City officials including (l to r) CFO Jack Martin, COO Chris Brown, Mayor Dave Bing and Deputy Mayor Kirk Lewis listen intently as attorney Michael McGee, co-author of Public Act 4 and city/state/MFA advisor on $137 million loan, argues that Corporation Counsel Krystal Crittendon has no authority to sue on behalf of Detroit.
$13 million paid out to vendors in one week despite alleged cash shortfall;
Council stands up to Big 5 June 11, but to meet in closed sessions June 13
By Diane Bukowski
June 12, 2012
DETROIT – Did the City of Detroit’s new “Big Five” deliberately engineer a fiscal crisis to get Corporation Counsel Krystal Crittendon to “stand down” from legal action challenging the validity of the June 4 Public Act 4 consent agreement?
So far, Crittendon has refused to back off, pending a hearing in the State’s Court of Claims before Ingham County Circuit Court Judge William Collette Wed. June 13, at 10 a.m.
Mayor Dave Bing demands Council stop Corporation Counsel legal action, in meeting June 11, 2012.
The Big Five took the stage at a joint meeting with City Council June 11. They are (in alphabetical order, not necessarily order of dominance), Mayor Dave Bing, Chief Operating Officer Chris Brown, Deputy Mayor Kirk Lewis, Chief Financial Officer Jack Martin, and last but by far not least, attorney Michael McGee, co-author of Public Act 4, as shown above.
“I demand that Corporation Counsel withdraw her lawsuit, and I demand that the City Council make the Corporation Counsel withdraw her lawsuit,” Bing stormed. Later he told the Council to vote to dismiss the lawsuit.
Councilman Kwame Kenyatta blasts Big 5 at Council meeting June 11, 2012.
“There is a $32 million bond payment on the pension obligation certificates due this Friday,” Chief Financial Officer Jack Martin, newly installed after joint approval by Michigan Governor Rick Snyder and Bing, said. “We were planning to make it based on $35 million in the escrow account from the state, but they will not advance it so long as the lawsuit is in place.”
In fact, the Fiscal Stablity [Consent] Agreement says the following about the loan.
“The anticipated aggregate size of the refinancing is approximately $137 million, of which approximately $33 million will be used to refinance existing debt, and approximately $104 million will be placed in an escrow account and used to pay for costs of the Reform Program and for City operating expenses.”
Attorney Jerome Goldberg said, “This is outrageous. Here we had city employees worried about whether they would be paid Friday, but the city was really worrying about paying off its POC debt.”
On June 12, City Council Fiscal Analyst Irvin Corley told Council that $13 million was mysteriously missing from the city’s cash flow forecast of May 24, which had the city in the black.
Corley told VOD later in the day that he has now discovered the $13 million was paid out to city vendors in just one week, money not included in the May 24 projection. Martin claimed June 11 that the city could “barely pay” its vendors and was not paying some.
Fiscal Analyst Irvin Corley at Council session March 29, 2012.
“The question I am asking the administration now is what prompted them to spend an additional $13 million in one week’s time on vendors?” Corley said.
Martin said June 11 that global accounting firm Ernst & Young generated the deficit figures. The states of New York and New Jersey are suing Ernst & Young for cooking Lehman Brothers’ books before its historic collapse in 2008. Is this a repeat performance? Is this criminal malfeasance on the part of the Big 5?
Council President Charles Pugh confronted them immediately June 11, telling Bing that the city’s lawyer is Corporation Counsel Crittendon, not McGee, when Bing said he had taken McGee’s advice.
“The Corp Counsel says she has a charter-mandated responsibility to do what she is doing,” Pugh said. “We cannot interfere. You, Mayor Bing, and you Jack Martin, and you Chris Brown and you Kirk Lewis, the four of you should be able to negotiate with the state to preserve our fiduciary responsibility to the citizens.”
Free Detroit-No Consent members turned out in force at council meeting June 11.
Bing began, “The Charter . . . .” then paused and said “Mike would you explain?”
Council members Kwame Kenyatta and JoAnn Watson erupted in outrage.
Councilwoman JoAnn Watson says state is guilty of extortion at meeting June 11, 2012.
