Rhodes set to cram-down plan to profit banks, cut pensions, break up city
Orr lawsuit v. POC banks a paper tiger
Group files motion to remove Rhodes
Emergency Town Hall meeting Sun. March 2 @ 3 PM
By Diane Bukowski
February 27, 2014
- Judge Steven Rhodes at forum favoring EM’s and Chapter 9 Oct. 10, 2012.
DETROIT – U.S. Bankruptcy Judge Steven Rhodes appears ready to “cram-down” a so-called “Plan of Adjustment” (POA) in Detroit’s Chapter 9 proceedings that will reward mammoth criminal banks with huge chunks of their outstanding debt, while slashing the pensions and health care of city retirees, and denuding the city of assets that are worth trillions of dollars.
His viciously hostile tone towards all creditors during a Feb. 25 hearing, during which their attorneys said the POA is grossly incomplete, missing at least 32 vital exhibits, made his intentions evident. Under bankruptcy law, Rhodes has the authority to enact, or “cram-down,” the city’s plan if at least one creditor agrees to it.
“There isn’t a single creditor constituent that supports the plan right now,” Attorney Carol Neville of Dentons, representing the Official Committee of Retirees, told Rhodes. “We’re looking at a total cram-down although I’m sure some creditor will be created to approve the plan.”
Bruce Bennett of the city’s state-imposed legal team Jones Day said the State of Michigan is a voting creditor in the case, “with respect to two classes at least,” during a press conference Emergency Manager Kevyn Orr held on the POA Feb. 24.
“No doubt there will be at least one impaired accepting class, but we expect there to be many,” Bennett said.
STATE CAN FORCE ‘CRAM-DOWN;’ GROUP WANTS RHODES OUT
- James Cole, Jr. and co-filers want Rhodes OUT.
The State of Michigan under Governor Rick Snyder and Public Act 436 effectuated the emergency manager takeover of Detroit. It planned the filing of Detroit’s Chapter 9 bankruptcy as early as 2011, using the corporate crony law firms of Ernst & Young, Miller Buckfire/Stifel Financial, and Jones Day as consultants. There is no real question regarding how the state would vote.
In a “quo warranto” motion challenging Rhodes’ authority filed Feb 24, community activist and paralegal James Cole, Jr. along with dozens of other plaintiffs, called for all of the judge’s actions to be declared “null and void ab initio.” They contended that Rhodes has judicially supported “parties/agents/carpetbaggers (the financial 1% leaders) that pursue a fast-track policy of plundering and pilfering the assets of Detroit’s Indigenous Citizenry under the bankruptcy fallacy and fiction. Click on DB James Cole petition to read filing.
- Greenwood, also known as “Little Africa,” in Tulsa Oklahoma burns in 1921.
The motion compares the dismantling of Detroit to the horrific, racist 1921 burning and looting of Greenwood, a prosperous community in Tulsa, Oklahoma known as “The Black Wall Street,” during which 300 Black residents were murdered.
Judge Rhodes of course, will not grant Cole’s motion, just as he refused to grant a motion for recusal filed by this reporter as a city retiree. That motion referenced his gross conflict of interest and “appearance of impropriety” in chairing a forum on Chapter 9 bankruptcy and Emergency Managers in Oct. 2012. The six-person panel consisted entirely of proponents of both, with the possible exception of one speaker. Click on DB Objection and request for recusal with expedited hearing for filing.
CANCEL THE CITY’S DEBT! TOWN HALL MEETING MARCH 3 @ 3 P.M
March to cancel Detroit’s debt to the banks.
A coalition of community organizations is planning an Emergency Town Hall meeting Sun. March 3 at 3 p.m. at Central United Methodist Church to oppose the plan and organize a means to stop it.
“We demand: Cancel the debt to the banks that caused Detroit’s crisis!” their flier (see below) reads. “The banks, corporations and the state must be forced to repay Detroit for the destruction they have caused. The hundreds of millions they owe us should go to fund a massive public works program, paying our youth to re- build our neighborhoods.”
Hopefully the coalition’s efforts will succeed, and Detroiters will flock to the meeting.
- City of Detroit workers strike Wastewater Treatment Plan Sept. 30, 2012.
But without a massive national march on Detroit, a boycott of Michigan products, and a general strike of the nation’s unions, who should be on the frontlines protecting the city of their birth, the largest Black-majority city in the U.S., the outcome remains in question. No national leaders have proposed these options, although they know the Detroit/Greenwood Plan is coming to their communities next. Jones Day is already planning bankruptcy proceedings for the entire U.S. territory of Puerto Rico.
BANKS MAKE OUT LIKE BANDITS IN PLAN OF ADJUSTMENT
The Orr/Jones Day Plan of Adjustment claims “settlements” are being worked out with the Wall Street banksters who perpetrated the $1.44 billion “Pension Obligation Certificates” (POC or COPS) scam of 2005-06, complete with interest swap agreements totaling another $370 million. (Click on DB plan for full 120 page plan.)
This is despite the fact that Orr sued the banks involved, asking Rhodes to declare all outstanding POC and swaps debt to them illegal and “void ab initio,” and absolving the city of any future payments. That would be at least $1.45 billion more in the city’s coffers for the services Orr claims he wants to provide to city residents, not to mention the money that should come BACK to the city for payments made between 2005 to 2013.
Jan. 31, 2005: (L to r) Detroit CFO Sean Werdlow who afterwards took a position with lender SBS, Joe Doherty of SBS, Stephen Murpy of Standard & Poor’s, Joe O’Keefe of Fitch Ratings, and Deputy Mayor Anthony Adams press $1.44 B POC deal at City Council table.
