Legal Challenges

  • The People’s Plan: Demonstrating for more pension, less bank payouts

    A day after the city of Detroit filed its amended Plan of Adjustment and Disclosure Statement, hundreds of retirees, city workers, advocates and other supporters gathered downtown for a demonstration. They closed off Lafayette Boulevard in front of the federal courthouse, circling and chanting slogans including “No justice, no peace. No pensions, no peace.” Several speakers addressed the crowd, urging Emergency Manager Kevyn Orr to not cut pensions as part of the city’s restructuring and emergence from bankruptcy.

    The demonstrators also are hoping to convince Bankruptcy Judge Steven Rhodes to better protect pensioners who also are facing  increases in their health care costs under the current proposed city restructuring effort.

    Attorney Jerome Goldberg was among several speakers. Goldberg has fought to stop home foreclosures in the city, and now represents David Sole, a retired Detroit waterworks employee.

    “UBS and Bank of America know: not one penny for the criminal banks. Hands off our pensions. Take it from the banks, not the workers,” Goldberg told the crowd.

    Some of the demonstrators say they have filed objections with the bankruptcy court over the city’s proposed restructuring. Others visited a table on the sidewalk at the demonstration where forms and instructions to file were provided. Rhodes will review those submissions, along with other legal challenges, as he considers the feasibility and responsibility to pensioners and other creditors as part of the bankruptcy case. A trial is scheduled for July.

    -By WDET’s Sandra Svoboda

    @WDETSandra and nextchapter@wdet.org

  • The DIA Post Detroit Bankruptcy? New provisions for funding the museum and pensions

    The city’s new Plan of Adjustment contains some details of private foundation contributions to the $815 million “grand bargain” – the deal that would maintain the Detroit Institute of Arts collections and other assets in charitable trust for the public and protect them from sale to fund pensions.

    The yet-to-be-finalized deal also includes Gov. Rick Snyder’s proposed $350 million over 20 years from the state. Under the deal, private foundations would contribute $373.5 million, including $7.5 million they have already committed to the museum (see below for foundations and amounts pledged). The DIA, according to the Plan, would contribute $100 million:

    The DIA undertakes to secure commitments for contributions of the $100 million (subject to the Present Value Discount) from the business community (and their related foundations), other foundations and individuals. As of the Closing, The DIA shall be responsible for any portion of the $100 million … for which is has not secured commitment from DIA Funders as of the Closing. However, The DIA shall have the right after the Closing to substitute for its obligation to pay any or all of he DIA Deficiency commitments from new DIA Funders or an increased funding commitment from an existing DIA Funder.

    Pensions, under terms of the “grand bargain” would be managed by a new Receivership Transition Review Board that is independent from the city for at least 20 years. The DIA also would establish an “ad-hoc” governance committee with members representing the foundations funding the grand bargain, the city and the state of Michigan.

    Meanwhile, bond insurer Syncora, which holds about $620 million of the city’s $18 billion debt, is seeking to subpoena a massive amount of information related to the museum’s assets, finances and management. No protective orders have yet been filed, nor are hearings scheduled about Syncora’s action.

    If the “grand bargain” goes through under the proposed and most recent Plan of Adjustment, the museum “will provide an array of art programs at no or discounted costs to the residents of the State.” While the Plan doesn’t mandate what those could be, it does suggest that “such programs could include” exhibitions rotating through other Michigan museums and art centers, professional development programs with the Michigan Museums Association, an expansion of the Inside/Out program to place art reproductions in outstate locations, providing discounted art conservation services for other Michigan museums and developing an educational program based on the DIA’s collection that supports National Common Core Standards.

    According to the court documents filed March 31, the “Foundation Funder Intended Funding Amount” plan is:

    Community Foundation for Southeast Michigan $10 million
    William Davidson Foundation $25 million
    The Fred A. and Barbara M. Erb Family Foundation $10 million
    Max M. and Marjorie S. Fisher Foundation $2.5 million*
    Ford Foundation $125 million
    Hudson-Webber Foundation $10 million
    The Kresge Foundation $100 million
    W. K. Kellogg Foundation $40 million
    John S. and James L. Knight Foundation $30 million
    McGregor Fund $6 million
    Charles Stewart Mott Foundation $10 million
    A. Paul and Carol C. Schaap Foundation $5 million*
    Total $373.5 million, less credits to DIA Commitments (*$7.5 million)

    Net Total $366 million

     

    -By WDET’s Sandra Svoboda

    @WDETSandra and nextchapter@wdet.org

  • Detroit’s New Disclosure Statement

    Here is the updated Disclosure Statement the city filed today in its bankruptcy case followed by the attached exhibits:

     

    Amended Disclosure Statement 3.31.2014

     

     

     

    Disclosure Statement Exhibits

  • Detroit’s New Plan of Adjustment

    The city today filed its amended Plan of Adjustment and Disclosure Statement, promising it would again modify the documents by April 14.

