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HUNGER STRIKE PROTESTS DECADES OF SOLITARY CONFINEMENT

JUDGE RULES PRISONERS CAN BE FORCE-FED AS AT GUANTANAMO

Posted on August 19, 2013 by prisonerhungerstrikesolidarity

http://prisonerhungerstrikesolidarity.wordpress.com/

Prisoners in cell in “Secure Housing Unit” at Pelican Bay State Prison, CA.

Supporters of prisoners who are on the 43rd day of hunger strike are expressing outrage at an order signed today by a federal judge allowing strikers to be force fed, disregarding international human rights principles.

“CDCR justifies asking for the order to force feed by claiming that the widespread hunger strike is ‘orchestrated’ by gangs, that the massive participation and support for the demands is coerced and that prisoners have signed ‘do not resuscitate’ directives under duress,” according to Claude Marks of the Prisoner Hunger Strike Solidarity Coalition. “This order violates all international laws and standards and gives the medical director of each prison authority to violate human rights laws instead of reasonably negotiating with prisoners.”

Thousands of prisoners have united to challenge the torture of prolonged isolation, demanding an accountable process to challenge the gang validations that have kept them in security housing for decades.

Continues Marks, “”This approach, much like Guantanamo, sets the US apart from all related international human rights standards.”

Sitawa Nantambu Jamaa, s/n Ronnie Dewberry, is shown in pictures taken in 2012 and 1988. After over 20 years of refusing to allow prisoners in the Pelican Bay SHU to be photographed, administrators relented in the past few months, taking pictures that prisoners can share with their loved ones. Pelican Bay is so remote that many prisoners’ families are unable to visit often, so they treasure a recent photo. – Photo: Adithya Sambamurthy, CIR

CDCR’s $9.2 billion corruption machine vs. Prison Human Rights Movement

 

by Sitawa Nantambu Jamaa, PBSP-SHU Short Corridor Collective

Aug. 14, 2013 – I would like to reiterate that the Agreement to End All Hostilities, issued Aug. 12, 2012, is significant for all prisoners because CDCR (California Department of Corrections and Rehabilitation) has encouraged prisoners in their 33 prisons to not only engage in self-destructive behavior but has also helped heighten racial hostilities – the catalyst for internal warfare, racial warfare and gang warfare – all of which has been magnified inside the prisons and throughout our communities.

Hunger striker supporters displayed photos and quotations from several of the movement leaders, including Sitawa, at the July 13 rally outside Corcoran State Prison. – Photo: Malaika Kambon

We decided to address these contradictions head on by engaging in a dialogue that was meaningful, sincere and honest with each respective entity. We realized that our responsibility was to end actions that were contrary to the growth and development of each and every prisoner. 

We have been attempting to end hostilities for the last 13 years, but the CDCR was not a willing participant in the process. In 2000, we were allowed to get together and work on ending racial and gang riots and to end internal violence.

The CDCR, after realizing that we were successful in our attempts, became very irritable and obstructionist toward our work and proceeded to deliberately sabotage it. During a racial riot in 2000, a young prisoner was murdered by a prison guard. Young prisoners were being murdered in these racial riots; their actions were used by prison guards to justify their being shot for being armed with a weapon – i.e., a makeshift prison knife.

Protests outside the Ronald Reagan State Building in downtown L.A. Monday, July 8, 2013, against solitary confinement in California prisons. (Michael Owen Baker/L.A. Daily News)

Countless prisoners have been murdered in cold blood under the CDCR’s “no warning shot policy.” The prison guards justify killing the prisoners because, they say, they thought they saw a weapon or witnessed one prisoner advancing on another. We consider this to be cold blooded murder. We called for an end to hostilities to eliminate giving prison guards an excuse to kill prisoners.

We realize that the justification for locking men and women away in solitary confinement on prison gang validations indefinitely while also subjecting us to a military debriefing process as the only way to program out constitute attacks to our physical and psychological well-being. Prisoners can no longer withstand such torture.

This process has led to many debriefings and mentally ill prisoners throughout CDCR: in PBSP-SHU, Corcoran SHU, Tehachapi SHU, Folsom SHU and San Quentin Adjustment Center (Death Row). As people who have suffered under such a brutal, diabolical system, we realize that it is our responsibility to help change the course of violent prison systems that have made their way to our communities.

A pair holds a solitary confinement protest sign outside the Ronald Reagan State Building in downtown L.A. Monday, July 8, 2013, during a protest against solitary confinement in California prisons. (Michael Owen Baker/L.A. Daily News)

Orchestrated activities are carried out by debriefers and collaborators whose sole role is to maintain hostilities and deepen infiltration and entrapments within our communities in association with the law enforcement in the streets.

We had been talking about playing a greater leadership role for the last 13 years throughout the PBSP-SHU, but we were unable to agree collectively due to our isolation. So when powerful entities within the California prison system – Institutional Gang Investigators (IGI), Investigations Services Unit (ISU) and Office of Correctional Safety (OCS) – isolated us together in the short corridor, a super-max SHU, we were able to re-open our dialogue and agreed to ending the blatant attacks that our families, friends and associates were being subjected to – the same attacks that we were being subjected to in solitary confinement.

Guillermo Cuauhtemoc protests outside the Ronald Reagan State Building in downtown L.A. Monday, July 8, 2013, against solitary confinement in California prisons. (Michael Owen Baker/L.A. Daily News)

We called for an end to hostilities to eliminate giving prison guards an excuse to kill prisoners.

We realize nothing productive can be done to change the current state of our situation, our prison environment, unless we end the hostilities between prisoners and end all racial and gang violence within the CDCR.

We feel that prisoners are the victims of a systematic process that manipulates them through racial and gang violence in order to prevent greater unity.

