News has come out in the City of Detroit’s bankruptcy eligibility trial that the State of Michigan and Jones Day, Detroit’s bankruptcy lawyers, had planned the bankruptcy more than a year before filing.
One witness said he knew as far back as March 2012 that Michigan was planning the Detroit bankruptcy.
This is not shocking news, as the city has been in hard times for many, many years, but does show that the State of Michigan had plans for bankruptcy and did not share them with the public.
If openness and accountable are the goals to achieve with tax payers – the source of state revenue, this would be a massive failure.
The State of Michigan should have taken a much stronger stance from the onset rather than fear political pressure from opposition. Detroit’s bankruptcy is historically large, but whether the time frame in planning was one year or three months, the bankruptcy is necessary to resolve Detroit’s insolvency.
DETROIT — Nine months before one of the world’s largest law firms secured a contract with the city of Detroit, Jones Day and the state of Michigan were discussing filing bankruptcy for the struggling city.
Investment banker Kenneth Buckfire, one of the country’s top restructuring advisers, testified Friday that he knew as early as March 2012, that the state and Jones Day, hired in December to restructure Detroit’s finances, had been contemplating filing bankruptcy. But he never disclosed that information to the city council or Mayor Dave Bing, he acknowledged during cross examination.
Responding to questions from creditor lawyers, Buckfire said it became evident to him around May 7 that the city couldn’t pay its debts. But “I didn’t decide the city was insolvent.”
Buckfire dominated much of Friday’s testimony in the federal trial to determine if the city is eligible for Chapter 9 bankruptcy. He also acknowledged that he recommended the city hire Christie’s auction house to evaluate the city-owned Detroit Institute of Arts’ collection, but he denied telling the museum to expect the city to file for bankruptcy in July.
The city is paying Christie’s $200,000 to value the collection, and the auction house is in the middle of its work. No efforts have been made to sell pieces to satisfy creditors.
Buckfire was one of three consultants who testified for the city that deep financial and operational troubles plagued Detroit in the weeks, months and years leading up to its bankruptcy filing.
Detroit Police Chief James Craig, appointed by the city’s emergency manager this summer, said the police department was in such dire straits when he assumed his post that it couldn’t afford high-quality bullet proof vests. So he brought his own from his previous job.
Craig also cited stories about police vehicles that have to get pushed to get started and bodies left at fire scenes because no one found them.
Detroit has problems he’s never seen elsewhere, the chief said. Police often drive injured victims to the hospital because emergency medical services don’t show up.
He was able to fix one problem, shrinking the unit assigned to protect the mayor from 26 officers to six, he said.
At the end of the day, Kevyn Orr, whom Michigan Gov. Rick Snyder tapped as Detroit’s emergency manager March 14, briefly took the stand to talk about his decision to seek bankruptcy protection for the city. Orr is a partner in Jones Day.
If U.S. Bankruptcy Judge Steven Rhodes approves of the filing, Detroit will have the largest municipal bankruptcy in U.S. history.
Initially, the trial to decide whether Detroit is eligible for Chapter 9 bankruptcy was expected to last five days, but testimony has been moving more slowly that Rhodes expected. Snyder is scheduled to testify Monday afternoon.
USA Today: http://www.usatoday.com/story/news/nation/2013/10/25/detroit-bankruptcy-trial/3197387/
