Loki Aftermath Looks Bad

einer writes "Things look mighty bad for Loki employees. From this article it appears that some of them haven't seen a paycheck since late 2000. Perhaps the most telling part of the article is contained in a parenthetical near the bottom of the page: "A single employee is listed in creditor filings as being owed almost $350,000 in unpaid salary and in expenses the company incurred using the employee's credit card."" there's a lot of not-so-happy-stuff in this article.

60 days

[wiredog]

I think. Or maybe 30. Still. The company used his credit card? I think he might want to consider criminal theft charges against the principles. Or would it have been considered a loan?

Re:60 days

[TClevenger]

Actually, Visa allows up to 12 months, but most issuers put 60 days in the contract to reduce their workload. But if it's enough money (and not reimbursed by a company like this) the employees may be able to file a claim directly through Visa.

Be wary of ANY check an employer writes to you:

[llamalicious]

Even if you are a paid employee, be cautious about receiving any type of compensation by check from your employer. Even bonuses and advances.

Undoubtedly, you will receive a 1099 at the end of the year, this is standard accounting practice (and the law [in the States] for the company writing the check)

You are left holding the bag on taxes, so make sure you account for any mileage or other costs associated with making that extra money.

Bottom line: companies are keeping records, you should be too.

"Corporate Card"

[kawika]

Wow, I never thought about this scenario, I've been lucky enough to never be there. A lot of companies issue corporate American Express cards to their employees so they can charge company expenses such as airline tickets, small equipment and software, etc. The employee is supposed to then file an expense report and be reimbursed for those expenses. Regardless, the employee is responsible for paying the card balance.

In this case it sounds like the employee was royally screwed by this arrangement. It's also possible that they never got around to filing an expense report. A few years ago I worked with one guy who hadn't filed expense report for eight months and was owed a few thousand dollars; the company sent him a letter saying he had to file by the end of the year or they wouldn't reimburse him.

Re:Whoa, doesn't the US protect its citizens ?

[Ravensfire]

Well, not quite as simple as that.

Basically (and highly simplified), creditors are placed in various groups (no, amount owed isn't a criteria - other factors are). These groups are then paid off in a set priority. If you are a creditor with an unsecured debt, you're not getting much. Within the group, the money is usually distributed in a level manner - x percent per dollar owed.

Usually, everyone in bankruptcy gets screwed, especially chapter 9.

What the courts CAN do is examine past transactions from the company, and compel the reversal of those transactions.

Re:at what point

[Bilestoad]

You stop working there and demand money the second time it happens to you. The first time I kept working, and wasn't paid for a couple of months. Luckily it was only salary and I didn't incur any expenses. In the end I was only out about $10,000. The lesson was worth at least that much.

Loyalty is all very well but you have to look out for yourself and your family.

Re:at what point

[OverCode@work]

Loki was a little different. For the most part, everyone WANTED to work there, and believed in the company. It's easy to believe promises and speculations when you trust the administration and have a sense of a common goal.

-John (former Loki contractor)

Paid in Loans?

[Sir Tristam]

During at least part of the period when employee payrolls were not met, Loki sometimes gave employees "advances" on salary owed. Former employees say that these advances were in the amount of their net pay; the benefit to the company was that federal and state taxes on the payroll were not paid, because the money was treated as loans rather than pay.

If I were a Loki employee that received one of these "advances", I'd make plans to talk to a lawyer, because the screwing might not be over. If these payments were actually made with the understanding that they were loans against future salary payments, the bankruptcy court might view the amounts as monies owed to the company, and thus an asset of Loki. If so, the employees might be required to repay the full amount, and then file as creditors for the amount of their salary owed (Pay back $1, get back $0.10 if you're lucky.) I would think that a 1099 for the 2001 tax year for the amount of the advances received would be evidence that the advance amount had been forgiven, so the emplyees shouldn't have to worry about amounts advanced in 2001; however, the court might still consider any of these advances made in 2002 as loans. IANAL, but I would think it would be prudent to talk to one in this situation.

Chris Beckenbach

Re:Whoa, doesn't the US protect its citizens ?

[slow_flight]

No, the US gov't only protects its CORPORATE citizens. The rest of us are viewed as a necessary evil or tax slaves.

Re:Open Books!

[Anonymous Coward]

How do you handle the issues raised by your employees who are displeased that Johnnie makes more money than they do?

In my experience, you don't have to. I work at such a company, and having a no-secrets, open-book policy has made it the least political environment I've ever had the pleasure to work in. Management is forced to be accountable for all decisions (including salary) and to actually listen to employees.

You'd be surprised at how much difference it makes in both productivity and morale when a company trusts their employees rather than herding them around like bad children.

Scott Draeker's wife's web page

[east_bay_pete]

If anyone cares, Scott Draeker's wife (Kayt Draeker, aka Kathryn Rosa Sorhaindo Draeker) has a web page [stanford.edu].