In solidarity, struggle, love and respect,

Sitawa

Sitawa Nantambu Jamaa is one of four members of the PBSP-SHU Short Corridor Collective who sit at the negotiating table whenever Gov. Jerry Brown authorizes the CDCR to negotiate the hunger strikers’ demands. Send our brother some love and light: Sitawa Nantambu Jamaa (R. Dewberry), C-35671, Pelican Bay State Prison SHU, D1-117L, P.O. Box 7500, Crescent City CA 95532.

Chino State Prison, California

STATEMENT FROM THE PRISON MEDIATION TEAM

Posted on August 19, 2013 by prisonerhungerstrikesolidarity

Day 43 – Time to Re-Frame the Debate

It is difficult to be a Mediator in a situation where no “negotiations with terrorists” are allowed to take place. But let’s start with that word “terrorist,” a grossly overused label in our post 9/11 era. It is meant to demonize. It is meant to conjure up fear and loathing. It is meant to justify any level of violence to counter the fear. Yet what we are dealing with in this non-violent struggle to improve prison conditions is a group of well-disciplined prisoners who have been working across their ethnic differences to adopt non-violent, historically grounded methods to focus attention on their grievances. And in between hunger strikes they reinforced their commitment to non-violence by issuing a Call to End Hostilities between so-called gang groups. So “terrorism” has no place in the discussion.

Rally during the first California prison hunger strike in 2011.

Taking a non-negotiation stance is reminiscent of hostage taking strategy. “We don’t negotiate with people who kidnap and hold hostages.” But when the Mediation Team questioned that terminology with the CDCR during the first hunger strike in 2011 we were told “but we are being held hostage by this strike.” Really? The prisoners themselves are bearing the suffering of their action, a hallmark in non-violent tactics. They have no power, except the moral power that the opponent feels as he/she/they confront the suffering of the strikers. All the power rests with the Department to either make the changes that are suggested, stonewall the demonstrators, and/or punish the demonstrators. So far the last two responses are the only ones they have chosen.

The Department claims that the leaders of the strike are forcing prisoners to refrain from eating. Yet every instruction they have issued, in our hearing, says the opposite. People should make their own decisions about whether to go on hunger strike and how long to remain on strike. People with pre-existing medical conditions should think carefully before going on hunger strike. People should accept re-feeding if their bodies are telling them they have had enough. The strike started with 30,000 prisoners and is down to a few hundred. If people were being forced to stay on, they don’t seem to be complying. Could there be some people in the system who feel peer pressure? Certainly. Could there be rogue actors, among the correctional officers or the prisoners, causing problems for people who start eating? Probably. But our Coalition has contact with prisoners and their visitors in institutions throughout the state and believes that a minimum of coercion, if any, is in play here.

A rally organized by LA’s Youth Justice Coalition ushered in a new era for California prisoners – the End to Hostilities – on the day it took effect, Oct. 10, 2012. A prisoner at Corcoran said recently, “The End to Hostilities has opened up a whole new world to us.” Spreading the spirit of solidarity to the streets is critical now that the California prison system has expanded eligibility for indefinite placement in solitary confinement from prison gangs only to street gangs. – Photo: Virginia Gutierrez

What do the prisoners themselves say about what they are doing? Sitawa Nantambu Jamaa, one of the four representatives at Pelican Bay said this week, “As people who have suffered under such a brutal, diabolical system, we realize that it is our responsibility to help change the course of violent prison systems that have made their way to our communities… We called for an end to hostilities to eliminate giving prison guards an excuse to kill prisoners. We realize nothing productive can be done to change the current state of our situation, our prison environment, unless we end the hostilities between prisoners and end all racial and gang violence within the CDCR. We feel that prisoners are the victims of a systematic process that manipulates them through racial and gang violence in order to prevent greater unity.” 

The only way the strike can end without any more participants dying is if the Department begins to see the prisoners as humans, not just as people who have committed crimes, usually decades earlier. Without this breakthrough there will be deaths.

Painting of Cesar Chavez depicts farmworkers who have died due to barbarous working conditions.

But an equally serious problem is that our own humanity is compromised when we demonize “the other,” and dismiss their humanity. Experienced practitioners of non-violence—such as Gandhi or Cesar Chavez—counseled that hunger strikes should only be used to raise issues within one’s community, where the moral imperative being lifted up can be embraced and real change can take place. When the opponent doesn’t feel that human affinity, all may be lost. It is sobering to remember that Cesar Chavez fasted to the point of permanently harming his own health, and died prematurely. We appeal to Secretary Beard and Governor Brown to demonstrate their humanity by making the reasonable changes that are being requested before it is too late. History will hold them accountable for these lives.

On behalf of the Mediation Team,
Laura Magnani, American Friends Service Committee (415) 565-0201 Ext. 11

Hunger Strike Mediation Team
Dr. Ronald Ahnen, California Prison Focus and St. Mary’s College of California
Barbara Becnel, Occupy4Prisoners.org
Dolores Canales, California Families to Abolish Solitary Confinement
Irene Huerta, California Families to Abolish Solitary Confinement
Laura Magnani, American Friends Service Committee
Marilyn McMahon, California Prison Focus
Carol Strickman, Legal Services for Prisoners With Children
Azadeh Zohrabi, Legal Services for Prisoners With Children

Call Governor Jerry Brown
Phone: (916) 445-2841, (510) 289-0336, (510) 628-0202
Fax: (916) 558-3160

Suggested script: I’m calling in support of the prisoners on hunger strike. The governor has the power to stop the torture of solitary confinement. I urge the governor to compel the CDCR to enter into negotiations to end the strike. RIGHT NOW is their chance to enter into clear, honest negotiations with the strikers to end the torture.