    In a statement to media, Emergency Manager Kevyn Orr says “The City continues to make progress with its creditors and retirees and hopes to reach agreement in the near term on a number of outstanding issues. … We believe that the Plan we have proposed, and continue to refine, is feasible and allows the City to reduce its staggering $18 billion in debt and live within its means. The Plan puts the focus back on providing essential public services to the City’s nearly 700,000 residents.”

    Here is the Plan:

     

    Amended Plan of Adjustment 3.31.2014

  • Speaking of Syncora…

    The international bond insurer that subpoenaed information from the Detroit Institute of Arts and the Michigan Attorney General has been busy with court filings during the last week in the Detroit bankruptcy case.

    Syncora Holdings Ltd. and its two subsidiaries are challenging the court’s approaching deadline for objections to the city’s Plan of Adjustment and Disclosure Statement. Judge Steven Rhodes extended his original April 1 deadline to April 3 after the city announced it would file its revised documents on March 31. Syncora argues it needs time beyond the April 3 deadline to file objections based on what new information the city provides.

    “The Disclosure Statement references Plan exhibits as well as many other documents which inform the treatment and other rights of creditors under the Plan that are completely missing,” Syncora attorneys say in arguing for the extension. “And now, as a result of the City’s … motion, parties in interest will only have 48 hours to digest and object to the amended (i.e. new) Disclosure Statement.”

    The city objected to Syncora’s request, writing “Although it dresses up its request for relief as a plea for the preservation of due process, Syncora merely seeks more disruption and delay. While this may be consistent with the scorched earth litigation strategy Syncora has adopted…it is inconsistent with the state purpose of the Court’s” order.

    Syncora, based in Bermuda, also has asked Judge Rhodes to delay the scheduled April 3 hearing on the $85 million pension interest rate swaps settlement. Rhodes will consider both requests at an April 2 hearing.

    Meanwhile, a group of European and American bond insurers filed in support of Syncora’s motion for the extension related to the Plan of Adjustment and Disclosure Statement, calling it “an eminently reasonable request” and saying:

    “the situation and any delay in the plan confirmation process that may result is one of the City’s own making. It appears likely that the amended disclosure statement will contain hundreds of additional pages that the City could have provided when it initially filed the Disclosure Statement in February and most of which have nothing to do with intervening settlements.”

    Michigan Council 25 of the American Federation of State, County & Municipal Employees also supports Syncora’s request for the extension, according to a Monday court filing.

    “The City has spent over 30 days revising, modifying, and materially changing aspects of the Disclosure Statement and Plan, and intends to ‘spring’ what will undoubtedly be a materially revised Disclosure Plan likely less than 72 hours prior to the new Disclosure Statement objection deadline,” the union’s attorneys wrote. “AFSCME intends to continue on the dual path of negotiation and the Plan confirmation adversarial process, but simply seeks the due process that all parties to these proceedings — particularly City employees that face the harshest possible result in the event of a confirmed cramdown Plan in this case — deserve.”

     

     

  • Subpoenas for DIA records, art appraisals, MI Attorney General papers and more

    Bond insurer Syncora is seeking a massive amount of information from the Detroit Institute of Arts, Christie’s and the Michigan Attorney General as part of the Detroit bankruptcy case. The request includes the DIA’s membership information, documentation of how art was acquired, financial performance reports and tax records, appraisals, communications with the city about selling artwork and more. (The entire request is visible below.)

    Next Chapter Detroit’s Sandra Svoboda discussed the subpoena with WDET’s Craig Fahle on his show today.

    The company filed copies of the subpoenas in bankruptcy court that were to be served on the museum, the auction house, which appraised part of the collection, and the state’s top lawyer, who wrote an order last year stating the DIA’s collection was held in “charitable trust for the people of Michigan, and no piece in the collection may thus be sold, conveyed, or transferred to satisfy City debts or obligations.”

    Spokespersons for all three entities declined comment to NextChapterDetroit.com. An attorney for Syncora did not return an email message. Syncora, according to the city, insures and partially holds about $620 million of the city’s $18 billion debt.

    The Detroit Free Press reports that legal experts say the subpoena “is unlikely to make much headway in court.”

    3.28.14 Subpoena Filing

     

     

    -By WDET’s Sandra Svoboda

    @WDETSandra and nextchapter@wdet.org