal friend
of Shawn Gordon's. I'll let people reach their own conclusions with regard
to his motives.

#

Re:Here's the Entire Interview -- Uncut

Posted by: Anonymous Coward on April 17, 2002 08:44 AM
The comment about me and Dennis personal friends is just stupid. I know Dennis like I know a bunch of other journalists in the Linux field. Obviously I know most of them because it is part of what we do as a company..talk to the press. I talk to Tina, and Robin Miller, and Grant Gross, and Brian Proffit and Michael Hall and Joe Barr and a whole bunch of other people I can't think of off the top of my head. The fact that Dennis has written about theKompany is, I believe, because he finds us interesting and likes what we are doing - he certainly doesn't give us a free pass, nor would I wish him to. Overall I have a good relationship with the press, and I personally enjoy Dennis work, but based on my association with the Loki bankruptcy, I can say that what I read from Dennis stories was culled almost entirely from court records, and none of it from me (because I never gave him any information for stories). I've stayed out of the public commentary on this one, and considering Scott Draeker is my cousin and I also helped fund Loki, I've been pretty good about it I think.

Shawn Gordon
President
theKompany.com

#

Re:Here's the Entire Interview -- Uncut

Posted by: Anonymous Coward on April 19, 2002 01:39 AM
Wow! Talk about a clash of the Titans.

All this information about Scott Draeker is just embarrassing. I was a strong Loki supporter. I purchased everything they released. Everything. And all this just blows my mind. It makes me feel like I put my money in the wrong place. I try to tell myself that I supported the programmers at least, but even that doesn't seem to be the case.

I was MORTIFIED when I saw that Loki owes TheKompany.com 56k! I can't imagine that TheKompany is a huge corporation. So, that had to hurt. So far I've only bought 1 product from TheKompany, but I suddenly feel the need to pick up a copy of Kapital and KDEStudio. Maybe Kivio would be good for me.

Oh well, I'm rambling. I'm just blown away.

If Scott's still reading this, I think you should realise this bitterness seems to come from both sides of this. You may have won your bankruptcy case and that's fine. If the courts decided that, then that is legally just. But I do think that you have an ethical obligation beyond the legal system to try to help out those people that were devestated by Loki.

First off, if you find yourself back on your feet, especially if you find yourself doing well, you should send some money to your old staff. They're human beings who are definitely suffering from this. If for nothing else, try to at least cover lost salaries. Then if for some reason you're really successful, start throwing money back at the small corporations Loki owed money too.

I mean, legally you're free and clear and so everything's fine if you can sleep well at night. But I do think it is the right thing to do to help these people out. There is a difference between law and ethics.

#

Re:Here's the Entire Interview -- Uncut

Posted by: Anonymous Coward on April 17, 2002 11:09 PM
Well, that's interesting.. making up one's own question and answer after the interview is over. Tanks for putting it in the proper context, Tina.

#

Litmus Test

Posted by: Anonymous Coward on April 17, 2002 05:09 AM
Mr. Draeker is singing solo saying one thing. All of the employees are in harmony saying something else. Hmmm... Who should I believe?

#

piracy ruined them

Posted by: Anonymous Coward on April 17, 2002 05:39 AM
why buy their games when you can download them from gnutella?

we dont have to pay for linux, why should we pay for loki software?

#

Re:piracy ruined them

Posted by: Anonymous Coward on April 17, 2002 06:23 AM
well, for that matter, why should we pay for any software!? Steal everything! A moochers free-for-all! Put the programmers on the streets!
Wheeeeee!

#

Re:piracy ruined them

Posted by: Anonymous Coward on April 17, 2002 09:43 AM
Because:
1. These games would not exist otherwise. Look at the budgets that these games require. How else would a company like Raven make a game like Soldier of Fortune?
2. Licenses are licenses. The GNU GPL is a license too, you know. Why should companies adhere to the GPL if people like you try to justify piracy. Don't like the license? Well, here is a hint: DON'T USE THE SOFTWARE. Go play TuxPuck or FreeCiv instead.

#

Re:piracy ruined them

Posted by: Anonymous Coward on April 17, 2002 07:14 PM
Yes, selling software as if it were a physical product is quickly becoming a pretty bad business model, especially to a market as niche as GNU/Linux gamers.