PLEDGE OF RESISTANCE WEEKLY ALERT!

Take the Pledge of Resistance to Stop Torture in the SHU

Sign the petition to the Governor

Donate

FEDERAL JUDGE GRANTS CALIFORNIA PERMISSION TO FORCE-FEED INMATES ON HUNGER STRIKE

August 20, 2013 01:49 

SACRAMENTO, CA — A US federal judge ruled that state and federal prison officials in California will be allowed to start force-feeding inmates participating in a nearly two-month-long hunger strike, if the prisoners appear to be approaching their death.

The California Department of Corrections, in conjunction with federal officials, requested the permission on Friday, saying they were concerned about the health of approximately 70 inmates who have refused meals since July 8. Roughly 130 inmates across California remain on hunger-strike, protesting the policy of isolating gang leaders and violent offenders in solitary confinement indefinitely. Continue reading →

Protest against City of Detroit and DPS debt to the banks May 9, 2012 in downtown Detroit.

DPS as well as other Michigan cities, school districts face higher bond costs

Aug. 19, 2013/WSJ

Detroit’s public-school system is expected to pay a hefty yield premium as it looks to sell $92 million in debt Tuesday, about a month after the city sent shock waves through the municipal-bond market with its record bankruptcy filing.

Early discussions between potential investors and investment banks marketing the debt suggest the one-year debt could yield around 4.50%. That compares with 0.18% yield on a typical, one-year triple-A rated muni, according to Thomson Reuters Municipal Market Data.

“Detroit’s school system is paying” for the city’s bankruptcy, said Michael Camarella, vice president and senior portfolio manager on the Oppenheimer Rochester municipal investment team, which oversees about $33 billion in munis. “Anything with the name of Detroit or issued in the state of Michigan is facing a [price] discount because of Detroit’s actions.”

He said he couldn’t comment on his firm’s participation in the Detroit school deal, but said “obviously, given the yield, it is an attractive investment.”

Protest against closing of Oakman Orthopedic School in Detroit July 24, 2013.

Detroit’s bankruptcy, filed July 18, has sparked concerns that municipal bonds may not be as safe as many investors once assumed. Kevyn Orr, the city’s emergency manager, has proposed saddling some bondholders with significant cuts as the city looks to restructure more than $18 billion in debt. In the wake of the city’s filing, at least three Michigan local governments have postponed debt offerings, citing the higher interest rates investors are demanding.

While some cities and counties in Michigan may have the luxury of being able to delay their borrowings, Detroit Public Schools has a more urgent need. The district is using the proceeds of Tuesday’s sale, which is being sold through the Michigan Finance Authority, to cover operating expenses for 2013-2014 school year, which starts next month, bond documents said.

Slide shown at Moratorium NOW! meeting on municipal and school debt in Detroit.

Detroit Public Schools is a separate legal entity from the city of Detroit, and the city’s emergency manager, mayor and city council don’t have “any authority over the District,” bond documents said. The debt has a rating of SP-1, Standard & Poor’s second highest short-term debt rating.

Still, Detroit Public Schools have been under state control, under a separate emergency manager, since 2009, given its fiscal distress. Detroit Schools has lost more than 33,000 students, or 40% of its enrollment base, since 2010, according to S&P, as charter schools have become more prevalent and Detroit’s fortunes have dwindled.

The district’s general fund deficit shrank from $283.9 million to $76.3 million, according to its fiscal 2012 audited financials, due in part to a debt restructuring.

Detroit teachers struck for one day in 2001 to attend this massive protest in Lansing against charter school legislation.

Still, investors could be comforted by the fact Tuesday’s Detroit schools deal is backed by a pledge of state aid, which is allocated to pay bondholders before the school district gets its share of the money, said Robert DiMella, co-portfolio manager of the $965.3 million MainStay High Yield Municipal Bond Fund.

Greedy Banker vs. the World game. Banker says Detroit bankruptcy is “opportunity” to rake in more billions.

“The state backing on these bonds is very strong,” said Mr. DiMella, who said his firm would consider purchasing some of the Detroit school bonds. “We do believe Detroit’s bankruptcy is creating a lot of different opportunities but you have to be very careful.”

Detroit Schools’ enrollment could decline as much as 33%, and debtholders should still get paid, according to S&P. The estimated 51,070 students enrolled in Detroit schools for the 2013-2014 school year is down about 250 people from last year, and the district is projecting stable enrollment through fiscal 2016, S&P said.

The state aid pledged to the new Detroit schools debt is protected by state law, according to bond documents. Still, “the enforceability of this lien in the event of a Chapter 9 bankruptcy case of the District…is uncertain,” the documents said. A municipal bankruptcy isn’t currently being considered by the district’s emergency manager, according to S&P.

Protest against Detroit school closures and state-appointed board June 16, 2005.

Detroit schools also has some other outstanding debt backed by its state aid, and those obligations will get paid off before the debt being sold Tuesday would, said Josh Gonze, portfolio manager at Thornburg Investment Management, which oversees about $10 billion in munis. State aid to Detroit schools could also be delayed or may decline, because it depends on student enrollment, he added.

Still, the high yield being offered on the school debt could make the risk of holding it worthwhile, said Mr. Gonze, who said his firm was considering participating in the deal. “It’s an enormous amount of yield” that is hard to find on other short-term debt, he said. 

Sent to VOD by
Thomas C. Pedroni

https://sites.google.com/site/thomascharlespedroni/

Protesters sit-down in Cadillac Place lobby June 28, 2012 to demand vote on PA 4, which was overwhelming rescinded. Snyder et al replaced it with PA 436 in the dark of the night..