“I find it appalling that we would bring in an outside attorney in to interpret the Charter,” Kenyatta said. “On that bond, he represented the city, the state and the Michigan Finance Authority. He got paid three ways. He wrote Public Act 4 and then advised us on Public Act 4. The City should have demanded that the Governor not violate the state’s bullying law. Until the court says the consent agreement is invalid, we should tell the GOVERNOR to stand down. I support the Corporation Counsel—how are you going to demand that someone not follow the law?”
Watson followed.
“This amounts to not just bullying—it sounds like extortion,” she said. “The state should not be in the business of engaging in that kind of behavior. It is outrageous, particularly given that the consent agreement never had any money on the table in the first place. That $137 million was a loan, money our grandchildren will be paying back. It is outrageous to make the high-demanded and then have threats of dismissal of the Corporation Counsel running on the media this weekend.”
Corporation Counsel Krystal Crittendon warning Council against PA4 consent agreement March 29, 2012.
Remaining Council members, except for President Pro-Tem Gary Brown, agreed that they had no power over Crittendon and refused to take any action against her. Crittendon can only be dismissed by the Mayor and a supermajority of the Council.
Bing, appearing to be taken aback by the Council’s response, said he himself did not intend to fire her.
Councilwoman Saunteel Jenkins said the state could resolve Crittendon’s legal action by simply paying at least part of the debts it owes Detroit. She and several other Council members downplayed the $224 million in revenue-sharing that Crittendon raised.
However, her legal action is in the Court of Claims, the only entity with the authority to handle monetary claims against the state. It will be up to Judge Collette to determine the validity of the $224 million debt as well as the others Crittendon listed in her request for a declaratory judgment.
Ingham County Circuit Court Judge WIlliam Collette
Payment of those debts would eliminate the alleged necessity for the pending $250 million city budget cuts, 2566 lay-offs, and elimination of entire departments.
Crittendon’s challenge to the consent agreement is that the city, under both state and federal laws, cannot enter into a contract with any entity in default to it. The state would remain in default if Collette determines the $224 million is a valid debt.
Willie Mae Hampton tells Council to stand firm in support of Crittendon.
Detroit residents packed the meeting, many of them members of Free Detroit-No Consent. They waved “We do not consent” placards and spoke forcibly in favor of Crittendon. They pointed out that the newly revised Charter not only gives her the power to take legal action against violations of the Charter, but also assigns her the duty of approving all contracts, bond issues, and other matters.
They also said the Council should have listened to Crittendon, not McGee, and voted the consent agreement down in the first place, on June 4. Only Council members JoAnn Watson, Kwame Kenyatta, Brenda Jones and Andre Spivey voted NO.
- Council Pres. PT Gary Brown was angry that he could not get Council to go forward with consent agreement June 12 by voting to Financial Advisory Board designees.
The situation, however, remains in flux. On June 12, the Council voted unanimously to hold two closed sessions June 13, one at 10:30 am and one at 2 pm. In the morning, the joint session will involve the Big 5, the Council and Crittendon, who evidently will not appear herself in Collette’s courtroom. In the afternoon, the Council will meet separately with Crittendon.
Brown moved unsuccessfully June 12 to vote that day to go forward with the terms of the consent agreement by appointing the Council’s two designees to the Financial Advisory Board. He said the legal dispute will not be resolved immediately.
Councilman Kenneth Cockrel, Jr. said he agreed with Brown. Jenkins said they could hold an adjourned session June 14 to deal with a possible vote on the matter.
APTE President Dempsey Addison during first Occupy Detroit march in 2011.
During public comments June 12, Dempsey Addison, president of the Association of Professional and Technical Employees (APTE), asked Council not to allow the dismantling and privatization of the federally-funded departments of Human Services, Health and Wellness Promotion, and Workforce Development. She said hundreds of lay-offs are scheduled to begin shortly.
“If the city is broke, why are we giving away hundreds of millions in federal grants?” she asked.
The Council voted unanimously June 1 only to temporarily fund the three departments while privatization progresses. They put the finishing touch on the budget June 12 by voting to approve the last outstanding item involving property taxes.
Below:
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