On December 3, United States Bankruptcy Judge Stephen A. Rhodes—to the surprise of no one—formally ruled that Detroit is “eligible” for bankruptcy. In other words, creditors will now wrangle over Detroit’s government assets with Rhodes as the referee.
It is important to understand that at no point has Detroit declared or requested bankruptcy. Indeed Detroiters and others in Michigan have resisted as best they could, only to be overpowered at every turn. As Judge Rhodes explains below, bankruptcy has been orchestrated from Lansing (the state capitol) with a lot of help from Wall Street banks and other financial players.
Taking power away from Detroiters began decades ago. As the city's African American population grew, so did the forces trying to deprive it of democracy and assets. A tangled web of bipartisan power grabs steadily shifted revenue and decision making to the suburbs, state government and predatory lenders. Far from helping the city—although onlookers wouldn't know it based on loud, public proclamations to the contrary—the end result crippled Detroit and ushered in its fall.
Starting in 1999 Lansing's state government decided it was in their bailiwick to manage the Detroit Public Schools, a task historically overseen by elected officials. The result? School performance worsened, which resulted in the departure of more residents. Combined, these two factors only sped up the area’s decline.
That colossal failure notwithstanding, from the day he took office in January of 2011, Governor Rick Snyder maneuvered to take even more power and resources away from Michigan’s predominately African American cities. The more he succeeded in doing so, the more difficult life became for residents of those cities.
So far, efforts to put the brakes on this process have failed. Most dramatically, the voters of Michigan repealed Governor Snyder’s emergency manager law (P.A. 4) in a statewide referendum held last November. His lame duck super majority co-conspirators in the Michigan legislature promptly enacted a still worse version. State courts repeatedly found ways to support the Governor’s take-over powers.
Now, a federal judge has also ruled in favor of continuing the very same dynamic.
If you think about the historic moment unfolding before us with the rationale that Detroit is an unfortunate outlier on the scale of thriving, solvent versus sad, “dysfunctional” U.S. cities—with Detroit falling squarely in the latter category—think again. Every public sector worker’s retirement security in the form of a pension is seriously imperiled. This is only compounded by the fact that Judge Rhodes’s decision greatly expands the leverage of those who want to reduce or eliminate them.
The entire process of taking over the governments of Detroit and other cities is also deeply disturbing if you believe that ordinary people ought to have at least some means to balance the interests of the one percent.
Finally, the point here is not to endorse Judge Rhodes’s version of the opposition to the bankruptcy. Ultimately, his theory of “bad faith” is a straw man characterization designed to help justify his commandeering of the city’s future. It completely ignores decades of white racism and other social and economic factors in favor of a simple conspiracy theory.
That said, it is still a revealing insight into how Rhodes—himself an agent of the one-percent—perceives the behavior of his own allies.
Below is a verbatim excerpt from two sections of Judge Rhodes’s 140-page opinion:
The Objectors’ Theory of Bad Faith
In section 3, below, the Court will review the factors upon which it relies in finding that the City filed this case in good faith. First, however, it is crucial to this process for the Court to give voice to what it understands is the narrative giving rise to the objecting parties’ argument that the City of Detroit did not file this case in good faith. The Court will then, in section 2, explain that there is some support in the record for that narrative.
It must be recognized that the narrative that the Court describes here is a composite of the objecting parties’ positions and presentations on this issue. No single objecting party neatly laid out this precise version with all of the features described here. Moreover, it includes the perceptions of the objecting parties whose objections were filed by attorneys, as well as the many objecting parties who filed their objections without counsel. Naturally, these views on this subject were numerous, diverse, and at times inconsistent.
The Court will use an italics font for its description of this narrative, not to give it emphasis, but as a reminder that these are notthe Court’s findings. As noted, this is only the Court’s perception of a composite narrative that appears to ground the objectors’ various bad faith arguments:
According to this composite narrative of the lead-up to the City of Detroit’sbankruptcy filing on July 18, 2013, the bankruptcy was the intended consequenceof a years-long, strategic plan. The goal of this plan was the impairment of pension rights through a bankruptcy filing by the City.
