Star Wars: Rogue Squadron and Lair developer Factor 5 is being sued by former employees for fraudulent behaviour in the wake of its bankruptcy, Gamasutra reports.

The suit alleges that before Factor 5 closed in May, to avoid paying its debts the studio's founders transferred all assets--including source code and intellectual property--to Blue Harvest, a new company under their control which continues to develop the projects.

Factor 5 reportedly faced 69 claims from employees of unpaid wages totalling over $900,000 soon after it closed. The studio was also believed to be up to $10 million in debt to various creditors, including a $4 million loan from LucasArts in 2003.

Blue Harvest, by the way, was a fake working title used by Lucasfilm to conceal the production of Star Wars: Return of the Jedi. Both the allegedly production-hiding company--since renamed White Harvest--and the Factor 5 founders have yet to respond.

The long-rumored closure of California-based Lair and Star Wars: Rogue Squadron series developer Factor 5 Inc. has been confirmed by way of an official announcement.

"The obstacles created by the sudden bankruptcy of Brash Entertainment for the continuation of operations have turned out too great to overcome in the current economic climate," reads a statement from Factor 5 GmbH CEO Achim Moller.

While Factor 5 Inc., formed in 1987, is officially no more, the "entirely unrelated" Factor 5 GmbH--said to have been "creating games since 1998"--is not affected by the "circumstances surrounding Factor 5 Inc.'s recent challenges," Moller explained.

Factor 5 Inc. was known to be working on a number of multi-platform projects, one of which was strongly rumored to be a Superman title. Whether those projects live on at Factor 5 GmbH, which promises to reveal its titles in the coming months, is unknown.

Following word of financial difficulties and layoffs at Lair and Star Wars: Rogue Squadron series developer Factor 5, a new report now claims that the long-running development studio has "officially closed."

"We just learned from inside sources that developer Factor 5 has officially closed their doors as of today," reads an e-mail that was sent to, and reposted by, IGN editor Matt Casamassina. "That's some pretty big news considering that those guys have been around for quite a while."

Factor 5, founded in 1987, has yet to issue an official statement on the matter. The developer was known to be working on a number of multi-platform projects and dedicated Wii games, one of which was strongly rumored to be a Superman title.

"Things are obviously in flux and we hope that the game proves to be as indestructible as our hero," Factor 5 president Julian Eggebrecht commented after publishing partner Brash Entertainment unexpectedly shut down earlier in the year.

Corroborating word of troubled times at Lair and Star Wars: Rogue Squadron series developer Factor 5, a new source has come forward, claiming that the studio has not paid its employees in nearly two months, and has laid off nearly half of its workforce.

"The last time staff got paid was October 15th," the anonymous source told Edge. According to the source, 37 employees were laid off on Friday, December 12, with roughly 38 people remaining at the besieged developer.

While the closure of publishing partner Brash Entertainment definitely hurt Factor 5, the extent of its problems wasn't known until then-animator Sam Baker blogged about the issues, detailing a cancelled project, no pay, and no employee health care.

Baker has since resigned from the studio, said the source, adding that "Factor 5 is thinking of suing [Baker] for good measure."

"He's young, and was totally devastated by his new found fame," the... Read more

Star Wars: Rogue Squadron series and Lair developer Factor 5 has been unable to pay its employees for over a month due to the closure of publishing partner Brash Entertainment, according to a now-removed blog post from animator Sam Baker.

"If we left, there would have been no hope in F5 staying afloat," he wrote. "We had faith in the projects and the company, so there was no reason to bail just yet."

The crisis then caused the studio to stop production on one of its titles after cutting employee health care, with Baker told by president Julian Eggebrecht that employees should start looking for other jobs if the more funding wasn't found within a week.

Following a 1UP report on his post, Baker deleted the entire blog... Read more

Reports indicate that licensed game publisher Brash has essentially run out of cash, leaving many of its projects, such as an unannounced Superman game from Lair (PS3) and Star Wars: Rogue Squadron series (N64, GCN) developer Factor 5, in limbo.

According to Variety, the publisher has laid off 20 employees and is seeking to raise funds by pairing with other companies, returning some of the licenses it holds, or selling them to another publisher. Only two of the company's many planned games are still confirmed for release: Six Flags Fun Park and Saw.

While the Superman game was unannounced, Brash previously confirmed a development partnership with Factor 5. Other games in danger are Prison Break, Night at the Museum 2, 300, Clash of the Titans and Tale of Desperaux. The report further claims that Brash has stopped paying developers for their work.

Upon its formation last year, Alvin and the Chipmunks publisher Brash announced that it has raised over $400 million in funding. But not all of that money was delivered upfront, with Variety reporting that most of the undelivered cash has "dried up" in the current credit crisis. The company has also suffered three high-profile depatures.