 Attorneys for plaintiffs in Phillips et al v. Snyder and Detroit NAACP et al v Snyder are studying strategy for court action in response

Police brutality cases, union arbitration proceedings are likewise stalled 

People’s forum on emergency manager Sat. Aug. 17, 9:30 am; rally against EM’s bankruptcy attack on retirees, city assets Mon. Aug 19, 11 a.m.

By Diane Bukowski 

Aug. 16, 2013

Michigan State Treasurer Andy Dillon and Gov. Rick Snyder

DETROIT – In federal court filings, State Attorney General Bill Schuette, on behalf of Michigan Gov. Rick Snyder and Treasurer Andy Dillon, has declared a stay on two federal lawsuits which challenge the constitutionality of Public Act 436, due to Detroit’s Chapter 9 bankruptcy filing. 

PA 436 is the current Emergency Manager Act which brought Detroit Kevyn Orr, and eventually the bankruptcy case. 

On Aug. 7, Schuette filed a “NOTICE OF PENDENCY OF BANKRUPTCY CASE AND APPLICATION OF THE AUTOMATIC STAY” on cases filed by AFSCME Council 25 Chief Negotiator Catherine Phillips and community and religious leaders, and by the Detroit Chapter of the NAACP, against Snyder and Dillon.  The cases have been pending in U.S. District Judge George Caram Steeh’s court since March, 2013. 

In his notice, Schuette refers to the “extended stay” U.S. Bankruptcy Judge Steven Rhodes granted with regard to lawsuits against Snyder, Dillon and the State Emergency Loan Board.” Phillips et al motion by state to stay pending bc 8 7 13 and NAAACP EM state motion re BC.

Atty. General Bill Schuette (Sieg Heil!)

“Actions taken while this Stay is in effect and/or in violation of this Stay, including proceedings in this case, are void and without effect,” Schuette writes in part. “Under these circumstances, the above-captioned proceeding may not be prosecuted, and no valid judgment or order may be entered or enforced against these ‘certain State entities.’ These certain ‘State Entities’ will not defend against, or take any other action with respect to, the above-captioned proceeding while the Stay remains in effect.” 

Numerous other actions are being stayed as well, including police brutality lawsuits and union arbitration proceedings.  

Rev. David Bullock speaks at right as Pastor Ed Rowe, Attorneys Julie Hurwitz and Butch Hollowell, and Rev. Wendell Anthony listen outside Detroit State Court Of Appeals offices June 20, 2012 after filing motions to demand placement of PA 4 referendum on ballot.

“We are living in a lawless society right now, where courts will not uphold the law or the constitution,” Attorney Julie Hurwitz, one of eight attorneys representing plaintiffs in the Phillips case, said. “As far as we’re concerned, the stay should not apply to our lawsuit, because it does not affect the bankruptcy case nor does it impact the assets of the City of Detroit. At the same time, one could argue that it does affect the case because if our lawsuit succeeds, it would invalidate the whole bankruptcy filing by the emergency manager.” 

She said she and attorneys in the case believe Rhodes’ stay was meant to apply to the three state lawsuits filed by retirees and the city’s two retirement systems in Ingham County Circuit Court Judge Rosemarie A quilina’s court. 

City consultants Bruce Bennett of Jones Day, EM Kevyn Orr, William Buckfire at creditors meeting June 14, 2013 at airport.

In what has been called a “rush to the courthouse,” Orr filed the bankruptcy petition just minutes before Aquilina was to hear motions to stop Gov. Snyder from approving the bankruptcy filing as it relates to pension benefits protected by the State Constitution. 

Hurwitz said attorneys in both cases are studying appropriate strategies, and will likely object to the applicability of the stay to their cases and ask Judge Steeh to rule on the matter.  She could not say when or whether that will actually happen. 

“He can at least say the part of the case that has nothing to do with the debtor can continue,” Hurwitz said. 

Attorney Herbert Sanders interviewed after former City Corporation Counsel Krystal Crittendon filed suit against consent agreement (financial stability agreement).

Phillips v. Snyder asks for PA 436 to be struck down not only on behalf of the City of Detroit, but on behalf of all municipalities, school districts and other local entities in the state.   

It asks for declaratory relief holding that PA 436 violates the U.S. Constitution, the Voting Rights act, and due process rights.

It also asks for injunctive relief preventing “present and future EMs  from implementing or exercising authority and powers purportedly conveyed by Public Act 436,” protecting Detroit union contracts and the powers of local elected officials, and “for liquidated, compensatory, and punitive damages.”

Click on PA 436 lawsuit Phillips et al and NAACP-EM-436-Complaint- for copies of both complaints.

Bankruptcy judge Steven Rhodes (r) with mediator Chief Judge Gerald Rosen (l), a member of the Federalist Society.

Attorney Herbert Sanders, another attorney in Phillips v. Snyder, told Rhodes during the first bankruptcy hearing July 24, “There has already been a motion for summary judgment, and arguments have been scheduled [in our case]. It appears that the city is seeking an extension of the stay regarding finances, but pursuant to oral litigation they are seeking relief concerning any litigation that might interfere with city’s rights as a Chapter 9 debtor. Our case should not be included as part of the stay order. It is imperative the issue in our case should be determined before bankruptcy proceedings.” 

Detroit firefighters protest bankruptcy filing July 24, 2013 outside federal court. It endangers their pensions, and they are not eligible for Social Security.

Also during that hearing, Attorney Barbara Paddock, representing the Detroit Firefighters Association, the Detroit Police Command Officers Association, The Detroit Police Lieutenants and Sergeants Association, and the Detroit Police Officers Association, concurred with Orr’s request for the extended stay. 

“We are not conceding the city is eligible to be a debtor,” Paddock said. “We simply believe this court is the proper forum because of the interaction of state and federal law. We want the stay to include members of public safety unions who may be subjected to lawsuits.” 

