Detroit files for Chapter 9 bankruptcy [UPDATED: Detroit is Eligible]

Here's a new development.
As has been mentioned, the Michigan Constitution protects public pensions....saying they must be kept whole.
Orr has repeatedly threatened drastic cuts to pensioners, but hard numbers have never been made public.

The Official Committee of Retirees on Wednesday filed a motion to have constitutional questions surrounding Detroit’s bankruptcy filing removed from U.S. Bankruptcy Judge Steven Rhodes’ jurisdiction. The request has been assigned to U.S. District Judge Bernard Friedman.

Attorneys for the retiree committee said in a court brief Wednesday there are specific legal issues that allow Friedman to remove the matter from Rhodes’ court.

Like other objectors, the retiree committee’s argument centers on a claim that the city’s bankruptcy filing violates the state’s constitutional protection of pensions, even though no specific plan for cutting retirement benefits has been proposed.

From The Detroit News: www.detroitnews.com...

ETA
So, here it is Mid-September...and they think they can plan and implement this change to thousands of retirees in two weeks oO
Pardon me if I laugh...although it's not funny to play with people's lives this way

Nowling declined to discuss specific proposals Orr discussed with the nine-member retiree committee, but stressed the “sense of urgency” at hand with enrollment beginning for private health insurance plans starting Jan. 1.

“We really have to give the retirees enough time to make a good, informed decision on what provider and plan they want to choose,” Nowling told The News. “We are hoping to have a robust dialogue with the retiree committee ahead of heading into any mediation. ... We wanted to come up with something for retirees so they can know what the benefit options are, especially those going onto exchanges.”

From The Detroit News: www.detroitnews.com...

And so it begins....

Judge Rhodes wants to try and settle as much as possible through mediation. The Judge overseeing the mediation likened today to the time-honored handshake that begins auto union negotiations.....

In an effort to keep Detroit's bankruptcy from getting mired in protracted and expensive litigation, U.S. Bankruptcy Judge Steven Rhodes has promoted the use of mediation to settle disputes over $18 billion in city debt and the city's limited to resources to pay its bills and long-term obligations.

The mediation sessions could help Detroit craft a plan of adjustment with creditors that is essential to the city emerging from bankruptcy court. First, however, Rhodes must determine whether the city is eligible for Chapter 9 bankruptcy relief; a trial is set for late October.

From The Detroit News: www.detroitnews.com...

and a hearing is set for Thursday.....

Last week, attorneys for the nine-member retiree committee filed a motion to have constitutional questions surrounding Detroit’s bankruptcy filing removed from Rhodes’ jurisdiction. The request was assigned to U.S. District Judge Bernard Friedman, who has not yet responded.

The retiree committee’s attorneys argue there are federal constitutional issues at stake in Detroit’s eligibility for bankruptcy that only a district court judge — not a bankruptcy jurist — can decide.

The committee also argues the state emergency manager law Gov. Rick Snyder used to authorize the July 18 bankruptcy filing violates the federal Constitution because it effectively strips “voters of their right to democratically elected representatives.”

From The Detroit News: www.detroitnews.com...

I do remember when Orr filed the bankruptcy....he seemed in an awful hurry and wanted it done before certain cases were decided in Michigan court.
I hope this doesn't get tossed.

I don't have a problem with EM so much as the way some tings have been done. Detroit obviously needs oversight.....

For those wanting to see the symptoms behind Detroit's Problems here is a good article

How Detroit Went Bankrupt

Article

Again, just to show how systematic the problems are/were in Detroit. I am fully confident that this is just the Tip of the Iceberg so to speak. I'm sure as they have third party people look further into the books, they will find more of the same.

Of 1,484 claims processed during the review period covered by the report, 13% or 192 were deemed to be “likely fraudulent” and another 36% or 536 were founded to be “highly questionable.”

Article

These are Unemployment claims filed by active city workers in Human Resources Department creating fraudulent unemployment benefit claims for themselves. 49% of the claims look to be bogus.

Fraud, Bribery and Nepotism, Cronyism ect. have run wild in Detroit for Decades now. I personally know of a handful of business owners who have experienced those things first hand when dealing with Detroit and Wayne County (where Detroit is located) officials.

reply to post by pavil



Hadn't seen that one...at some point you get overwhelmed by all of it

They need to clean house,...no doubt about that.
But, they need to do it without taking away from those who can least afford it: the retirees.....most of whom have done nothing wrong and should not be punished for the corruption of those put in charge.

Some of these MSM articles make it sound like they are living on easy street.
Most aren't.

reply to post by DontTreadOnMe


Yeah you do become numb to it all. Didn't even surprise me one bit.

