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Federal Judge Describes, Then Supports Plot to Rob Detroit Pensioners

This is what it looks like when a federal judge declares a city bankrupt—to the surprise of its residents and elected officials.

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  • Exhibit 846, an email dated March 2, 2012, from Jeffrey Ellman to Corinne Ball, both of Jones Day, with two other Jones Day attorneys copied. The subject line is,

“Consent Agreement,” and the body of the email states: We spoke to a person from Andy’s office and a lawyer to get their thoughts on some of the issues. I though MB was also going to try to follow up with Andy directly about the process for getting this to the Governor, but I am not sure if that happened. ...The cleanest way to do all of this probably is new legislation that establishes the board and its powers, AND includes an appropriation for a state institution. If an appropriation is attached to (included in) the statute to fund a state institution (which is broadly defined), then the statute is not subject to repeal by the referendum process. Tom is revisiting the document and should have a new version shortly, with the idea of getting this to at least M[iller]B[uckfire]/Huron [Consulting] by lunchtime.

  • Exhibits 201 & 202, showing that Jones Day and Miller Buckfire consulted with state officials on the drafting of the failed consent agreement with the City. They continued to work on a “proposed new statute to replace Public Act 4” thereafter. Ex. 847, Ex. 851. See also Ex. 846.
  • The testimony of Donald Taylor, President of the Retired Detroit Police and Fire Fighters Association. He testified about a meeting that he had with Mr. Orr on April 18, 2013: “I asked him if he was - - about the pensions of retirees. He said that he was fully aware that the pensions were protected by the state Constitution, and he had no intention of trying to modify or set aside . . . or change the state Constitution.” Eligibility Trial Tr. 140:9-13, November 4, 2013. (Dkt. #1605)
  • At the June 10, 2013 community meeting, Mr. Orr was asked a direct question – what is going to happen to the City employee’s pensions? Mr. Orr responded that pension rights are “sacrosanct” under the state constitution and state case law, misleadingly not stating that upon the City’s bankruptcy filing, his position would be quite the opposite. In response to another question about whether Mr. Orr had a “ball park estimation” of the City’s chances of avoiding bankruptcy, Mr. Orr responded that, as of June 10, there was a “50/50” chance that the City could avoid bankruptcy, knowing that in fact there was no chance of that.
  • State Treasurer Andy Dillon expressed concern that giving up too soon on negotiations made the filing “look[] premeditated” Ex. 626 at 2.
  • The City allotted only thirty four days to negotiate with creditors after the June 14 Proposal to Creditors. Ex. 43 at 113.

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[1] Judge Rhodes subsequently states: “The Court finds … that in some particulars, the record does support the objectors’ view of the reality that led to this bankruptcy filing.” (P. 131) “The Court must acknowledge some substantial truth in the factual basis for the objectors’ claim that this case was not filed in good faith.” (P. 135)

 

Frank Joyce is a lifelong Detroit labor and political activist and writer.