Ex-Factor 5 Employees Cry Fraud

Former employees of the recently shuttered Factor 5 studio in California are taking the company to court, claiming that it fraudulently transferred assets, including source code for the next Rogue Squadron title.

When Factor 5 filed for Chapter 7 bankruptcy on May 13th of this year, they had an estimated $50,000 to $100,000 in assets, with debt estimated at between $1 and $10 million, with 69 claims for unpaid wages in excess of $900,000. The lawsuit alleges that, prior to the filing, Factor 5 and its three founders transferred company assets to a limited liability company called Blue Harvest, now White Harvest, including original intellectual property and the partially completed code for a Wii installment of the Star Wars: Rogue Squadron series. As the employees' lawyer James Smith explains:

"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"

The employees are understandably upset. According to the filing, employees at the studio weren't paid after November 1st of last year, after which they were laid off with little notice on December 19th, right before Christmas.

If the allegations are true, this would mean that Factor 5 took assets that could have been negotiated in order to pay their workers and passed them over to another company to save them from sinking along with the rest of the ship.

With the defendants' lawyer declining to comment on the situation, we're currently only seeing one side of the story of course, but quiet lawyers aren't generally a good sign. We look forward to seeing how this whole thing plays out in court, should it make it there.

Employees sue bankrupt San Rafael video-game company [Marin Independent Journal via Edge]