I agree that Pensioners shouldn't bear the brunt of this, but Detroit is so far down the hole that everyone is going to have to take a drastic haircut. Even Pensioners.

It's not going to be nice or easy to the average citizen when those in charge have betrayed the Public's trust.

Worst thing is, I think Detroit is the Canary in the Coalmine.......... many others are going to repeat what Detroit is going through.


I wouldn't be laughing and mocking them, just wait till our National safety nets have huge holes ripped in them by the full force of the Baby Boomers dropping down on them.


Too many Pensioners and not enough workers or money to go around to cover them. Where have I seen that before???

reply to post by pavil


Although it's hard to tell, as far as I can see, there's plenty of money to pay those people....as long as something is done to keep the crooks out when this bankruptcy is all said and done.
Like put the pension into the State Municipal Fund....which a lot of municipalities belong.......it's not the State Employees find....

Now, their healthcare...that is a HUGE unfunded liablility....that they may lose.
And that should be ALL they have to lose.

Orr proposes freezing Detroit's two pension funds, moving employees to 401(k)-style plan
Not very well written, as is often the case in the Detroit papers

A better explanation here:
Detroit pension-fund practices compel Orr to call for freeze
Read more at www.toledoblade.com...

Detroit Emergency Manager Kevyn Orr wants to freeze the pension system for public workers in light of evidence it was operated in an unsound manner for many years, contributing to the city’s financial downfall. Details were outlined in a memo provided by Tina Bassett, a spokesman for the trustees of Detroit’s General Retirement System.

The memo said the city’s defined-benefit pension plan would be closed to new members as of Dec. 31.

Further benefit accruals would be halted on that date for workers vested in the plan, but they would keep the pensions they had earned. That type of freeze is legal and fairly common in the private sector.

This is a very good article, I suggest reading it.

The pension trustees acted with poor judgment for over 20 years. Their first order of business should have been to the solvency of the fund they were entrusted to keep whole....and not be in bed with unions to cushion benefits already in place.

Had the pension acted more judiciously, Detroit would still be in trouble for bad practices, corruption and fraud.
But it would likely not be in bankruptcy, IMHO.

And pensioners and future retirees would not be facing dire cuts to their livelihoods.


ETA
George Wills' take on Kevin Orr

reply to post by DontTreadOnMe


401(K) was not originally built to be the sole source of retirement funds. One of my tax profs discussed the subject of retirement funding at length (took an entire 3 hour class to do so though it was not specifically related to tax--he saw it as "something that we absolutely must comprehend for our own futures in order to protect ourselves" because he was terrified for us. That's pretty scary talk coming from someone who was called to give expert opinion in front of Congress.) Social security and 401(k) were never created to be a sole source of retirement income but as a way of supplementing retirement income. However, after each one was created, employers found it as a cause to essentially change the retirement game from being a reward for employee loyalty and longevity ("you gave 20-30 years working for us to help us grow so we'll take care of you when you grow old") to one that increasingly offset it to the employee's responsibility.

According to that tax prof, who had looked at people's finances for decades, most people do not have enough tucked away to survive off of. And when you walk into a department store like Target, you can see the truth of that. 20+ years ago, I worked at Target as a 20 year old. The majority of my coworkers were older teens and early 20 somethings. I go there now and the cashiers are all elderly. I know how tiring it is to stand all day. These people aren't working because they want to. It's because they have to in order to survive and when an employer has the option between someone experienced and mature and a young kid with little experience, it's logical why the preference tends towards the elderly.

These games that are being played with the last of the pensions are vile. The Detroit pensions are an 18 billion debt with $3.5 billion unfunded. That leaves 14.5 billion in the fund, sitting. This is a very long term liability that slowly gets trickled out over decades. The 18 billion isn't due next week or even next year. It won't even come fully due in 10 years or even 20. Orr is using sticker shock to set the dialogue and it's b.s. If he's successful in doing the same exact thing that a number of corporations have already done this point to lose their pension obligation (Hostess, American Airlines, and Kodak to name a few), that means more elderly working, taking those jobs that would typically go to the college students, and a tremendous economic ripple effect.

Here's a short article with a a theory on how Detroit's decline began....I think there is a lot of truth to it....

