Factor 5's fiscal woes were first revealed in December. Upon returning from an extended leave, an animator with the studio behind Lair blogged of the company's tenuous financial position, saying employees had not been paid since November. Shortly thereafter, reports surfaced that Factor 5 had laid off a number of employees at its San Rafael, California-based offices and that the company was considering legal action against the affronted animator.
Now, though, Factor 5's employees are bringing the fight back to the now-bankrupt studio. The Marin Independent Journal reports this week that former Factor 5 employees have filed suit against the developer due to fraudulent business practices leading up to Factor 5's closure last month.
Marin IJ reports that prior to liquidating its assets under the Chapter 7 bankruptcy law, management transferred the studio's intellectual property to another company to avoid paying unpaid employee wages and outstanding debts to creditors. According to James Smith, attorney for the plaintiffs, that work included a new version of Star Wars: Rogue Squadron for the Nintendo Wii.
The suit notes that upon filing for bankruptcy, Factor 5 had assets of only $50,000 to $100,000, with debts totaling between $1 million and $10 million and unpaid wages of more than $900,000 due to 69 employees. Factor 5's largest outstanding creditor is LucasArts, which loaned the studio $4 million in 2003.
"We allege in the suit that Factor 5 and its three founders fraudulently transferred assets, including source code and other intellectual property to Blue Harvest, which is now known as White Harvest," Smith told Marin IJ. As noted by Smith, Blue Harvest is steeped in Star Wars history, having been the code name for LucasArts' Star Wars Episode VI: Return of the Jedi, and it was also the working title of Factor 5's in-development Rogue Squadron Wii project.
"We believe and have alleged in the complaint that Factor 5 and White Harvest are essentially the same company, being run by the same people, being represented by the same sets of lawyers, with all the same management and ownership and control, performing all the same work that they were doing at Factor 5, just now with a new name and a new address," Smith went on to tell the Marin IJ.
Smith also alleged further shady financial dealings, particularly by Factor 5 CEO Julian Eggebrecht. The lawyer told the Marin IJ that on November 11, Eggebrecht transferred his stake in a $548,000 San Rafael home to Katja Reitemeyer, Intel Corp.'s director of business development and fellow title holder, for a mere $5,000. Eggebrecht and Reitemeyer reportedly took out an $890,000 second mortgage on the house in January 2007 and then secured a $100,000 home equity line of credit in November 2007.