Bankruptcy Court

  • Judge Rhodes to Graduates: Lessons learned from the Detroit bankruptcy case

    IMG_2556Judge Steven Rhodes used his 18-minute speech at Walsh College’s commencement to offer graduates a few lessons from history’s biggest municipal bankruptcy case in Detroit. Numbering them one through five, Rhodes translated from the 17-month case five lessons learned, and he explained to the crowd at the Zion Christian Church in Troy how they applied to their post-graduation lives.

    Among Rhodes’s advice from the case: Ask for the help that’s out there. Do not be in denial of problems, and get help when you need it. Use teamwork to get the help you need. To get help, give help.

    Here is the full audio of his address. The full text of his speech appears below.

    Here’s what he said about some hallmarks of the case:

    On why bankruptcy happened

    “…the city of Detroit got into trouble because people ran the city. People who were not perfect. People who made mistakes. People who took unnecessary risks with the assets and the responsibilities that were entrusted to them.”

    On what bankruptcy isIMG_2559

    “…people a second chance, a fresh start, to forgive them. That’s of course what bankruptcy is all about. It’s a chance for people who have fallen on hard time or made bad choices to start over. “

    On how Detroit’s situation got so bad

    “…. It’s simply called “denial.” People who need help deny needing help, and they deny it for too long.”

    On the $1.8 billion pension financing deal in 2005

    “…that was a bad deal because it involved a financial gamble that the city would never be able to pay off and it was a bad deal because it only delayed the inevitable. If you can’t pay your debts, it doesn’t help just to substitute a new creditor for your old creditor. Worse yet, that deal almost certainly violated state law by evading the city’s legal debt limit and worst of all, the consequence of that deal made the process of resolving Detroit’s problems eight years later when it did file bankruptcy much more challenging and much more expensive. “

    On teamwork involved in the case

    “…there was teamwork between the city’s professionals in the bankruptcy case and its elected officials and employees. As a direct result of that teamwork, we have a much more feasible, effective and efficient plan to revitalize the city with full buy-in. And so it was that that little teamwork among me and my colleagues led to an important level of teamwork in creating a viable plan for the city of Detroit. Now teamwork does not necessarily mean that everyone agrees on everything all the time. No. In the Detroit case there was serious litigation over big and little issues from the beginning to the end: whether to sell the art at the DIA to pay creditors was probably the biggest issues. But even that litigation was conducted by the professionals in a cooperative, professional way.”

    On why creditors agreed to settle

    “…Certainly there was a measure of self interest in each of their settlement decisions. Let’s not doubt that. But there was much more to it than that. Much more. A big reason all of this happened is because the mission of the city of Detroit is to help people.”

    IMG_2565In summary

    “Lesson No. 1 from the Detroit case: We Americas love to give help. Lesson No. 2: Ask for the help that’s out there. Lesson No. 3. Denial is a river in Egypt. Come on, Denial is a river in Egypt. (The audience says it with him.) Get help when you need it. Lesson No. 4: Use teamwork to get the help you need. Lesson No. 5: To get help, give help. It’s who we are. May you get the help that you need to run a straight course up the mountaintop of success in business and may the help that you need never require a trip to my bankruptcy court.”



    Detroit Bankruptcy Judge Steven Rhodes at Walsh College Commencement

    By in Bankruptcy Court, Feature, WDET
  • The Water Deal: Macomb exec raises questions

    A much heralded piece of regionalism during Detroit’s bankruptcy case, the Great Lakes Water Authority was part of the city’s exit from Chapter 9. Now, Macomb County Executive Mark Hackel says some of the numbers involving the authority are not adding up. He explains his concerns to WDET’s Quinn Klinefelter.

  • The Year(end) in Bankruptcy

    Detroit had an historical year in 2014, to say the least and to say it again.

    The city’s bankruptcy – history’s largest municipal case, as we’ve said, written and blogged countless times — monopolized local news, and 2014 brought Detroit and the bankruptcy to the forefront of all local and some national news outlets. Former Emergency Manager Kevyn Orr and Bankruptcy Judge Steven Rhodes captured headlines, and the “grand bargain” became a household phrase.

    Here is a look at some of the year-end news recaps as well as into what 2015 might hold for Detroit:

    The city’s past and the future were discussed on 2014’s final Flash Point with optimism reigning supreme. Former City Council Shelia Cockrel, however, “cautions city officials that hard work is on the horizon as the return from bankruptcy continues.”

    The WDIV program’s guests included  Portia Roberson, the city’s group executive for civil rights and ethics, Cockrel, political consultant  Adolph Mongo and The Detroit News’s Nolan Finley. The picture painted of the future is bright but not without bumps in the road.

    Roberson predicts 2015 will “undoubtedly be a better year for the city of Detroit, thanks to the emergence from bankruptcy and resulting financial flexibility.” But Cockrel cautions city officials that there is plenty of work left. Mongo suggested ways the city can avoid past mistakes, Finley recommend focusing on raising revenues.