Its genesis was hatched in a law review article that two Jones Day attorneyswrote. This is significant because Jones Day later became not only the City’sattorneys in the case, but is also the law firm from which the City’s emergencymanager was hired. The article isJeffrey B. Ellman; Daniel J. Merrett, Pensions and Chapter 9: Can Municipalities Use Bankruptcy to Solve Their Pension Woes?,27 EMORY BANKR. DEV. J. 365 (2011). It laid out in detail the legalroadmap for using bankruptcy to impair municipal pensions.
The plan was executed by the top officials of the State of Michigan, including Governor Snyder and others in his administration, assisted by the state’s legaland financial consultants - the Jones Day law firm and the Miller Buckfireinvestment banking firm. The goals of the plan also included lining theprofessionals’ pockets while extending the power of state government at theexpense of the people of Detroit.
Always conscious of the hard-fought and continuing struggle to obtain equalvoting rights in this country and an equal opportunity to partake of the country’sabundance, some who hold to this narrative also suspect a racial element to theplan.
The plan foresaw the rejection of P.A. 4 coming in the November 2102election, and so work began on P.A. 436 beforehand. As a result, it only took 14days to enact it after it was introduced in the legislature’s post-election, lameducksession.
It was also enacted in derogation of the will of the people of Michigan as justexpressed in their rejection of P.A. 4.
The plan also included inserting into P.A. 436 two very minor appropriationsprovisions so that the law would not be subject to the people’s right of referendumand would not risk the same fate as P.A. 4 had just experienced.
The plan also called for P.A. 436 to be drafted so that the Detroit emergencymanager would be in office under the revived P.A. 72 on the effective date of P.A.436. This was done so that he would continue in office under P.A. 436, M.C.L.§ 141.1572, and no consideration could be given to the other options that P.A.436 appeared to offer for resolving municipal financial crises. See M.C.L.§ 141.1549(10) (“An emergency financial manager appointed under former 1988PA 101 or former 1990 PA 72, and serving immediately prior to the effective dateof this act, shall be considered an emergency manager under this act and shallcontinue under this act to fulfill his or her powers and duties.”); see also id.§ 141.1547 (titled, “Local government options . . .”).
The plan also saw the value in enticing a bankruptcy attorney to become theemergency manager, even though he did not have the qualifications required byP.A. 436. M.C.L. § 141.1549(3)(a).
Another important part of the plan was for the state government to starve the City of cash by reducing its revenue sharing, by refusing to pay the City millionsof promised dollars, and by imposing on the City the heavy financial burden ofexpensive professionals.
The plan also included suppressing information about the value of the City’sassets and refusing to investigate the value of its assets - the art at the DetroitInstitute of the Arts; Belle Isle; City Airport; the Detroit Zoo; the Department ofWater and Sewerage; the Detroit Windsor Tunnel; parking operations; Joe LouisArena, and City-owned land.
The narrative continues that this plan also required active concealment andeven deception, despite both the great public importance of resolving the City’sproblems and the democratic mandate of transparency and honesty ingovernment. The purposes of this concealment and deception were to providepolitical cover for the governor and his administration when the City wouldultimately file for bankruptcy and to advance their further political aspirations.Another purpose was to deny creditors, especially those whose retirement benefitswould be at risk from such a filing, from effectively acting to protect thoseinterests.
This concealment and deception were accomplished through a publicrelations campaign that deliberately misstated the ultimate objective of P.A. 436 –the filing of this case. It also downplayed the likelihood of bankruptcy, assertedan unfunded pension liability amount that was based on misleading andincomplete data and analysis, understated the City’s ability to meet that liability,and obscured the vulnerability of pensions in bankruptcy. It also includedimposing an improper requirement to sign a confidentiality and releaseagreement as a condition of accessing the City’s financial information in the“data room.”
As the bankruptcy filing approached, a necessary part of the plan became toengage with the creditors only the minimum necessary so that the City could laterassert in bankruptcy court that it attempted to negotiate in good faith. The plan,however, was not to engage in meaningful pre-petition negotiations with thecreditors because successful negotiations might thwart the plan to filebankruptcy. “Check-a-box” was the phrase that some objecting parties used forthis.