Meanwhile, firefighters and other public safety workers protested outside. They said the bankruptcy case endangers their retirement, since no federal law protects public pensions. Additionally, they said, they are not eligible for Social Security as are other city workers, because they never paid into the fund. 

AFSCME Local 207 workers on strike at Wastewater Treatment Plant Sept. 30, 2012.

Hurwitz said she represents numerous clients in lawsuits against Detroit police officers, and that so far, every judge has considered those actions stayed as well.

John Riehl of AFSCME Local 207 said Rhodes’ stay has affected grievance procedures in the unions as well. He said Labor Relations have notified union officials that they consider the stay to apply to grievance arbitration, even though not all grievances involve financial matters. 

Schuette earlier issued a much publicized statement that he would intervene in the bankruptcy proceedings to protect public retirees under provisions of the State Constitution. He has filed to intervene, but has not yet introduced any arguments to that effect.

  NEXT BANKRUPTCY HEARING Wed. Aug. 21, 2013 10 am

    Federal courthouse 231 W. Lafayette, Downtown Detroit

                  TOPICS: $1.5 BILLION POC DEBT, RELATED SWAPS,                                MOTION BY ROBERT DAVIS

          STOP THE THEFT OF OUR PENSIONS COMMITTEE 313-680-5508        

MORATORIUM NOW! WEBSITE http://moratorium-mi.org                                                                        

Documents related to Detroit bankruptcy case http://www.mieb.uscourts.gov/

By THE EDITORIAL BOARD 

THE NEW YORK TIMES

Published: August 15, 2013

The Detroit bankruptcy case has been cast as a contest between bondholders and pensioners that can be resolved only by shared sacrifice.

In principle, we have no problem with that, though in practice, the pensioners’ fair share will have to take into account their extreme vulnerability: Public pensions are not federally insured and many municipal retirees do not receive Social Security.

What we do have a problem with is shared sacrifice that does not seem to apply to the big banks that abetted Detroit’s descent into bankruptcy.

March in downtown Detroit May 9 2012.

Last month, just days before its bankruptcy filing, Detroit reached its first settlement with creditors. The settlement was with UBS and Bank of America, and though the precise terms will not be nailed down until the bankruptcy judge weighs in, Detroit is set to pay an estimated $250 million to terminate a soured derivatives transaction from 2005.

The derivatives, known as interest-rate swaps, were supposed to protect Detroit from rising interest payments on a chunk of its variable rate debt. The banks would pay Detroit if interest rates rose, and Detroit would pay the banks if rates fell. By 2009, both interest rates and the city’s credit rating were falling, forcing Detroit to pay the banks some $50 million a year and to pledge roughly $11 million a month in casino-tax revenue as additional collateral.

Bankruptcy judge

In the settlement, Detroit will keep the casino-tax revenue. It will also reduce its debt load, according to city officials, because the banks have agreed to a discount of as much as 25 percent off what they are owed. But the haircut doesn’t mean that the banks will suffer. They have already made money on the swaps; the true extent of any discount will not be known until the deal is finalized.

This much is clear:

■ The banks’ 25 percent hit is nothing compared with the 90 percent cut to pensions suggested by the city — a cut that would be disastrous in both human and political terms and that the State of Michigan must prevent from happening.

■ Municipal officials are prey for Wall Street. The Dodd-Frank financial reform law called on regulators to establish “enhanced protection” for municipalities and other clients in their dealings with Wall Street, but the Securities and Exchange Commission has not yet completed rules, while the Commodity Futures Trading Commission’s rules are so weak as to virtually invite the banks to exploit municipalities.

Protest against bank bail-out.

■ The special treatment banks receive when debtors are in or near bankruptcy is unfair and economically destabilizing. Detroit’s agreement with the two banks requires court approval, but, in general, swap deals by banks are not subject to the constraints that normally apply in bankruptcy cases; in effect, the banks are paid first, even before other secured creditors and certainly before pensioners. That privilege, dating to the heyday of derivatives deregulation in the 1990s and 2000s, is destabilizing because the assurance of repayment fosters recklessness.

Detroit’s problems are a reminder of broader challenges, identified but still unmet: protecting pensions; protecting municipalities from Wall Street; and, at long last, revoking the obscene privileges of banks that allow them to prosper on the failings of others.

Protesters at the Coleman A. Young Municipal Center July 26, 2013 denounce criminal banks.

SWAPS PROBE FINDS BANKS RIGGED RATE AT EXPENSE OF RETIREES

By Matthew Leising – Aug 2, 2013 10:17 AM ET

Bloomberg News

Note from VOD: City of Detroit creditors and home mortgage-holders involved in the probe include Bank of America, Citigroup, Deutsche Bank, Goldman Sachs,  JP Morgan Chase, Morgan Stanley,  UBS (which loaned the city’s Retirement Systems Service Corporations the disastrous sum of $1.5 billion in a predatory deal), and Wells Fargo.

Most of the banks in this slide from the Moratorium NOW! Coalition are involved in this probe.

Recorded telephone calls and e-mails reviewed by the Commodity Futures Trading Commission show that traders at Wall Street banks instructed ICAP Plc brokers in Jersey City, New Jersey, to buy or sell as many interest-rate swaps as necessary to move the benchmark rate, known as ISDAfix, to a predetermined level, according to a person with knowledge of the matter. 

U.S. investigators uncovered evidence that banks reaped millions of dollars in trading profits at the expense of companies and pension funds by manipulating a benchmark for interest-rate derivatives. 

Companies, pension funds and investment firms from CalPERS, the largest U.S. pension, to Newport Beach, California-based Pimco, manager of the world’s biggest mutual fund, use the kind of derivatives at the heart of the ISDAfix probe to hedge against losses or to speculate on interest-rate fluctuations. 

