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.

Re:60 days

[al_d]

"The company used _his_ credit card?"

Not really that unusual for an employee to spend their own money and then claim it back 'on expenses' (e.g. business trips).

Sucks to have the compeny not pay you back though

A shame

[Violet Null]

During that period, however, the Draekers took almost $92,000 out of the company, according to court filings; in counter filings, Loki claimed that the funds went chiefly to pay employees, though it did note that Scott Draeker was paid $46,504 in salary during the period from January 15 to July 31, 2001, with Kayt Draeker receiving $18,643.52 during that time; the company paid medial insurance premiums for both during that period.

And it's this sort of thing, boys and girls, that causes me to never trust management. The real shame is that you've got employees who are going without their pay, ostensibly because of loyalty to the company, and then getting shafted in the end.

Moral of the story: When the company asks if they can stop paying you, don't agree to let them use your credit card.

Comment removed

[account_deleted]

Comment removed based on user account deletion

Wow

[loraksus]

Jesus fucking christ. As cool as the project is, don't these people have any common sense? You don't get paid for a year, you jump ship. I'd be gone after 2 bounced [or not received] paychecks. The market is shitty, but I'm sure that someone could hire them. Of course management got paid, this was a friggin sweatshop.

There are no more heroes

[Toodles]

I had always wanted to consider Loki one of the "good guy underdogs". A company to root for. I mean, c'mon. They helped bring Quake3 to Linux, how could you NOT like them? But then I read this:

Instead of sending them W-2 income tax forms, they were sent 1099s, meaning that they are left to pay taxes on income for which the company was already supposed to have -- but hadn't -- paid federal withholding.

The question here is, did Loki without the taxes/FICA, etc. out of the paychecks? If they withheld, didn't deposit it, and then sent out a 1099, then the company should immediately be investigated for tax evasion and any other criminal charges that are relavent. This is fraud, and the victims are the employees. If the taxes were NOT withheld, then this is a non-issue. Yes, it sucks having a large tax amount due all at one, but thats life.

Who wants to take bets that this gets publicized as FUD that Linux does not a viable company make?

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

[turbine216]

only problem is that Loki's board of directors is as broke as its employees. A lawsuit would have very little effect, if any.

This never should have happened at all. Loki and its employees were obviously working under some promise of eventual financial gain, or they would not have been there. Which means that someone at the top was either "blinded by the open source light" or was lying through his teeth. It's shit like this that makes working for Microsoft seem like a good alternative.

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

[dirty]

This is funny???

You make a really good point though. I can't figure out how it's legal in the US that management can walk away from a dead company with millions of dollars in their pockets, while the employees walk away thousands in the hole. Maybe the US should look to Canada and follow its lead (in just one of many places).

From what I understand the employees almost always get screwed in these situations because the way the creditors are paid off is the ones who are owed the most get their money first and then it works its way down. IMHO it should be exactly the other way around, FedEX can afford to lose $100,000, Joe Programmer probably can't afford to lose $20,000.

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

[javatips]

I aslo came from Quebec. I was working for Sanga just before they stop paying their employee. I've not stayed long being upaid. However they still owe me 6K CAN.

At first we went to the "Office des Normes du Travail" and filled a complain, along the other Montreal employee. They was some legal proceeding going on. Up to the point were the Sanga employee in Ontario decided to file a class action suit. The "Office des normes du travail" decided to give control to the lawfirm that was suing for the ON employee.

I received many legal document telling me that thing were going well. Up to the point were the company filled for bankrupcy. At that point, the lawfirm (can't remember which one) decided it was not worth the trouble and drop the charges.

So did the Quebec laws protected me... Not at all, it just gave me the illusion of being protected for some time. Sure I can decide to sue, but it will cost me a lot more that what they owe me.

The point is that the law may be protecting you, but if the system fail to help you being protected, there is not point in having these laws.

Lesson learned

[estoll]

Without naming names, I worked for a company that experienced a similar downfall; however, not as extreme. I was a college intern at the time and the company employeed about 70 people. At the time, the sky was the limit. The company had a great reputation for open communication with its employees and an excellent working environment. We had monthly status reports from the executives on how well the company was doing and then one day, they just said they had no money left. It came as a shock to everyone. They said they had enough money to keep everyone employed for 6 months and would not have to lay people off if we got new business. Since the company had such a great environment and the employees were really happy there, people started taking salary cuts and some voluntarily gave up their salaries. No more than 2 months after the bad news, the 6 months they promised turned out to be a lie. They laid off almost 30 people in one day. Since I was just an intern, I finished my semester and left. I had big eyes on working for this great company but got quite a reality shock instead. I am now happily employed for a competitor of my old employer and I still see a couple resumes from people who work there or used to work there come across my desk every month. I think the economic bubble we lived in taught everyone a big lesson and for me it was, don't ever trust your employer when things seem even the slightest bit wrong.