In 1954, Northland, the first modern shopping center in the country, was built in Southfield. It featured the J.L. Hudson Co. department store surrounded by several stores duplicated from downtown. Northland was an instant success. It offered free parking, easy access and a more relaxed environment. Before long, office and medical buildings, restaurants and other services were built, as well. This was a game-changer for the beginning of decentralizing the nearly 2 million people who lived in Detroit. The new offices were modern, with central air-conditioning and heating. Free parking and much lower operating expenses enhanced the appeal. New housing came with modern conveniences, new schools and infrastructure, including roads. Services, stores, churches, offices and housing attracted customers from the city — and at the expense of the city. This story was repeated over and over again in surrounding communities outside of Detroit.
www.freep.com...

Now to pension mismanagement and corruption.....you wonder how much better Detroit would be faring right now if they TRULY had the interests of their citizens, employees and retirees at heart.

Living within reading distance of this disaster....and realising that not everything in the MSM is gospel, one can't help but wonder ......What could they have been thinking all these years....

A Wall Street deal backed by former Mayor Kwame Kilpatrick that helped push the city into bankruptcy bankrolled a three-year spree of alleged corruption, according to federal court records and pension officials.

The spending cheated Detroit retirees out of more than $84 million, led to criminal charges against six people and compounded the impact of a money-losing Wall Street deal, which could eventually cost the city more than $2.7 billion.

From The Detroit News: www.detroitnews.com...

And, even today, they still want more....in spite of fears of pension cuts.

In court today, Rhodes granted a motion, sought by Michigan Council 25 of the American Federation of State, County and Municipal Employees, to allow a state labor judge to file his opinion that Detroit City Council could not stop the pensions from paying a 13th monthly check to some active workers and retirees.
www.freep.com...

And, deadbeat Detroit...doesn't pay its bills....but expects citizens to pay theirs....and the suburbs to pay their water bills.

The city owes $59 million to hundreds of companies and individuals, ranging from high-profile lawyer Sam Bernstein to a popcorn vendor, according to federal court records filed late Monday that illustrate the scope and impact of the biggest municipal bankruptcy in U.S. history.

A list of companies with unpaid invoices was among more than 3,500 pages of documents filed Monday in U.S. Bankruptcy Court. The filings provided an unprecedented glimpse at the city’s garden-variety debt that is part of Detroit’s overall debt totaling almost $18 billion.
....

The debts were as low as $6.88 and the filing disclosed hundreds of creditors with litigation claims against the city and lists thousands of active city employees who are owed vacation, severance, sick leave and retirement benefits.

From The Detroit News: www.detroitnews.com...

Prosecutors: Give former Detroit Mayor Kwame Kilpatrick 28 years in prison for 'astonishing ... devastating' corruption


Read more at www.liveleak.com...

Thought u might be interested.




www.liveleak.com...




reply to post by BobAthome


just an update,,

reply to post by BobAthome


He definitely speeded up the demise of the City....like a vulture picking the remains off the carcass of the City.
Shameful.
And, Council stood by and let it happen.....and sometimes aided.

Duplicate posting of above.......

Former Detroit mayor sentenced to 28 years in prison


Pop goes the weasel !!!

28 years in prison.

DETROIT — Seven months after his historic conviction on wide-ranging public corruption charges, Detroit's former mayor was sentenced Thursday in U.S. District Court to 28 years in prison.

Though Kwame Kilpatrick's defense team had asked for a 15-year sentence, prosecutors requested least 28 years, and District Judge Nancy Edmunds gave it to them.

Kilpatrick said in court that he respects the justice system and the jury's verdict though he disagrees with it. Kilpatrick admitted he lied about having an affair with his former chief of staff, Christine Beatty. He also said he was sorry to those he let down — including his wife, children and parents — who were not in court.

"I want the city to heal," he said. "I want the city to prosper. I want the city to be great in the end. I want the city to have the same feeling it did in 2006 when the Super Bowl was here. ... Everybody felt like this was their town."

Former Detroit mayor sentenced to 28 years in prison

More hearings for Judge Rhodes:
Citing the State Constitutional protection for City Retirees, it will be argued that Detroit should not be allowed to continue in bankruptcy.
That the City should refile, excluding the pensioners.
And really, the pensioners have already lost up to 33% in benefits, as their health care is canceled as on January 1, 2014.