‘Strict Rules’

Michael Spencer

ICAP Chief Executive Officer Michael Spencer said on a May 14 conference call with reporters, “We have very strict rules for our staff who work on the dollar-swap desk. So far, nothing that we have discovered in our internal investigations gives me sleepless nights, and nothing that I’ve heard externally suggests ISDAfix has been tampered with.” 

Recorded telephone calls and e-mails reviewed by the Commodity Futures Trading Commission show that traders at Wall Street banks instructed ICAP Plc brokers in Jersey City, New Jersey, to buy or sell as many interest-rate swaps as necessary to move the benchmark rate, known as ISDAfix, to a predetermined level, according to a person with knowledge of the matter. 

Cecily McClellan of Detroit speaks in Benton Harbor in 2011 against Wall Street banks, EM law..

By rigging the measure, the banks stood to profit on separate derivatives trades they had with clients who were seeking to hedge against moves in interest rates. Banks sought to change the value of the swaps because the ISDAfix rate sets prices for the other derivatives, which are used by firms from the California Public Employees’ Retirement System to Pacific Investment Management Co., said the person, who asked not to be identified because the details aren’t public. 

That may run afoul of the 2010 Dodd-Frank Act, which bars traders from intentionally interfering with the “orderly execution” of transactions that determine settlement prices. 

The phone calls and e-mails emerging since Bloomberg News first reported in April on the rigging of ISDAfix add to growing evidence that banks have gained financially by distorting key financial gauges in world markets on everything from interest rates to currencies to commodities. 

Million E-Mails  

LIBOR scandal only the “tip of the iceberg.”

The revelations show the manipulation of the London interbank offered rate, or Libor, a benchmark for $300 trillion of securities, may be the tip of the iceberg. The Libor probe has so far led to fines of about $2.5 billion against Barclays Plc (BARC), UBS AG (UBSN) and Royal Bank of Scotland Group Plc. (RBS). 

While the indexes under scrutiny are little known to the public, their influence extends to trillions of dollars in securities and derivatives. Britain’s markets regulator is looking into the currency market, where $4.7 trillion is exchanged each day, after Bloomberg News reported in June that traders have manipulated key rates for more than a decade.

As part of the ISDAfix investigation, the CFTC has interviewed more than a dozen traders and brokers since May at Barclays and ICAP, both based in London, and New York-based Citigroup Inc., and plans to talk with people at 13 other banks as it sifts through 1 million e-mails, the person said. Barclays gave the CFTC recorded phone calls, the person said. 

‘Bigger Story’  

CalPERS retirees are under the gun in bankruptcy fillings in Stockton, San Bernandino and other cities in California.

Companies, pension funds and investment firms from CalPERS, the largest U.S. pension, to Newport Beach, California-based Pimco, manager of the world’s biggest mutual fund, use the kind of derivatives at the heart of the ISDAfix probe to hedge against losses or to speculate on interest-rate fluctuations. 

“ISDAfix, more obscure than Libor, has the potential to affect more people’s lives” because it’s used by pension funds to hedge portfolio risks and by most companies or users of fixed-income derivatives, said Jack Chen, a financial consultant in New York who has written about the swaps benchmark and Libor for SFC Associates, a financial consulting firm specializing in litigation matters. 

“In three years, ISDAfix will be the bigger story and could be potentially bigger than Libor in terms of damages,” he said. 

Representatives from Calpers and Pimco didn’t immediately respond to requests for comment.

 Skyscrapers to Annuities 

Swaps on Detroit’s Pension Obligation Certificates involving UBS and Bank of America will be discussed at bankruptcy hearing Aug. 28, 2013.

ISDAfix is used to value derivatives trades known as swaptions, which are options on rate swaps. The contracts give the holder the right to swap a fixed- for a floating-rate obligation at some future point at a predetermined level. The amount of derivatives underlying swaptions contracts outstanding as of July 26 totaled $29.5 trillion, according to the Depository Trust & Clearing Corp. 

ISDAfix rates also help determine everything from borrowing costs on bonds that finance skyscrapers to interest on annuities. The benchmark, set in five currencies, is used to price euro-denominated corporate bonds and $550 billion of securities tied to commercial real estate. Fluctuations help determine the performance of structured notes bought by wealthy individuals. 

Kerrie Cohen, a spokeswoman for Barclays, declined to comment, as did Scott Helfman of Citigroup and Steve Adamske, a spokesman for the CFTC in Washington.

“ICAP is cooperating with the CFTC’s wider inquiry into this area, and due to its pending nature we will not be commenting further,” Guy Taylor, a spokesman, said in a telephone interview. 

‘Banging the Close’  

Banks set ISDAfix for 10-year rate swaps at 2.861 percent yesterday, up from 1.785 percent at year-end, according to ICAP data. 

Commodities Futures Trading Commission is investigating swap deals.

CFTC investigators are piecing together evidence that shows swaption traders at banks worked with rate-swap traders at their own firms to manipulate ISDAfix, the person said. The swaption traders told their rate-swap colleagues the level at which they needed ISDAfix to be set that day in order to bolster the value of their derivatives positions before these were settled the next day, the person said. 

The rate-swap trader would then tell a broker at ICAP, the biggest arranger of the contracts between banks, to execute as many trades in interest-rate swaps as necessary to move ISDAfix to the desired level. This would be done just before 11 a.m. in New York, the time when current trades are used to create reference points that help determine the final ISDAfix rates, the person said. 

Treasure Island

Buying or selling large volumes to move prices just before the end of a trading day or benchmark fixing is known as banging the close. Such trading may violate Dodd-Frank, the regulatory overhaul passed by Congress after the worst financial crisis since the Great Depression. The law defines the activity as demonstrating “intentional or reckless disregard for the orderly execution of transactions during the closing period.”

