Detroit To Seek Judge’s Approval For Improved Deal With Big Banks

BY ALAN PYKE/Think Progress

Detroit’s high-priced bankruptcy lawyers think a revised deal that pays large banks almost 60 cents on the dollar will win approval from the judge who rejected a previous arrangementthat was even more generous to the banks.

The deal in question relates to $300 million in loans the city has to pay back to UBS and Bank of America. Emergency manager Kevyn Orr originally wanted to pay UBS and Bank of America roughly $230 million — between 75 and 82 cents on the dollar, according to The Bond Buyer — in a deal that U.S. Bankruptcy Judge Steven Rhodes rejected. At $165 million, the new deal is cheaper for the city, but that is no guarantee of Rhodes’ approval as the judge’s objections seemed to have more to do with the process than the price. Rhodes said the city made the deal “with a gun to its head,” and insisted that Detroit and the two banks not only renegotiate the terms of the deal but that they return to his courtroom prepared to show in detail how any deal with the banks is better for the city than its alternative, which is to sue to get the loans canceled outright.

While $300 million may seem minuscule next to a total of $18 billion in unpayable debts, this deal is central to the city’s bankruptcy plan. When Detroit made the loans in question it promised to use revenue from area casinos as a last resort repayment mechanism in the event of a default. Now bankrupt, the city needs that casino money to finance basic services and operations in the short term, making the resolution of this debt a high priority for Orr and his $28 million team of consultants and lawyers.

Because the debt is attached to that collateral, the megabanks are considered “secured creditors” and are therefore legally entitled to get a somewhat better deal than the city’s “unsecured creditors,” a category which includes more than 20,000 retirees who depend upon the modest pensions they were promised. Orr has proposed paying retirees about 16 cents on the dollar of what the city owes them, and has announced that retiree health insurance plans will be canceled in the new year.

Any improvement in the terms of Orr’s deals with secured creditors like UBS and Bank of America should in theory create space for his team to be less stingy in its eventual deal with pension funds. But Orr and other officials have been adamant that pensioners will have to accept cuts no matter what. That position isn’t merely unjust, given that retirees and pension promises did not cause the city’s financial problems despite Orr’s apparent efforts to exaggerate the pension funding gap. The cuts are also unwise for the city’s future economic prospects, which experts say depend primarily upon its ability to retain and concentrate its population.

UPDATE

A lawyer for Detroit’s pension funds said Thursday he will fight the new casino funds proposal, labeling it “far too rich” and “a huge windfall” for the banks.

Detroit is Paying Emergency Manager Kevyn Orr a Quarter Million to File for Bankruptcy

By: Black Liberal Boomer/politicususa

The surprise is not that Detroit is filing for bankruptcy. The road signs have been pointing toward this conclusion at least since Emergency Manager Kevyn Orr took the job – and the leash – offered to him by Gov. Rick Snyder.

Strike that.

Detroit has been headed toward bankruptcy for years, because Detroit’s accounts have been screwed for years. Management of Detroit’s finances has been the equivalent of a shell game for quite some time, so those who say that the bill has come due are correct on that point. I am 100 percent opposed to Orr’s appointment, and I will never stop saying that his presence here is illegitimate. Gov. Snyder’s decision to disregard the will of his own voters and force them to accept an EM was nothing short of criminal.

But it would be a lie to say that Orr is responsible for the bankruptcy. As a matter of fact, I suspect the only reason he didn’t move to file on his first day behind the desk was because he had to at least appear to be trying alternative strategies. Strategies like offering to take Detroit’s creditors on a bus ride through the Detroit ghettoes so they could see firsthand how bad things are here. And then, after a good cry, find it within their hearts to forgive all debts because surely no creditor would have the heart to collect on a debt after seeing that the debtor is having a hard time, right?

Yeah. Strategies like that. Well thought-out strategies. Brilliant strategies. Strategies that make it so wonderfully clear why Michigan is paying this man Orr his $275,000 salary; to offer bus rides to creditors. And then, when the creditors decide they’d rather not take the ride because they don’t want their pictures taken and because they would have to sign a form that basically lets the city off the hook in case they get shot or killed or whatever (because, after all, they were going to the ghetto and chances are they would indeed stand out just a tad), then Orr moves forward on what was most likely the plan all along.

Funny thing is, we really didn’t need to pay Orr all this money to file bankruptcy. I’m pretty sure that’s a course of action our own elected leaders could have figured out how to do on their own. And once the bankruptcy is in place, once again, why exactly do we need Orr? Because we’re the biggest municipality to file bankruptcy means we need an emergency manager to make sure everything goes OK?

