Attorney: Plan would cause 'mayhem to the rule of law
By Corey Williams
Associated Press
DETROIT (AP) - An attorney for Detroit concluded his opening statement Wednesday in the city's bankruptcy trial by saying the debt-restructuring plan focused first on resolving a dire financial situation and does not discriminate against creditors.
But an attorney for the most vocal of the opposing creditors said the plan of adjustment - Detroit's blueprint for emerging from the largest municipal bankruptcy in U.S. history - is unfair for financial creditors.
The trial's second day began with attorney Bruce Bennett telling federal Judge Steven Rhodes that the plan, put together by state-appointed emergency manager Kevyn Orr and his restructuring team, has to be followed in order for Detroit to be stronger and viable.
"The city did all of this with the proper purpose of restructuring its financial affairs," Bennett said, adding, "The facts will show Detroit has earned this court's help."
Detroit wants to cut $12 billion in unsecured debt to about $5 billion through its plan of adjustment, which must be approved by Rhodes. Most creditors, including more than 30,000 retirees and city employees, have endorsed the plan of adjustment.
Syncora Guarantee is not one of those creditors. The New York-based bond insurer's attorney, Marc Kieselstein, said the city's plan is "so flawed in its structure, so dismissive of basic fiduciary duties and so lacking in evidentiary support that it cannot be confirmed without doing serious mayhem to the rule of law."
Syncora has said its claims are about $400 million and it would receive pennies on the dollar under Orr's plan. It is one of about 12 creditors opposing the plan in court.
Syncora and some other creditors have pushed for the city to look into the sale of assets, including city-owned pieces in the Detroit Institute of Arts.
The threat to artwork also prompted the creation of the so-called Grand Bargain - commitments from the state, major corporations, foundations and others to donate more than $800 million over 20 years meant to soften cuts to city pensions while placing pieces in the DIA into a trust and out of the reach of debtor demands.
Pensioners this summer voted in favor of Orr's plan, which calls for general retirees to take a 4.5 percent pension cut and lose annual inflation adjustments. Retired police officers and firefighters would lose only a portion of their annual cost-of-living raise.
Orr has called the impact of Detroit's bankruptcy on pensioners the "human dimension." But Kieselstein said the human dimension is legally impermissible under bankruptcy law.
"It's enough to sink this ship," he said of the plan. "Bankruptcy is sadly the land of broken promises."
The trial is likely to take a number of days, during which lawyers from the city and other creditors will debate the city's debt, the rights of its creditors and what is allowable under bankruptcy law. Dozens of witnesses are expected to be called - including Orr and possibly Detroit Mayor Mike Duggan.
Earlier Wednesday, an attorney for the DIA spoke in favor of Orr's plan, saying the art museum's pieces can't be used to satisfy creditor debt because most of the 60,000 total pieces were donated or bought through donations.
The forced sale of city-owned art "would chill philanthropic giving for generations to come," Arthur O'Reilly said.
Published: Thu, Sep 04, 2014
––––––––––––––––––––
Subscribe to the Legal News!
http://legalnews.com/Home/Subscription
Full access to public notices, articles, columns, archives, statistics, calendar and more
Day Pass Only $4.95!
One-County $80/year
Three-County & Full Pass also available