Re:at what point

[bsletten]

You're missing out on the fact that these guys probably really believed in their mission of getting these games to the Linux desktop. They probably also legitimately believed it was a hard thing to do and so were willing to make some sacrifices toward that larger goal.

That goal may not have sustained you (or many folks) through a period of inactivity. Sure, you have to pay the rent and know when to draw the line, but it hardly seems kind/fair/legitimate to lambast someone for having vision and principles beyond making a buck.

Re:at what point

[reflective recursion]

Frankly, it's the Open Source/Free Software mentality that did that. OSS coders already work for free (don't deny that Red Hat and many others make money on other people's work).

This is just more fallout that most of the dot-com companies already experienced. The world does not revolve around wishful thinking.

I will probably get moderated as flamebait because many /.'ers are still stuck in that euphoric state-of-mind. Many can still not accept that it's possible for people, who provide what /.'ers consider a good service, to fail.

But this is the norm at many startups

[Ars-Fartsica]

Most startups at some point demand some extraordinary sacrifices of their employees, either in low pay or no pay for some periods.

This is why you don't work for one if you have a mortgage to pay and three kids in college. Look at most start-ups and you see two types - the very young and the very rich.

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

[dirty]

The sad thing is that even when management faces jail time, it's usually pretty short. Would you be willing to spend six months in a minimum security prison to walk away with millions of dollars?

Re:at what point

[matt-fu]

do you STOP working there and demand some money? In my opinion, about 1 month of not being paid would be the end. Anyone who works longer than that without pay is a sucker, and i have no remorse if they get taken to the cleaners.

The thing is, if you can afford to take a $350,000 loss, you probably aren't working there for the money so much as for the fun of it and maybe the principle of it all.

Re:60 days

[Anonymous Coward]

That's just a word to the wise. NEVER charge ANYTHING on a card with your name on it unless you're expecting to be liable for it. Get a purchase order up front if and whenever possible.

Re:at what point? ONE DAY

[beamin]

I work for a big, blue company, and you can bet that the checks had better be VERY regular. Of course, they're a bit more well-heeled than just about everyone, but this isn't my hobby. It's a JOB. I enjoy it, but I sell my time to my employer so I can buy what I need to live.

Showing up to work even one day after having your paycheck not be there is crazy.

I run a company and...

[Thagg]

I've told my employees that if I ever miss a paycheck, they should quit immediately, regardless of what I say at the time. I tell them not to believe me if I say it will get better. I've never seen things get better for a company once they stop being able to make payroll. I don't suppose that the visual effects business is any different than any other business in that respect. Once you start digging a hole it becomes increasingly impossible to ever get out of it.

The problem is, that once a company starts foundering, the founders often begin to lose touch with reality and start making promises that they can't keep -- whether or not they know that is not really an issue. The hole is not only financial (although that's a big enough hurdle on its own) but it's also bad will, that is, the accumulated acrimony festering within the company.

thad

How that happens

[SuperKendall]

This happened to me at a company I worked for in Texas - it was a very, very small company I worked at right after college. At first they slipped a paycheck or two and then made it up... but after a while they slipped more and more and eventually they were four months behind on paychecks.

How do you survive? Credit cards, the debt from which it takes you years to get rid of.

Why do you stay? It's pretty easy to say (as many here have) "I'd be gone that month!" The reality is that sometimes you really like what you do and don't want to leave the situation. Sometimes you might not have very good options for leaving like if you just bought a house or were just finishing college there and would loose a bunch of credit by moving. Sometimes (especially starting out) your feelings are that you want to be a loyal employee and not abandon a company at the first sign of trouble (an easy feeling to have when your company is small enough that you know the owners well). Sometimes you are just young and inexperienced and don't really know when is a good time to leave.

When I left I moved out of state, and since I was leaving for good I demanded they give me full back pay - which they actually did cough up. My condolences to these employees that may not see anything from this at all. Good luck and I hope you have better luck with your future employers!