The penultimate moment that represented the successful culmination of theplan was the bankruptcy filing. It was accomplished in secrecy and a day beforethe planned date, in order to thwart the creditors who were, at that very moment,in a state court pursuing their available state law remedies to protect theirconstitutional pension rights. “In the dark of the night” was the phrase used todescribe the actual timing of the filing. The phrase refers to the secrecysurrounding the filing and is also intended to capture in shorthand the assertionthat the petition was filed to avoid an imminent adverse ruling in state court.
Another oft-repeated phrase that was important to the objectors’ theory of theCity’s bad faith was “foregone conclusion.” This was used in the assertion thatDetroit’s bankruptcy case was a “foregone conclusion,” as early as January2013, perhaps even earlier.
Finally, post-petition, the plan also necessitated the assertion of the commoninterest privilege to protect it and its participants from disclosure.
Continuing at Pp. 131- 134 of the opinion:
The evidence in support of the objectors’ theory is as follows:
Food for thought for your conversation with Baird and us - I understand that the Bloomberg Foundation has a keen interest in this area. I was thinking about whether we should talk to Baird about financial support for this project and in particular the EM. Harry Wilson-from the auto task force-told me about the foundation and its interest. I can ask Harry for contact info-this kind of support in ways ‘nationalizes’ the issue and the project. Ex. 402 at 2. Exhibit 402 also contains an email dated January 31, 2013, from Dan T. Moss at Jones Day to Mr. Orr, which states: Making this a national issue is not a bad idea. It provides political cover for the state politicians. Indeed, this gives them an even greater incentive to do this right because, if it succeeds, there will be more than enough patronage to allow either Bing or Snyder to look for higher callings whether Cabinet, Senate, or corporate. Further, this would give you cover and options on the back end. Ex. 402 at 2.
(1) “Summary and Comparison of Public Act 4 and Chapter 9”
(2) “Memoranda on Constitutional Protections for Pension and OPEB Liabilities”
(3) “The ability of a city or state to force the decertification of a public union”
(4) “The sources of, and the ability of the State to withdraw, the City’s municipal budgetary authority.”
(5) “Analysis of filing requirements of section 109(c)(5) of the Bankruptcy Code (“Negotiation is Impracticable” and “Negotiated in Good Faith”)
“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.
 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)
Link to original article from AlterNet
Page 10 of 59
After initially stating he would rule on an emergency appeal to stop water shutoffs at the end of Tuesday’s court session, US federal bankruptcy judge Steven Rhodes announced Wednesday he would issue no decision until at least September 17. This means the city, which has shut off water service to nearly 1,000 households since resuming this brutal policy last week, will continue for at least the next two weeks.
Rhodes appointed a mediator from the US bankruptcy court, US chief judge Phillip Shefferly, to hold “confidential” mediations between the Detroit Water...
Lawrence Porter | World Socialist Web Site 04 Sep 2014 Hits:198 Michigan
While they carry signs “Thirsty For Justice” nearly 45% of Detroit’s 173,000 water accounts are considered past due, with 420 customers due to be denied service Tuesday.
The bankrupt Detroit lifted the month-long suspension of shutting off water to people who have not paid bills. Some 25,000 customers have reached payment plans with the city.
The new system seems to be working very well,” said John Roach, spokesman for Mayor Mike Duggan. The biggest changed to the payment plan program was to require only 10% of past-due balances to enter a payment...
Kaye Wonderhouse | The Global Dispatch 28 Aug 2014 Hits:172 Michigan
DETROIT, Mich. (WJLA/AP) -- Detroit's massive municipal water department, which has been widely criticized for widespread service shutoffs to thousands of customers, drew nationwide attention Thursday on Capitol Hill.
Due to public pressure, the department has temporarily suspended shutoffs for customers who were 60 days or more behind on bills for 15 days.
But with the prospect of shutoffs resuming in a week, some members of Congress are now asking the Obama administration and the Department of Health and Human Services to intervene in what they contend is a humanitarian crisis facing...