In manipulating ISDAfix, ICAP brokers profited from the commissions they received from the interest-rate swap trades banks ordered to influence the benchmark, the person said. 

Banks were willing to endure trading costs with the brokers that may have reached hundreds of thousands of dollars because they stood to earn millions on swaptions by manipulating ISDAfix by as little as a quarter of a basis point, or 0.0025 percentage point, the person said. 

The CFTC investigation is centered on ICAP’s (IAP) U.S. interest-rate swap desk, nicknamed Treasure Island because brokers there were paid as much as $7 million a year at the market’s peak, two people with knowledge of the matter said in April. 

Trader works on floor of U.S. stock exchange.

Electronic Screen

ICAP manages an electronic screen known as 19901 on which rate-swap prices are displayed throughout the day to about 6,000 corporate treasurers and money managers so they can value positions. The trades displayed on the screen are used to create the reference points for ISDAfix rates, according to ISDA’s website. ICAP then sends the reference point to banks, which either accept it as their contribution to the benchmark or submit a different value. 

The team of about 20 Treasure Island brokers made $100 million to $120 million annually for ICAP around 2008 and 2009, the people said in April. Rates swaps with a notional value of $370 trillion were outstanding at the end of 2012, according to the Bank for International Settlements. 

LIBOR Rigging  

Shell is part of investigation; rigging may affect gas prices.

Investigators will need to produce e-mails that clearly show manipulative intent by traders, as they did in the Libor probe, Chen said. Otherwise, the banks may be able to defend the actions as typical trading activities, he said.

Regulators from New York to Singapore have begun looking into the possible rigging of other market benchmarks. 

NYSE Euronext, owner of the New York Stock Exchange, said last month it will replace the British Bankers’ Association in administering Libor rates and vowed to restore confidence to the measure amid the rigging scandal. Libor has been overseen by the U.K. Financial Conduct Authority since April as part of an overhaul. 

The European Commission said in May it was investigating Royal Dutch Shell Plc, BP Plc and Statoil ASA, three of Europe’s biggest oil explorers, over potential manipulation of Brent Crude, which helps set prices in the $3.4 trillion-a-year global oil market. Neste Oil Oyj, Finland’s only refiner, was asked to provide information regarding the probe.

The International Swaps and Derivatives Association created ISDAfix in 1998 along with the predecessors of Thomson Reuters Corp. and ICAP. 

“ISDA developed ISDAfix to facilitate the determination of exercise values for cash-settled swap options,” the New York-based lobbying and trade group says on its website.

The rates are distributed by Thomson Reuters, Telekurs and Bloomberg LP, the parent of Bloomberg News, according to ISDA’s website. Bloomberg competes with ICAP in some businesses, including foreign-exchange and swaps trading.

 The contributors to ISDAfix being investigated by the CFTC are Bank of America Corp. (BAC), Barclays, BNP Paribas SA, Citigroup, Credit Suisse Group AG (CSGN), Deutsche Bank AG (DBK), Goldman Sachs Group Inc., HSBC Holdings Plc (HSBA), JPMorgan Chase & Co. (JPM), Mizuho Financial Group Inc. (8411), Morgan Stanley (MS), Nomura Holdings Inc. (8604), Royal Bank of Scotland, UBS and Wells Fargo & Co. (WFC)

Representatives of the banks declined to comment.

Click on Understanding the ISDAfix Controversy and Its Potential Impact for further info.

Moratorium NOW! slide by Mike Shane.

“Stop and Frisk” case plaintiffs (L-R) Nicholas Peart, Lalit Clarkson, Leroy Downs, Devin Almonor and David Ourlicht pose for the media after a news conference at the Center for Constitutional Rights in New York, August 12, 2013. REUTERS/Eduardo Munoz

A judge rules that the NYPD’s practice of stopping, questioning and frisking young black and Latino men violates the Fourth Amendment

AlterNet / By Kristen Gwynne

August 12, 2013 |

On Monday, a decade-long battle to curb the New York Police Department’s racial profiling of young, black and Latino men reached a historic turning point. Federal judge Shira Scheindlin ruled that New York City has routinely and systematically violated the Constitution by unlawfully stopping, and often frisking, young men of color.

U.S. District Judge Shira Scheindlin

Scheindlin’s striking decision in the class action lawsuit, Floyd v. City of New York, delivers a severe blow to the racially discriminatory policies of Mayor Michael Bloomberg and NYPD Commissioner Ray Kelly, whose police practices have led to humiliation and harassment in New York communities.

Scheindlin’s 195-page decision [3] explained that the NYPD’s practice of stopping, questioning and frisking young black and Latino men violates 4th Amendment law mandating reasonable suspicion for a search. Rather than targeting individuals in the process of committing a crime, the NYPD targeted all young black and Latino men in their jurisdiction. The city, Scheindlin said, “adopted a policy of indirect racial profiling by targeting racially defined groups for stops based on local crime suspect data.” The policy violated not only the 4th Amendment rights of New Yorkers, but their 14th Amendment protections as well.

The ruling does not deem stop-and-frisk unlawful as a police tool (in fact, it’s used in police departments everywhere) but acknowledges that its enforcement has not been in line with Supreme Court decisions outlining the tactic’s legal use.

New York Mayor Michael Bloomberg

Scheindlin ordered as part of the injunctive relief (no monetary damages were filed) that a court-appointed monitor oversee stop-and-frisk, and mandated a Joint Remedial Process, complete with a facilitator, to include input from stakeholders like residents in communities with high volumes of stops. The ruling also mandates a one-year pilot program of police officer-worn cameras in one precinct per borough, whose recordings, Scheindlin wrote, “may either confirm or refute the belief of some minorities that they have been stopped simply as a result of their race, or based on the clothes they wore, such as baggie pants or a hoodie.”