From the Detroit Free Press:

• If the judge authorizes the city to move forward with a Chapter 9 bankruptcy case, Orr would propose a plan of reorganization. This could take weeks, months or years. Bankruptcy court allows the city to restructure its operations and its balance sheet. This could involve budget cuts, layoffs, consolidation, the sale of assets, slashing union contracts, selling assets and dramatically reducing city debts, including outstanding bonds.
•  The city will attempt to win support for the reorganization plan from creditors, including secured bondholders, general obligation bondholders, unions and pension boards. If the city wins enough support, the plan would be put to a vote — and with enough support, the city could emerge from bankruptcy. Without enough support, the judge could tell the city it must continue to negotiate with creditors.

In other words, we might not even be approved for bankruptcy, which means we’d be back to square one. And since a sizable number of creditors have already signaled they don’t exactly plan to swallow the numbers that Orr  has been trying to feed them then it’s all but a certainty they’re gonna take this fight to the mat. Maybe they’ll prevail, maybe they won’t, but didn’t I tell you this was gonna get real ugly?

Maybe it’s just me, but I thought Orr’s purpose was to be our salvation. To save us from ourselves. To make a way out of no way. For a quarter million dollar salary I damned sure expected more than this, even if he did sign on to assist Gov. Snyder in stealing democracy from his own citizens. You mean to tell me there isn’t even honor among thieves anymore?

In a tweet today, Orr said, “We’re changing the culture of entitlement here in Detroit, Michigan.”

By filing for bankruptcy? Really?

No, Kevyn. Last I heard, we’re still entitled to a democracy. That’s the thing about theft; the rightful owner doesn’t mind putting up a fight to get back what’s rightfully his.

Records: Snyder pledged to raise funds for Orr performance bonus

CHAD LIVENGOOD/Detroit News

Lansing — Gov. Rick Snyder's administration initially pledged to raise private money to provide Washington, D.C., bankruptcy attorney Kevyn Orr with a "performance" bonus on top of his $275,000 annual salary to be Detroit's emergency manager, according to records disclosed Wednesday.

Emails obtained in a lawsuit related to the emergency manager appointment process indicate Snyder was ready to put Orr to work fixing the city's finances a month before his official appointment.

"Governor already asking me if you are ready to start yet," Snyder aide Rich Baird wrote in a Feb. 12 email to Orr. "Honestly … dog years!"

"Dog years" is Snyder's saying for the private-sector-style efficiency he's tried to inject into state government since taking office in January 2011.

Baird's email detailed an initial compensation package offered to Orr for an 18-month contract that included a $275,000 annual salary, security, a furnished apartment, commuting expenses for traveling back to his home in Maryland and the "intent to raise private funding for performance measures/outcomes bonus."

The bonus was not included in Orr's final contract, Snyder spokeswoman Sara Wurfel said.

Wurfel said the administration was courting Orr before a financial emergency was declared as a precaution.

"Everything was done on a contingency basis to be prepared just in case for any scenario," she said.

Orr made $700 an hour during Chrysler Group bankruptcy proceedings in 2009 and told The News in March that he was taking a significant pay cut to become emergency manager, but didn't disclose his annual compensation.

Records show Orr replied in a Feb. 12 email to Baird that he needed more time to "transition out" of his law firm, Jones Day, which landed a contract to provide restructuring legal services to the city before Orr was appointed emergency manager.

Baird, whose title is Snyder's "transformation manager," is not a state employee but works for the governor through his consulting firm, MI Partners LLC, which is paid a $100,000-a-year contract through Snyder's not-for-profit civic group, New Energy to Reinvent and Diversify, or NERD Fund.

Union activist Robert Davis released the records Wednesday following a court hearing related to his effort to get Orr's appointment voided.

Davis claims the Snyder administration violated the Open Meetings Act by offering Orr the job a month before a state panel hired him March 14 in a public meeting. The state's financial review team determined Detroit faces a financial emergency on Feb. 19 — one week before Orr and Baird's correspondence.

At a Wednesday morning hearing, Ingham County Circuit Court Judge William Collette said he wants state Treasurer Andy Dillon and other top state officials to sign sworn affidavits attesting they've turned over all documents in a lawsuit related to Orr's appointment.

Andrew Paterson, an attorney for Davis, said Wednesday the state has turned over just one email from Dillon, who played a key role in Orr's March appointment, yet he's separately obtained additional emails Dillon received through a subpoena of Baird's records.

Baird, who is a private contractor for Snyder and not a state employee, was recently deposed in the lawsuit and claimed an executive privilege for not releasing records related to 20 different individuals interviewed for the emergency manager job, Paterson said.

"He claimed executive privilege and refused to answer those questions on his deposition," Paterson said. "It's curious to me how somebody who's not a state employee can claim executive privilege, but so be it."