Sharon Levine, an attorney for AFSCME, the city’s largest employee union, attacked the constitutionality of Chapter 9 bankruptcy. She said the law allows the U.S. government to infringe on state rights and gives “political cover” to Detroit emergency manager Kevyn Orr to pursue pension cuts.
~~~~
Claude Montgomery, attorney for Detroit’s retiree committee, which has objected to the city’s filing, said the bankruptcy must be rejected before Orr is allowed to enact pension cuts.

www.freep.com...

Read about the health care cut, forcing all retirees onto ACA:

The idea was introduced late last month by emergency manager Kevyn Orr. Orr has consistently stated that the city needs to cut pensioners’ benefits, in part because unfunded retiree health care liabilities make up nearly $6 billion of the city’s $18 billion in long-term obligations, according to a report he filed to support the city’s bankruptcy filing.

www.freep.com...
and, in an effort to tame costs, retirees and active employees get a taste of ACA:

Detroit’s bankruptcy is starting to hit home for 28,500 current and retired city workers who are getting the first glimpse this week at drastic cuts to their health insurance plans.

Emergency Manager Kevyn Orr announced sweeping changes Monday to health insurance for active and retired workers slated to take effect Jan. 1. The changes will likely face a legal backlash as the city fights to win court approval for bankruptcy protection from its creditors.

The changes mark the first major dent Orr is attempting to put in the city’s legacy costs at the center of Detroit’s bankruptcy case as he seeks to shift more of the cost burden onto employees and retirees.

From The Detroit News: www.detroitnews.com...

It's been some time since I posted to this thread.....but the bankruptcy filing trial has been going on for days now, and the Closing Arguments were yesterday.

Both sides did their best to show the other side was wrong. It does seem that no one negotiated with the retirees AT ALL before the filing.....as unions refused and the pensioners association had no authority....Judge Rhodes allowed an official retiree group after the filing.
The main concern of those against the bankruptcy is that the was a lack of good faith bargaining by Orr and Co. Orr and Co. allege there were no alternative ideas presented by creditors.

Since last I posted, retiree health care was cut completely as of December 31....and given a two month stay yesterday.
Judge Rhodes is an active judge, asking many questions, many of them aimed at Orr and city attorneys.

The jostling between the city’s attorney and the judge capped nearly eight hours of closing arguments from attorneys for the city and its creditors over whether the case should move forward.

Retiree and union attorneys continued to argue the bankruptcy case was rushed to court just 34 days after the city proposed a debt-cutting plan, while state and city attorneys maintained the Chapter 9 filing was Detroit’s only option to break loose from billions of debt.

The seven hours of closing arguments Friday were largely a repackaging of hundreds of pages of city and state records presented by bankruptcy eligibility objectors and testimony from a slate of high-profile actors that included Orr, Snyder and former state Treasurer Andy Dillon.

From The Detroit News: www.detroitnews.com...

and

Emergency Manager Kevyn Orr’s proposed health care initiative for retirees has been postponed until Feb. 28 under an agreement with the city and the retiree committee, officials announced Friday.

The current health care coverage and other post employment benefits will continue while the city and the retiree committee appointed in bankruptcy court continue negotiations on a long-term package, officials said. Retirees had been scheduled to get money from the city to find insurance on the federal health care marketplace exchanges.

From The Detroit News: www.detroitnews.com...

28 years? That is absurd, this scumbag should be serving life without the possibility of parole, in a max security hellhole. Hell, ship his ass to gitmo.

The bankruptcy decision could come any day now....although my money is not until after Thanksgiving...
and lawyers are already lining up to appeal whatever Rhodes decides.
The Detroit Free Press had a story today featuring several ways the Judge could rule.

“Because of the attention that’s being focused on this case and because of the likelihood of an appeal, I would suspect he’ll address all the arguments,” said John Pottow, a University of Michigan bankruptcy law professor. “No one wants to get overturned in a high-profile case. He’s going to do all his homework.”

The criteria to enter Chapter 9 bankruptcy requires a city to prove it’s insolvent, obtain the state’s approval and prove it negotiated “in good faith” or that it became “impracticable” to do so.
~~~~
A nine-day bankruptcy eligibility trial — which concluded Nov. 8 — provided clues on Rhodes’ thinking and exposed holes in the city’s case, while simultaneously undercutting creditors’ objections.

www.freep.com...

From what I have seen, Judge Rhodes is not lightweight....and I believe his opinion will be the best one possible under this extreme situation.

Well, it has begun.....the city filed in good faith, although it did not appear to negotiate in good faith.
Pensions will be allowed to be cut....in spite of the Michigan Constitution.

Detroit — A federal judge has ruled Detroit is eligible to file for the nation’s largest Chapter 9 bankruptcy to help dig out from under $18 billion in debt and that city pension payments can be cut to help make that happen.

U.S. Bankruptcy Judge Steven Rhodes determined the city meets the criteria for bankruptcy, ruling the city is financially insolvent and that the filing was properly authorized. He dismissed challenges to Michigan’s emergency manager law and ruled that pensions are not protected by the state Constitution.

“The case was filed in good faith and should not be dismissed,” Rhodes said.

From The Detroit News: www.detroitnews.com...

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