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Factor 5 sued by former employees

Former staffers are claiming bankruptcy fraud; unpaid wages total over USD 900,000

Former employees of game development studio Factor 5 are suing the remains of the company over claims of bankruptcy fraud.

According to the suit, as first reported by the Marin Independent Journal, the prosecution is claiming that Factor 5 transferred assets to a separate company called Blue Harvest in order to avoid claiming them when it filed for Chapter 7 bankruptcy in May, effectively shielding its assets from the court.

"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," said James Smith, a San Francisco lawyer representing the former employees.

"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," he continued.

The suit says that the Blue Harvest transfer is not the only way the company shielded its assets, citing public records that show Factor 5 CEO Julian Eggebrecht transferred his share of a house assessed at USD 548,000 to Intel's Katja Reitemeyer for only USD 5,000.

Factor 5 cut off its payroll on November 1, 2008, and then "abruptly laid off all employees with little or no notice" on December 19, "just before Christmas," said the report.

Deborah Schwartz, who is representing Factor 5 in the case, declined comment to the Marin Independent Journal.