At a mid-day Wednesday news conference in his Lansing office, Snyder was asked under what authority Baird could invoke an executive privilege in the case.

"I'm not going to comment on ongoing legal proceedings," Snyder said. "With respect to hiring Kevyn Orr, we followed proper procedure, and he's doing a fine job."

Wurfel said late Wednesday the administration turned over 265 pages of Baird's emails but withheld records that named the other candidates for the emergency manager position to protect their identities.

At a Wednesday morning court hearing in Mason, Collette expressed frustration over the slow pace of the discovery process in Davis' lawsuit, which claims the Snyder administration violated the Open Meetings Act in appointing Orr to takeover City Hall.

"I want affidavits from the people involved," Collette told two assistant attorneys general representing Snyder and Dillon. "If in fact people are not turning over stuff and they file false affidavits, it's a very serious manner."

Affidavits are signed under the penalty of perjury.

Paterson said he's obtained eight pages of emails from Snyder aide Richard Baird through a subpoena that show Dillon was the recipient of other emails related to Orr's appointment. But those records were not turned over separately, said Paterson, who questioned whether the Snyder administration is concealing other records.

"Your honor, this is the first I've heard of this," Assistant Attorney General Michelle Brya told the judge.

The judge questioned how Dillon could have sent just one email to members of the Emergency Loan Board in the days and weeks leading up to the appointment.

"To anybody to expect that Mr. Dillon sent one email to one person on this issue doesn't seem realistic at all," Collette said.

The two sides were in Ingham County Court Wednesday morning for a show cause hearing Collette scheduled to determine whether Dillon, Orr and other state officials should be held in contempt over failure to produce records. Davis is suing Snyder, Orr, Dillon and members of the Emergency Loan Board, a three-member panel consisting of gubernatorial appointees who actually hired Orr.

Collette instructed the Attorney General's Office and Paterson to compare lists of which emails Davis has received in the case and appear back in his court at a later date. He also suggested Dillon and other state officials involved should review their records to make sure they haven't withheld something subject to disclosure under the Freedom of Information Act.

Brya also asserted emails Snyder sent or received are not subject to disclosure because the governor is exempt from provisions of FOIA.

Collette suggested he may have to take the case to trial, where Snyder could be subpoenaed to testify.

"It's been apparent for whatever reason it appears things are not being done here," Collette said. "At some point, Ms. Brya, people need to have the facts here."

Detroit's Emergency Financial Manager Takes Over: 'Dangerous Precedent'?

 
• By: Jenée Desmond-Harris/The Root

Monday is bankruptcy attorney Kevyn Orr's first day on the job as emergency financial manager for Detroit, the largest city in the country to come under state oversight. He's tasked with taking over the finances of the city and developing a plan to tackle its fiscal crisis.

But not everyone is welcoming the "turnaround specialist." A rally protesting Orr's appointment was set for 11 a.m., CBS Detroit reported this morning. Plus, a group led by prominent Detroit pastors has expressed fierce opposition to his post and the Michigan emergency-manager law that allows it.

On Friday the Rev. Jesse Jackson called for mass protests, calling Orr's appointment by the state and his power to neutralize a sitting mayor and City Council, end or renegotiate labor contracts and sell off city assets a "dangerous precedent.”

Read more at CBS Detroit.

Detroit News: 4 Tax Liens On Kevyn Orr's Home Include 2 Still Outstanding

From Deadline Detroit:

Ooops, this is what PR types call "stepping on the message" and politicos dub "bad optics."

Keyvn Orr, the attorney appointed to get Detroit financially straight, was hit with with four tax liens on his Maryland home in four years for income and unemployment taxes, Joel Kurth and Chad Livengood of The Detroit News found via online sleuthing.

They note that the situation is ironic "since Orr is tasked with improving tax collections."

State records show Orr, who was appointed emergency manager on Thursday, has two outstanding liens on his $1-million home in Chevy Chase, Md., for $16,000 in unemployment taxes in 2010 and 2011. Two other liens of more than $16,000 in unemployment and income taxes were satisfied in 2010 and 2011, records show.

Orr said he didn't know anything about the liens when shown records of them Friday morning by The Detroit News.

"I don't know what they are," Orr said, as his new boss, Gov. Rick Snyder, sat next to him in The News' offices. "That's surprising to me, to be honest."

Quick damage control followed.

By late that afternoon, Snyder's spokeswoman said Orr would pay "in full ASAP." He blames the embarrassment on his tax accountant.

State backround checkers hadn't spotted the liens, Snyder's press secretary told The News.

READ MORE:  THE DETROIT NEWS