She's the one that was "listed in corporate papers as the company's secretary".

Re:at what point

[Col. Klink (retired)]

The company was still giving employees money, but they were calling it an "advance" and not taking out the withholding taxes. So it "seemed" like they were getting paid when, in fact, Loki was setting them up for a huge tax burden and scamming them.

Read the article...

Are you stupid, or something?

[Anonymous Coward]

I had always wanted to consider Loki one of the "good guy underdogs". A company to root for.

The company's business model was based 0.24% of the desktop market. Among that 0.24% are 0.24% that would pay for software. Definitely NOT a company to root for.

1099s? That bugs me.

[Yekrats]

But it doesn't surprise me. Some companies are slimy like that. Heck, it happened a couple of years ago to my wife.
Fortunately for us, the IRS has pretty stringent rules on who is and is not a contractor. If it's called into question, there's 20 Guidelines [prounlimited.com] which the IRS uses to determine if a person is self-employed or an employee.

If you think you're an employee, but your employer dodges their own taxes by handing you a 1099, you can petition the IRS to look into it. Check out Form SS-8 [irs.gov].

If the company's only worth $20k, who owns the IPR

[Simon Brooke]

Is it me or does something stink even worse than the article describes? Loki developed some fine technology. Some of it, of course was Open Source [lokigames.com] (Who's hosting that now, BTW?) but there was IPR in the ports of the games, and there was IPR in tools. Even the IPR in the Open Source bits has some value... I've just read through the credits on my copy of SMAC, and I can't see '© Loki Games Inc' anywhere. So just who does own that IPR now?

I see Draeker was an IP lawyer. My prejudice against the breed is only comfirmed.

Re:There are no more heroes

[Anonymous Coward]

Background:

I had a conversation along these lines with my Tax Lawyer some time ago. His comment was that (this applies to U.S.) the folks at the IRS aren't bad folks, or malicious. Sometimes some aren't totally competent, but they aren't malicious. As he put it, you could owe $150k and not have filed a return for four years - all they'll do is set you up on a payment plan for the taxes, interest and penalties and then everyone goes about their way.

As some have mentioned here, a Corporation shields the owners from most forms of liability. For stuff like Loki's, ya gotta sue the corp, because the corp is the legal entity that incurred the expenses, etc.

End background

HOWEVER:
In the case where an employer does not send witholding taxes to the IRS, the IRS will go right through the corporation and take any personal assets from the Officers (maybe the Board of Directors). Yes, that means houses (residence and all), cars, what ever. According to my Lawyer, this is where the IRS folks get vicious. They don't just collect the unpaid taxes, and whatever else. They collect multiples of what is owed and unpaid. The reason - in many cases, there is nothing to collect - smaller company goes "belly-up" and owners can't be found or have nothing. So to handle this situation, when the IRS can collect, they collect more than needed to put the excess into a fund to handle situations where collection can't be made.

Also, I don't recall whether this is with regards to IRS/taxes, or with Texas Workforce Commission/payroll, but the person(s) in charge of payroll & benefits shares some liability for this kind of situation (whether or not an officer in the company).

As for the 1099 bit, that depends on the paperwork that was filed for the "advance". I've not experience that bit of "financial wizardry". For those folks left holding the 1099's, I'd suggest having a chat with a competent attorney and/or local IRS representatives. If it is found that this was done improperly or in bad faith, the Mr. Draeker could be in for a "world of hurt". That nice bit of cash he's wanting from the Bankruptcy Judge might not do him a bit of good.

Why do I know some of this:

For our 2000 IRS taxes, my wife's former employer sent us a bogus W-2 including income that he never paid (we'd also sued the company for it).

For 2001, the employer she left back in May (who is now defunct) didn't send a W-2 at all. Thankfully this one paid her up until she left.

BTW: IANAL!

$50k?

[Anonymous Coward]

Where I live you can't even afford to eat on $50k.

The cost of living varies tremendously from place to place, country to country, etc.

Careful how you toss those numbers around....

RTFC (Read the Frigin' Contract)

[Stephen Samuel]

I had always thought a company card belonged to the *company* and that they would bear liability for payment ...Apparently it doesn't work that way

When you got the card, you were probably asked to sign some paper. That paper was a contract. Did you read the contract? Did you keep a copy of it?

Always read what you sign. Also be willing to NOT sign it. You'd be impressed with what people ask you to sign. If they say things like "It's really meaningless" when you question something, then ask them to take out the 'meaningless' clause, and see what their reaction is.

If the contract you signed with Amex said that you were jointly (or singly) liable for your credit card, then you are the one on the hook. If it says that you are only responsible for misuse, then that's a diffferent issue.

It's also possible that the contract didn't hold you responsible, but Amex simply went after the easiest target -- but generally large companies like that tend to cover their ass with your hide.