Scott Thurman | AP | ABC 7 News 01 Aug 2014 Hits:334 Michigan
Maude Barlow, Canadian author and national chairperson of the Council of Canadians, with a delegation of water rights advocates brought 260 gallons of water to Detroiters July 24.
Of the 15,000 homes that have had water shut off by Emergency Manager Kevyn Orr, it is estimated that only 48 percent are back in service.
“We came to pay tribute to the people of Detroit,” Barlow said in remarks made at St. Peter’s Church, Michigan and Trumbull, where the water was delivered.
“Fresh water and sanitation are human rights guaranteed by the United Nations,”...
The Michigan Citizen 30 Jul 2014 Hits:312 Michigan
The Detroit Water and Sewerage Department is suspending its water shutoffs for 15 days starting today to give residents another chance to prove they are unable to pay their bills.
“In case we have missed someone who has legitimate affordability problems this will allow them to come to us to see if they can work out payments,” department spokesman Bill Johnson said. “We’ve always maintained that what we were doing was a collection effort — not a shutoff effort.”
The decision comes after the city has put into national spotlight for a...
Brent Snavely, Matt Helms | Detroit Free Press 21 Jul 2014 Hits:243 Michigan
Oh, make you wanna holler
The way they do my life
This ain't livin', this ain't livin'
No, no baby, this ain't livin'
No, no, no, no
--Marvin Gaye, "Inner City Blues"
On July 18 thousands of activists and dozens of organizations will converge on downtown Detroit to protest the privatization of the city’s assets and the disconnection of water to tens of thousands of low-income residents. The UN has called the shutoff a human rights violation. Demonstrators from around the country will rally in Hart Plaza at 1 pm, linking arms with the citizens of...
Ben Ptashnik and Victoria Collier | The Progressive 09 Jul 2014 Hits:360 Michigan
Detroit made international news this month when its municipal water board resumed cutting off water to residents with unpaid bills. With thousands of community members struggling in homes with no running water, local groups reached out (PDF) to the United Nations special rapporteur on the human right to safe drinking water and sanitation to intervene. On Wednesday, U.N. officials responded, calling the water department’s actions a “violation of the human right to water and other international human rights.”
The Detroit Water and Sewerage Department’s decision to cut off residents with unpaid...
Anna Lappé | Al Jazeera English 02 Jul 2014 Hits:759 Michigan
Rep. John Conyers (D-Mich.) won't appear on the Democratic primary ballot after failing to submit enough valid signatures, Wayne County Clerk Cathy Garrett said on Tuesday.
"It is my determination that in accordance with the current laws and statutes of the State of Michigan, the nominating petitions filed by Congressman John Conyers, Jr. are insufficient to allow his name to appear on the August 5, 2014 Primary Ballot," Garrett said in a statement.
The decision means Conyers may have to run as a write-in candidate if he wants to keep a seat he's held...
Cameron Joseph | The Hill 14 May 2014 Hits:665 Michigan
Rep. John D. Dingell (D-Mich.) will retire at the end of his current term, capping a historic career as the longest-serving member of Congress in history.
In prepared remarks for his annual "State of the District" speech distributed by his office Monday afternoon, Dingell described his decision as personal and rooted in the standards he had set for himself as a lawmaker.
"Around this time every two years, my wife Deborah and I confer on the question of whether I will seek reelection. My standards are high for this job. I put...
Sean Sullivan | Washington Post 24 Feb 2014 Hits:504 Michigan
On December 3, United States Bankruptcy Judge Stephen A. Rhodes—to the surprise of no one—formally ruled that Detroit is “eligible” for bankruptcy. In other words, creditors will now wrangle over Detroit’s government assets with Rhodes as the referee.
It is important to understand that at no point has Detroit declared or requested bankruptcy. Indeed Detroiters and others in Michigan have resisted as best they could, only to be overpowered at every turn. As Judge Rhodes explains below, bankruptcy has been orchestrated from Lansing (the state capitol) with a lot of help...
Frank Joyce | AlterNet 17 Dec 2013 Hits:519 Michigan
Michigan lawmakers passed a controversial measure on Wednesday that will ban all insurance plans in the state from covering abortion unless the woman's life is in danger. The law, which takes effect in March, will force women and employers to purchase a separate abortion rider if they would like the procedure covered, even in cases of rape and incest.