Re:at what point

[reflective recursion]

That is the entire reason they failed! They didn't see how _to_ make a buck. They kept seeing past it and _ignoring_ that tiny little detail.

For one thing, Linux is a _small_ user base. On top of that, the majority of Linux users are not willing to _pay_ for software. That is the reason they use Linux. The whole "freedom of software" is just plain bullshit to many. They know it, and so do I. Which oddly explains how Loki, a proprietary company, can even attempt to market Linux to begin with. Then you get the free software believers who will not purchase Loki games based on principle. _They_ are the ones who have vision beyond making a buck. People like RMS.

All-in-all, Loki had no clear vision and their market was very fragmented and almost noexistant. The only people who would purchase their games are die-hard Linux users who could wait a few months and pay a higher price for the same game they could have had on Windows for a lower price. Then take out the people who believe in freedom and the people who want free (no-cost) software and you are left with _no_ market.

If you truly believe Loki had a chance, then you live in a fantasy world.

Loki wasn't an Open Source company

[Sloppy]

This is BAD FUCKING PRESS for the OSS development community

Um, except that Loki's main products were closed-source conventionally-licensed games. Yes, they did release some libraries (e.g. SDL, OpenAL) under GPL. But those were just a building blocks for their main business: selling conventional, commercial software in exchange for money.

If OSS somehow does get tainted by the Loki story, then it really is dishonest FUD. Loki never had (or claimed to have, that I know of) an Open Source revenue model.

Re:Wow

[coyote-san]

The market is shitty, but I'm sure that somebody could hire them.

Yeah, right. I don't know anyone who's working, and it's not for lack of trying. I don't recall where Loki is located, but in a lot of markets the only possibilities are an unpaid job or unemployment, and the former looks a lot better on the resume since a lot of people still think that this is a minor recession, not a 50+% unemployment depression with no end in sight.

Re:at what point

[xonker]

I think this mindset is typical of the dot-com fallout - people were so convinced that things had to get better that they stuck it out with companies that were obviously (at least from the outside) headed for the crash. I saw a lot of this at my old company.

I left my dot-com shortly after an enforced "voluntary" cut in pay when it became painfully obvious that management was too busy chasing VC to run the business -- and VC wasn't forthcoming.

Right after I got out of high school I had a job working as a janitor for a company that contracted to small businesses. After about three months, I had a paycheck bounce. Went to the company's bank and found that it wasn't an uncommon thing for this company to bounce checks. I immediately quit and demanded my back pay + the fee for bounced checks within 24 hours on the threat of turning the checks over to the DA. I got my money.

I think that if a company owes you back pay, you can go to the local authorities and secure company equipment as collateral. I'm sure what happened at Loki has to violate some labor laws.

Re:A shame

[Waffle Iron]

With credit card interest rates, it's unwise to let any debt accumulate a revolving account..

Building up your own debt at 18% APR is not a good decision.

Letting a company do that on your account is extremely foolish.

Letting a company that is a product of a market bubble do that is utterly insane.

Re:Loki Employees should retain thier code

[Lxy]

This is probably the best thing that COULD come from this. With bankruptcy floating over his head, the CEO has basically only one choice. File for bankruptcy, divide up the assets (which includes the code) to his creditors (employees) and hope he doesn't go to jail. If the employees have the code, they may be able to get another startup going. Linux software can be successful in the marketplace, but you need to be careful how to manage it. What were they buying for $350K??? Sounds like a lot of Aeron chairs and BMWs to me. Budget yourself well and your business can succeed.

My guess:

[kwashiorkor]

By being nothing but open and honest about why employees are paid the amount they are paid. Start with clearly defined roles and responsibilities then add clearly defined performance metrics. It's almost self managing because everyone has an idea of what everyone else is supposed to be doing to earn what they are earning.

Re:at what point

[shawnmelliott]

I have been in this situation myself.... It's not so cleancut as no pay.. stop working. Considering that I live in the technological wastelands of Louisiana finding another job wasn't so easy especially since most people don't mind hiring highly skilled people for cheap cheap rates. So what do you do? you hold on Hoping that things will get better... It doesn't help that you're lied to that things will get better. You get a little here.. a little there to keep you barely going but not enough to put you in good paces. Of course, after about 3 months of this I found another job and the next monday I quit ( still waiting for my pay ) and I think 1 - 2 years is a little much. But before you just assume that these people a "sucker"'s and you have "no remorse if they get taken to the cleaners." you need to consider what it's like to be in their shoes.