#

physical product argument

Posted by: Anonymous Coward on April 18, 2002 01:31 AM
see #2

#

Even if each linux desktop user bought their games

Posted by: Anonymous Coward on April 18, 2002 11:47 PM
it still wouldn't suffice to keep up with payroll. The Linux market is too small.

#

Stick to Windoze, warez d00dz

Posted by: Anonymous Coward on April 20, 2002 10:58 AM
Pirating commercial Linux software is about the
lowest thing anybody could ever do. Just because
you are used to it from some other OS don't screw
up our's. If you can't afford to buy it you should
stick to the 1000's of free games until you save
up enough money.

I paid $ for 10 Loki games and never pirated one.

#

What about the games?

Posted by: Anonymous Coward on April 19, 2002 12:54 PM
Loki should not have been a business, but simply an association of programmers of competing programmers to exchange ideas. The success of Linux as a gaming operating system was taken desperately and retro-actively by Loki. They dove in head first. They invested in the company, knowing what they were doing, and now everyone is going sour; Colvin first, but you can't blame anyone. Draeker managed the business and it sounds like he didn't manage some expenses correctly and ethically. For one, the market was fresh, and you need to start with a small team of dedicated individuals; I see wives and children getting in Loki's payroll. For starters, in Business 101, everyone's payroll should be determined based on demand for their product. That means no president or shiskabob salesman will start making $100,000.00 a year! Second, the rule for product demand is not to sell an older product whose lifetime had previously been spent. Loki ported a great handful of titles, but many of these titles were being overlooked. The closest Loki was within a title's equivalent release on the MS Windows platform was 6 months; that's old people, it's typical, and old.

Finishing argument:

Linux was an expensive lesson. Scott may have lied, or more-so, mis-lead people in court, but his one truth of all stands; the market for Linux exists, and yes, Loki failed to grasp that market. Loki was big, too big for its own good. If Loki was 7 people strong, on payroll, instead of 25, then they would be around to port more titles. Loki tried to work on good business ethics before it could harness the business. Believe me, not every start-up businesses could have offered any of the many features that the Loki company boasted. Next time around, maybe Loki 2.0, we should see progress grow gradually using market stimulus, not bank loans.

I live in the Huntington Beach area, about 20 miles from Tustin, and if I was in the area, I would've taught them howto defend themselves from the IRS. It's just so ironic that everyone in Loki was talking so pleasurably on how they were releasing 5 to 10 titles in a year, planning more, talking about designing their own home-brew title, etc. They had potential, but may have desicrated the market as they fumbled their finances.

#

Re:What about the games?

Posted by: Anonymous Coward on April 20, 2002 04:33 AM
"Loki was big, too big for its own good. If Loki was 7 people strong, on payroll, instead of 25, then they would be around to port more titles."

What about Tribsoft and Hyperion? They were small, but did none too well. The verdict is still out on Linux Game Publishing. I hope they can pull it off, and they seem to be on the right track. Time will tell.

#

Re:What about the games?

Posted by: Anonymous Coward on April 21, 2002 08:41 AM
Tribsoft and Hyperion?

Bad ports of ancient games, then big mouths about bad sales.

#

Error

Posted by: Anonymous Coward on April 21, 2002 01:38 PM
"The closest Loki was within a title's equivalent release on the MS Windows platform was 6 months"
WRONG. The Tribes 2 delay was the shortest, being about 3 weeks.

#

Re:Error

Posted by: Anonymous Coward on April 22, 2002 11:47 PM
RT2:Gold was shortest, being a few days ahead of the Windows release of RT2:Gold. Sadly, however, RT2:Gold for Windows had money greasing its way through the distribution channels, and shelf space once it made its way through -- something that would have bankrupted Loki even faster had they chosen to vie for it.

#

At least they tried...

Posted by: Paran0id on April 22, 2002 05:04 PM
I think we should give Loki some credit. It's pretty simple to criticize them now but at least they tried. I don't see many people doing the same.

// n0id...

#

Re:At least they tried...

Posted by: Anonymous Coward on April 23, 2002 12:03 AM
True...

#

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