Supporters of the "Abortion Insurance Opt-Out Act" argue that it allows people who are opposed to abortion to avoid paying into a plan that covers it. Opponents have nicknamed it the "rape...
Laura Bassett | Huffington Post 11 Dec 2013 Hits:1669 Michigan
U.S. Bankruptcy Judge Steven Rhodes ruled Tuesday that the city of Detroit is eligible for bankruptcy after a long court battle between city appointed 'emergency manager' Kevyn Orr and union and labor activists who say the decision paves the way for workers' pensions to be cut.
Rhodes ruled that Detroit is insolvent, a legal criteria for bankruptcy, meaning it can cut public pensions for the bankruptcy filing.
Critics say the city bankruptcy filing, the first of its kind, is an attack on pensions and future livelihoods for workers in the city of...
Common Dreams Staff 03 Dec 2013 Hits:418 Michigan
Contradicting what the corporate media editorial boards have promoted in chorus with the multi-millionaire Governor Rick Snyder and his appointed emergency manager Kevyn Orr, 110 people filed objections to the forced bankruptcy of the City of Detroit. The hearing took place on September 19 and was widely covered in the local, national and international press.
This extraordinary hearing had provided only a small window of time for legal action. Many of the people that testified were retirees, city workers, community organizers and professionals who met the deadline set by the Judge...
Abayomi Azikiwe | Global Research 24 Sep 2013 Hits:789 Michigan
Much has been justifiably made about the damage the Roberts Supreme Court has done to voting rights in their recent decision, Shelby County v. Holder. However, a potentially more insidious plot denying the precious right to vote is occurring in my own state of Michigan, where Republican Governor Rick Snyder has appointed an emergency manager to run Detroit in place of the duly elected mayor and City Council. Even more troubling, the governor did so after Michigan voters had rejected the emergency manager law at the ballot box, when late...
Rep. John Conyers, Jr | Huffington Post 16 Sep 2013 Hits:740 Michigan
Detroit filed the largest municipal bankruptcy in the nation’s history Thursday afternoon, capping a long decline that left the nation’s automaking capital bleeding residents and revenue, while rendering city services a mess.
The nation’s fourth-largest city in the 1950s with nearly 2 million residents, the city has seen its populaton plummet to 700,000 as residents fled increasing crime and deteriorating sevices, taking their tax dollars with them.
The five-decade slide has left the city owing creditors some $19 billion and under the control of a state-appointed emergency manager. The manager has been...
Michael A. Fletcher | The Washington Post 18 Jul 2013 Hits:431 Michigan
In November, Michiganders voted the state's undemocratic Emergency Financial Manager law out of existence. But that didn't keep Snyder and legislators from claiming control of Motor City.
As of today, Detroit…
On Thursday an emergency manager was named for Detroit, Kevyn Orr, a partner in the Jones Day law firm.
MICHAEL STAMPFLER, [email] Available for a limited number of interviews with major…
Teachers in Grand Rapids, Michigan, say that new paycheck cuts are leaving them with so little pay they qualify for food stamps. The teachers, working without a contract, have been…
Michigan Governor Rick Snyder declared the city of Detroit in a state of "fiscal emergency" on Friday afternoon and announced he would appoint a emergency financial manager (EFM)…
On the heels of a lawsuit filed recently in the Ingham County District Court challenging the constitutionality of Michigan’s new Right to Work law, a coalition of unions has filed a…
Michigan’s so-called lame duck legislature passed a remarkable 232 bills in its last week of business. Only one bill, SB 0116 (2011), the so-called Right to Work Bill, passed on…
LANSING, Mich. — The Michigan Legislature approved sweeping legislation on Tuesday that vastly reduces the power of organized labor in a state that has been a symbol of…
Newly elected Rep. Dave Curson moved into his spacious, sun-drenched Capitol Hill office three weeks ago, eager to savor every minute of his congressional career.
And relish it he…
Lansing, MI – Many concerned worker gathered in Lansing today as Republican legislators scrambled to move forward two bills that had been dormant in their committees for most of the…
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