Rhodes has set no date for the lawsuit to be heard.
The “settlements” would involve payments of 40-70 percent of the “outstanding principal” on the still remaining POC debt of $1.45 billion (no mention of interest). That would therefore be at least a payment of $680 million on the POC debt alone. The plan also says a “lower” re-payment is being negotiated on the swaps than the two deals already rejected by Rhodes.
- Pres. Barack Obama playing golf with Robert Wolf, CEO of UBS AG America, one of his strongest supporters. No wonder Obama won’t come to Detroit.
The banks involved include UBS AG, Siebert, Brandford and Shank, and Bank of America Merrill Lynch (which has backed SBS credit), all of them criminally and civilly convicted in courts across the nation and the globe of interest-rate manipulation, money laundering, and other scams. UBS AG paid the U.S. Department of Justice $1.5 billion to settle one lawsuit, while it faces a $5 billion claim from the Securities and Exchange Commission in another action.
ATTACKS ON RETIREES, CITY’S YOUTH
During his press conference, Orr painted the POA’s proposals as “generous” for retirees, claiming general retirees would see a “recovery” of two-thirds to 70 percent of their pensions, while police and fire retirees would see a rate “at or below” 90 percent. In other words, the plan proposes monthly pension payment cuts of up to one-third for general retirees, and possibly more than 10 percent for police and fire retirees, along with severe cuts to health care.
- Detroit EM Kevyn Orr with sidekick Bill Nowling/Photo Mandi Wright DFP
He told reporters also that the plan attacks retirees’ annuity funds, money they themselves paid into the retirement system without city support. The minority of retirees who left their annuities in the system when they left get checks that separate their “pension” and “annuity” amounts.
“The mechanics of this have not yet been determined,” Orr’s spokesman Bill Nowling later told VOD. “What employees have payed (sic) in themselves is not at issue. What is, rather, are the rates of return that were over and above actual market rate for return for the funds. When payments in excess of the rate of returns are made to annuity fund holders (dividends), it comes at the expense of the health of the overall pension funds.”
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Any clearer now, for those retirees who will allegedly receive ballots to vote on the proposed plan of adjustment, through a process which the plan does not detail?
Orr said that any settlements with the city’s creditors, including its unions and retiree associations, would be predicated on their withdrawal of federal lawsuits against the city’s bankruptcy eligibility, which the Sixth Circuit Court of Appeals agreed to hear just before he filed the POA. The Court did not agree to expedite the hearing.
This may explain Rhodes’ unseemly haste in getting to the cram-down phase, before the Sixth Circuit gets a chance to weigh in on whether Detroit should even be in bankruptcy proceedings. Additionally, U.S. District Court Judge George Caram Steeh is just resuming hearings on a state-wide lawsuit challenging the legality of PA 436, from which the City of Detroit has been redacted to get Rhodes to lift the stay on it.
The mainstream media keeps claiming the urgency is due to the expected departure of Orr in September. However, PA 436 provides that the City Council, the Mayor, and the Governor must all approve that departure. Even if he goes, the city would remain under transitional state control for an indefinite period.
PRIVATIZATION KEY TO DETROIT PLAN
Orr proposed more massive privatization, which has already included the Department of Water and Sewerage (DWSD), the Public Lighting Department, Belle Isle, the Department of Public Works, and three departments that were nearly 100 percent federally-funded, with the Department of Transportation likely next under a Regional Transit Authority. He did not discuss the huge damage the privatization would do to the General Retirement System pension fund, in particular, as well as the prospects for jobs for Detroit’s youth.
It is only because an Emergency Manager is dealing with Detroit’s bankruptcy that such disposition of its assets can even be considered under Chapter 9. The law forbids creditors’ demands that assets be liquidated “unless the debtor agrees.”
Regarding the proposal to regionalize DWSD, Orr said, “The city gets $27 million annually in an income stream for years, and adequate funding for capital needs for an authority.” So far, suburban leaders have not reached any agreement with the Detroit on this matter, but Orr claimed “we are negotiating, trying to act in good faith and a professional manner.” He said he has met with the county executives involved, except for Wayne County Executive Robert Ficano, who he plans to meet with soon.
During the press conference, Orr said the city plans to invest $1.5 billion in city services as part of the plan, but could not specify any revenue stream that would provide those funds.
“We are working on that,” Bennett said. “There will be a new revenue stream, not post-petition financing, but another instrument in the process of being defined, which will include the opportunity for creditors to participate in city’s revenue growth events.”
- Hantz Farms proposal.
Orr also declared that the plan involves demolishing 70,000 houses in the city, which he claimed are vacant or in disrepair. A reporter asked what he plans to do with the vacant land.
“It won’t be like Hantz Farms,” he said. “I am working closely with Mayor’s proposal, and plan another meeting to review the Detroit Future Cities plan. I’m not going to speak to that right now.”
Hantz Farms developers want to grow a forest on a wide swath of Detroit’s east side, while others want to turn Detroit, to which sharecroppers from the south fled in the mid-20th century, into an “urban farm.”
Excerpts from filing by James Cole, Jr. et. al. asking for Rhodes’ removal.
Greenwood or “Little Africa” section of Tulsa, Oklahoma, was known as “Black Wall Street” before whites burned it down in 1921.
The Coalition is proposing a “People’s Plan for Restructuring for a Sustainable Detroit,” which will be discussed and added to at the Town Hall meeting. Click on People’s Plan for Restructuring for a Sustainable Detroit to read the proposal.
Coalition press conference held Feb. 24 to announce People’s Plan for Restructuring of Detroit. Monica Patrick is at podium.