Re:But this is the norm at many startups

[Skyshadow]

Look at most start-ups and you see two types - the very young and the very rich.

How very 1999 of you. Personally, working at startups, I've seen a lot of a third group: the formerly rich-on-paper who work so much their kids don't recognize them at the holiday parties.

Startups tend to be a breeding place for workaholics. I'm all for spending as much time as I need to at work, but I've watched people literally destroy their families by working 90 hour weeks, then get laid off and have two weeks pay to show for it rather than the untold riches they'd been hoping for.

Cautionary tale, I suppose. I still like working for startups and I'd do it again, but you've got to remember to control the workplace environment rather than letting it control you.

Re:My guess:

[zulux]

By being nothing but open and honest about why employees are paid the amount they are paid.

Yep! Coulden't have said it better myself.

Anytime a company needs to keep salery levels hidden, it's beacuse someone in the company is getting screwed. The levels of pay tend to be flattened - I (the owner) don't make much more than average. But it's worth it.

I have a theory, that after a certain level of pay (say around $50K a year) - you happiness in life is determined not by money anymore, but by the choices you make. I make more that $50K - so I'm happy, and by me not cheating others, more people around my are happy.

So in short, open salery keeps jelousy down and trust up. And it has the added benifit of me (the owner) not screwing my friends.

Re:at what point

[Hostile17]

I am with you on this one, my loyalty to a company stops with my paycheck. I once quit a job for this very reason. Once my pay stopped so did my work, when I was notified I would not get paid, I stood up , packed my desk, went to my managers cube and handed him my badge. I then filed a suit in small claims court, I got $500, which oddly enough they paid without a problem. This may not sound like much, but it was $500 more than everyone else got in the end. This may sound cold, but what company wouldn't lay me off based on financial reasons, they can do it to us, we are perfectly justified in doing it ourselves. Lets face it, a company that can't make its payrole, probably has deeper problems as well.

Re:WTF?

[catfood]

At least working without pay is still a job.

Yoo-hoo. Hello?

No, working without pay is nothing like "still a job." At best it's an interesting volunteer project, and likely not even that.

Why I WON'T give /. my money

[Anonymous Coward]

How the hell did THIS get modded up? And how does anyone find it funny? This is drivel. There's no content to it.

Re:Wow

[Anonymous Coward]

Hindsight is always better than foresight. When you have a job you would die for, you may be asked to die (or at least sacrifice) for it... The boss won't come ask you to work a year w/o pay; no one would agree to that, he will come and ask you if he can hold off paying you a week because of some obligation the company has. Then he will show you that the big payoff is coming (he might even take the time to show you his projections spreadsheet). After you say yes to that a few times he will gradually increase the stakes until the end result is a year w/o pay.

These employees were not idiots... they were passionate idealists that loved what they were doing and lost track of reality. Some of you may only work for a pay check... no pay no more work from you. But some work because they like what they do... no pay well pay me next week then.

Don't condem these employees until you have been in their shoes.

Work should stop when the pay stops.

[BStorm]

Back in 1986, I worked for a company called Xanaro Technologies. I joined the company to be part of building an integrated word processing, spreadsheet, graphics and flat database program. What made the product unique at the time was the ability to link data such that when data was updated in the spreadsheet, it would update the graphics. OLE before OLE.

I joined in the spring all gung-ho and happy to work on a pontential Lotus killer. We believed in the product more so than the reality. The reality was in August we stopped getting paid. We continued to work for the next 3 months with no pay, subsiding on promises of next week we would be paid and that an investor was lined up.

I left to go back to Toronto in late November, poorer and some what wiser. Belief in a product or company is great. When that paycheque is missed, the company has failed in it's obligations to it's employees. There may extenuating circumstances, but those circumstances never can justify the failure of management to meet a payroll.

In my case the owner of the company lied to us. We believed his lies, because we were so caught up into doing something great! I still don't regret being conned, since I was so willing to be conned.

What I was left with was an appreciation that unless I have written stake in a company, then all the verbal promises are worth nothing. As it turns out we the employees were not the only ones left holding the bag. PC-World sent out a massive Ability demo, the designer of the Ability box was not paid, and millions of dollars was wasted on ??? All totalled the development cost about $500,000 dollars Cdn.