    The Detroit Free Press provided comprehensive coverage throughout 2014 about the bankruptcy. Through their extensive reporting, Freep reporters composed a bit “manifesto” chronicling Detroit, the bankruptcy and how it got there. “And, ultimately, it’s the story of how, one by one, like soldiers switching sides in the midst of battle, the major players and creditors who had been at war with the city dropped their objections and joined a “grand bargain” to save Detroit.” It was published in November, but we think it’s worthy of a re-post at year’s end.

    Crain’s Detroit Business named Orr and Rhodes Newsmakers of the Year for 2014. Their work doing what many believe to be impossible earned them this titled.

    USA Today, in a year-end wrap up of the single biggest news stories in all 50 states, named the bankruptcy as Michigan’s. “The nightmare is over,” they wrote.

    Still, the bankruptcy didn’t solve all of the city’s problems. An Agence France-Presse piece, published in Business Insider, outlines the great progress the city has had but also makes note of problems that still lie ahead.

    The venerable New York Times also points out that many questions remain to be answered as the city moves forward.

    For the local take on what remains, here are the Freep’s answers to those questions.

  • A Tie: Judge Rhodes and Orr selected Crain’s “Newsmakers of the Year”

    Detroit’s weekly business publication couldn’t decide. So Publisher Keith Crain picked two “Newsmakers of the Year.” Former Detroit Emergency Manager Kevyn Orr and Bankruptcy Judge Steven Rhodes. Amy Haimerl, of Crain’s Detroit Business, talked with Detroit Today hosts Laura Weber Davis and Stephen Henderson about the “award.”

  • For Detroit, it’s time for the post-bankruptcy chapter

    Effective at midnight tonight, Detroit is no longer in bankruptcy…and Kevyn Orr is no longer the emergency manager.

    Here’s the last order he issued in his position.

    Orr, Gov. Rick Snyder and Detroit Mayor Mike Duggan met with reporters this morning. They made statements, thanked numerous parties and looked ahead to Detroit’s next chapter.

    Here’s some of what they said:

    From Orr:

    “We are thankful that at this point the city will emerge later today, by the time I go to bed, from bankruptcy. We will exit and we look forward, truly to a better time for the city going forward.”

    “The reality is that the city is moving forward and that gives me a great deal of pride and satisfaction.”

    From Snyder:

    “How can we make sure the neighborhoods are coming back, jobs are being created?”

    “If you look at the timeframe, over the last year or so, we’ve seen a major improvement in city services which was long overdue.” 

    “I want to recognize the retirees who are taking some cuts through this. That shouldn’t be forgotten.”

    “We’re showing in this world, compared to the old world, where you used to hear about deficits, new problem and new issues. Now we’re showing how we can work together, show better results, and I’m really excited about partnering, again with the mayor and city council and only watching that path get better and better.”

    “We’re all focused on growing the city of Detroit, a tremendously exciting outcome. … We’ve got an outstanding outcome, far better than people’s expectations.”

    From Duggan:

    “The Plan of Adjustment gives us the tools to have a chance to succeed.”

    Some of the city’s consultants, hired before the bankruptcy was filed, will continue with the city specifically for financial matters.

    “All the drama has been on the bankruptcy side. It hasn’t been with the city officials. … People of the city have seen the improvements.”

    “We’re going to start fresh tomorrow, and we’re going to do the best we can to deliver the services people of the city deserve. … Tomorrow’s not different than any other day.”

    “Kevyn Orr. Former Emergency Manager. That has a nice ring to it.”



  • On Michigan Radio: As Orr goes, where will Detroit head?

    Appearing on Michigan Radio’s Stateside program, Detroit News business columnist Daniel Howes characterizes Emergency Manager Kevyn Orr’s tenure, saying he was “judicious” in using the power he had under Michigan law. He told host Lester Graham that Orr could have stripped pay and power from Detroit’s mayor and City Council, and could have been more aggressive about extracting concessions from the city’s unions in bankruptcy court.

  • Challenge to state EM law to proceed

    A judge is allowing a challenge to Michigan’s emergency manager law to go forward in federal court in Detroit.

    Filed last year, the lawsuit challenges the constitutionality of the law on the grounds that it violates rights of due process, voting and representative government under the U.S. Constitution. Defendants in the case are Gov. Rick Snyder and former state Treasurer Andy Dillon.

    In May, Judge George Caram Steeh held a hearing in Detroit after the state moved to dismiss the lawsuit.

    Now, the judge has denied the state’s request and is allowing the case to go forward on the grounds that it violates the constitution’s equal protection clause. Currently a majority of Michigan’s African-American population lives in cities that have or have had emergency managers.

    In his ruling Steeh wrote that his decision should not affect Detroit’s bankruptcy case, which was brought by the city’s emergency manager acting under the power of the law being challenged.


    11.19.14 Steeh Decision