Re:Always get it in writing...

[Progoth]

Among the liabilities listed in the bankruptcy filing was a total of $560,412.65 in unpaid salary, of which it was claimed that $302,009.70 was owed to the Draekers in unpaid salary and unreimbursed expenses.

(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.)

hmmm, looking at the math, it appears that Scott Draeker is the "mystery employee". I kinda figured this would be the case when I was reading the threads. The founder of the company gives himself (and his wife) an exorbitant salary, and then claims that it is owed to him/them. All the posts are bemoaning the poor programmer out of $350,000; the article seems to say that some shady stuff was going on, and maybe we shouldn't be moaning for the programmers, but pointing questioning fingers towards draeker.

Re:at what point

[Rogerborg]

• In my opinion, about 1 month of not being paid would be the end. Anyone who works longer than that without pay is a sucker, and i have no remorse if they get taken to the cleaners

I reluctantly agree. I say "reluctantly" because I've been there. Not to the extent of not getting paid, but to the extent of working two jobs worth of hours for one tiny paycheck for a startup games company, in an environment that went from "Thanks for working all the hours! Big rewards soon!" through "I notice you didn't work this weekend. You realise how important this is to us, right?" to "Why the fuck did you take Sunday off? Don't you realise that we're fucked?".

It's true that the games industry is practically reliant on young guys with nothing to lose. The number of burnouts is amazing: in my current telecomms job, there are four ex-games programmers among the forty or so developers in my office, and we all excel as nine to five career guys, we just hit our late 20's and couldn't stand the pace of games development (and the hostile environment) any more. I've seen entire teams sacked en masse a day after going gold, and whole offices arriving on Monday to find a note on the door saying "This office is closed. Your P45's (severance tax notices) are in the post.", or guys get told that actually, it turns out that the company wasn't paying up their tax or benefits at source like they claimed for months or years. Worse, I've seen programmers leave in disgust at working with soulless backstabbing producers, only to have the producer follow them to the new job, sack them on a trumped up charge within a week, and (off the record) say "Go ahead, try and find the money to sue us."

What you have to remember is that games developers are basically venture capitalists. You invest a lot (time, money, your health) in the hope of getting huge rewards (the buzz of a game on the shelves, royalties/shares if you got the right contract). It's largely a lottery: when the company I was with started sinking, two of the original developers (both 100% dedicated and 100% fuckwits) walked away with $750,000 of paper shares between them. I walked away after my employer agreed to sell me (yes, as a commodity) to a publisher as part of a risible contract for a dying title. Last laugh to me though, those $750,000 worth of shares became more like $20,000 after the price bottomed, and those two guys had invested more than that in the company.

For every John Romero, spinning his way through life based on an early success, there's fifty young guys busting their nuts in the hope of emulating him and getting their own customised Ferrari. It's a tempting proposition.

What you must understand most of all though is that in a startup games developer, everyone is sincere. You're probably sitting next to the company owner, and he can usually thrash you at any deathmatch you mention. No matter how late you're in, he's there too. There's a real sense of cameraderie, and none of it is bullshit. It's only when the shit starts hitting the fan (usually after the company employs an accountant full time, I've noticed) that the cracks start to show, and your best buddy turns into the Pointy Haired Boss from Hell. But it's not like a switch gets flipped. You get abused by inches, and you have all those good early memories to keep you going. It's really easy to buy the line "Things will get better", for months and years, when the reality is that for most games companies, once they've burned their capital and burned out their programmers, there's plenty of younger outfits full of inexperienced optimists with money to burn waiting to pick up the slack.

My heart goes out to Loki's employees

[analog_line]

Gods reading all of this I'm getting flashbacks about all the crap I just got out of, being unemployed for 6 months until just recently, and with all kinds of shenanigans happening with my last paychecks and the severence, and I was laid off from a far more stable company (in theory).

I know that everyone that's was left at the end is kicking themselves for not getting the hell out of there when paychecks started coming. All the people here going at them about it apparently don't realize that you are your own worst critic. The people who were working at Loki are certainly going through nine kinds of hell over what they did to themselves, and they're gonna be paying for it for a long time. Lets have the decency not to kick them in the head when they're down.

My best wishes to all of them. You're gonna need all the luck you can get. May the gods take pity on you 'cause doesn't seem like anyone here does.

Whatever! Ever hear of frequent flier miles?

[glrotate]

I got a free flight to Hawaii by using my CC and having the company reimburse me.

The moral is, don't expected to get paid by a company that doesn't make any money.

Summary

[Anonymous Coward]

1. This is a genuine shame for all those employees who got stiffed.

2. This is what happens when you mix a tiny, pathologically cheap market with ethically challenged businessman wannabes: A failed company and lots of innocents getting hurt.

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

[jedidiah]

Actually, corporations exists specifically to allow this sort of thing.

Corporations exist to grant a collection of individuals all the rights of a normal person and none of the responsibilities.

A combination of things...

[Mandi Walls]

Having just started week 2 of my new job after 3.5 months without pay, I thought I'd weigh in on this one. The company still exists, and still owes the employees money, so I've still got my fingers crossed though I've left.

There are a number of reasons to try to hang on at a job that isn't paying. The foremost, for me, was the people I was working with and the company atmosphere. As long as my co-workers were coming in and we were getting something done, then everyone could comiserate, share tips and job leads, play UT for awhile to get everyone's mind off what amounts to a life-altering circumstance.

Another is the job market. It sucks. I started looking for work in September when they first told us that the next major funding deal had fallen through. I finally found something reasonable in February.

The third reason for us was that they were still paying our health benefits. When it comes down to numbers, health benefits cost more than you can collect on unemployment.

Eventually, yes, those things aren't enough to stay for, and you'll find work elsewhere. In my case, most of the staff left, and certain members of the non-development staff were getting increasingly hostile. At that point, no matter how compelled I felt to do a good job, to not burn bridges, to finish my projects, I just couldn't handle being browbeaten by other members of staff and not get paid for it.

So yeah, there are some throw-away jobs out there, but on the off chance you get into a situation you want to stay in, it can be more difficult to leave than to borrow some money and stay.

--mandi

Re:let's make somehing so we can break it later?

[RogueAngel7]

Well, to answer your question, the concept of Loki based games is still cool. And I believe that if linux is going to have a significant chance at taking a major chunk of the desktop market that Linux based games are extremely inportant (and i do think they have a future). However, any company that stiffs its employees while padding the pockets of the upper brass is bad news.

In other words Loki games was a great concept, with terible execution.

Ra7
-

No pay, no work

[ucblockhead]

Something I learned the hard way: companies that ask for sacrifices like delayed paychecks almost invariably fail before any "reward" appears.

WARNING!!! Preferential Payments

[BravoZuluM]

It could get worse...much worse. The trustee for Loki can go back and ask for any payments made within 90 days of filing bancruptcy. Those individuals who received any money, and those 1099's may find the Loki trustee asking for the money back.

This claim of "preferential payments" will not be made for another 9 months or so. The jurisdiction will be in the federal court in the state that the company was incorporated in. So, if you choose to fight it (there are defenses against it), it will cost you about $20,000 to hire a lawyer in the state where the federal court is.

This has become a big business for bancruptcy lawyers as they get a cut of the amount that they are able to recover. Clinton's administration introduced this change into the bancruptcy laws. This is a two-sided sword. It may capture some of the money the Draekers paid themselves, but it also snares innocent people who won't see it coming.

How do you protect yourself from this? You can't. It is outside of your control. But, you can minimize the damage. Incorporate in the state you are live. Accept 1099 and consulting income through the corporation only. Rememeber to keep your books and hold a stock holders meeting at least once a year. Do NOT mix your finances with that of the corporation. You can pay yourself from the corporation, but don't use the corporate bank account as your personal account.

Check with a lawyer as IANAL.

Also, I'm not certain, and I have yet to check into this. I think you could send a 1099 back to Loki for debt relief for any amounts Loki owes. This might have the effect of offsetting some of the 1099 income you received from Loki. (Just thinking out loud.)

Re:A shame

[ryanwright]

I don't know what Draeker made for the rest of the year, but 46 thousand is not a lot of money, especially for the CEO of a software house. His wife was paid 18 thousand, which is less than my wife makes at Wal-Mart as a cashier.

I doubt your wife makes $36K a year as a Wal-Mart cashier. Note that the figures in question were for a 6.5 month period - January 15th 2001 to July 31st 3001. ~$128k per year for the Draekers seems more than fair under normal circumstances. When the employees are working for free, however, it's fucking bullshit. They took care of themselves and left everyone else to rot.