Bloomberg’s Propaganda Machine

The NYPD stopped more than 684,000 people in 2011, marking a 600 percent increase from Bloomberg’s first year in office in 2002. Nearly ninety percent of those stopped have been Black or Latno. Scheindlin found that plaintiffs proved an “action pursuant to official municipal policy” caused the constitutional violations, and held Mayor Michael Bloomberg’s administration responsible not only for enforcing the lawless behavior, but intentionally ignoring and downplaying evidence of widespread misuse and damage to communities.

NYPD Commissioner Ray Kelly

Under the NYPD’s policy, targeting the ‘right people’ means stopping people in part because of their race. Together with Commissioner Kelly’s statement that the NYPD focuses stop and frisks on young blacks and Hispanics in order to instill in them a fear of being stopped, and other explicit references to race,” wrote Scheindlin, “there is a sufficient basis for inferring discriminatory intent.”

The judge’s decision is troubling news for Mayor Michael Bloomberg, who has already vowed to appeal the ruling. Bloomberg continued his longstanding, heated campaign to smear Scheindlin—as well as multiple critics of stop-and-frisk—when he accused of the judge of not giving the city “a fair trial” this afternoon.

While Bloomberg has repeatedly claimed that stop-and-frisk is an essential tool for deterring gun violence, Scheindlin stated as fact that less than 2 percent of stops from 2004 to 2011 uncovered a weapon. She added that nearly 9/10ths of all stops resulted in no further law enforcement action, like a summons or arrest, suggesting via the NYPD’s own data that officers rarely have the suspicion necessary to make these stops.

Unfounded police stops, searches and seizures are one of the primary reasons this state and country’s prison population is booming.

Still, Scheindlin has emphasized that the case is not about whether the NYPD’s stop-and-frisk policy works or saves lives, but the constitutionality of police behavior.

“The goals of liberty and safety may be in tension, but they can coexist — indeed the Constitution mandates it,” she wrote in the ruling. Moreover, she said the case is not primarily about the 19 stops that were the subject of testimony at trial, but “policy” or “custom” of violating the Constitution with unlawful stops and frisks.

It is “important to recognize the human toll” of unconstitutional stops, said Scheindlin. “While it is true that any one stop is a limited intrusion in duration and deprivation of liberty, each stop is also a demeaning and humiliating experience. No one should live in fear of being stopped whenever he leaves his home to go about the activities of daily life,” she wrote.

Youth in Highland Park outside school board meeting where dozens of their teachers were laid off. Photp 4 29 2004.

Scheindlin linked the ruling to the national struggle for the humanity of young men of color, who are far too often deemed suspicious or guilty without reason. In a nod to NYPD testimony claiming that suspect descriptions for young black men allow for race-based targeting by police, Scheindlin rejected Bloomberg’s rhetoric that stop-and-frisk must target color to be effective.

“Rather than being a defense against the charge of racial profiling, however, this reasoning is a defense of racial profiling,” wrote Scheindlin. “To say that black people in general are somehow more suspicious-looking, or criminal in appearance, than white people is not a race-neutral explanation for racial disparities in NYPD stops: it is itself a racially biased explanation. This explanation is especially troubling because it echoes the stereotype that black men are more likely to engage in criminal conduct than others.”

Noting the prevalence and damage of racist stereotyping, Scheindlin references in the footnotes Michelle Alexander’s book The New Jim Crow, and goes on to quote from Obama’s impromptu speech following George Zimmerman’s acquittal:

“There are very few African-American men in this country who haven’t had the experience of being followed when they were shopping in a department store. That includes me. There are very few African-American men who haven’t had the experience of walking across the street and hearing the locks click on the doors of cars. That happens to me, at least before I was a senator. There are very few African-Americans who haven’t had the experience of getting on an elevator and a woman clutching her purse nervously and holding her breath until she had a chance to get off. That happens often.”

Scheindlin also referenced a New York Times op-ed [4] by Ekow N. Yankah:

FILE – In this Aug. 4, 2009 file photo, Detroit Chief of Police Warren Evans, right, and team stop a vehicle in Detroit. On any given day or night, dozens of Detroit’s toughest, most street-savvy officers descend on high-crime areas to round up as many illegal guns, drugs and bad guys as possible in one swoop with tactics as simple as minor traffic stops. (AP Photo/Carlos Osorio, File)

“What is reasonable to do, especially in the dark of night, is defined by preconceived social roles that paint young black men as potential criminals and predators. Black men, the narrative dictates, are dangerous, to be watched and put down at the first false move. This pain is one all black men know; putting away the tie you wear to the office means peeling off the assumption that you are owed equal respect. Mr. Martin’s hoodie struck the deepest chord because we know that daring to wear jeans and a hooded sweatshirt too often means that the police or other citizens are judged to be reasonable in fearing you.” 

Speaking at an emotional press conference Monday afternoon, plaintiffs in the suit made clear the human toll Scheindlin references in her decision. “I could’ve been like Trayvon Martin,” said plaintiff Devin Almonor. Similarly, plaintiff David Ourlicht linked the practice to the “polarization of people of color” in “America as a whole.” Upon hearing the decision Monday morning, Ourlicht told the press, “The first thing I did was cry.” Struggling to find the right words, Ourlicht expressed relief in hearing his struggle “recognized.”

Plaintiff Devin Almonor said, “I could have been like Trayvon Martin.”

Scheindlin cited the stop of Cornelio McDonald as evidence of “the NYPD’s policy of indirect racial profiling based on crime suspect data.” Aware that black males had been burglarizing residences and committing armed robberies in Queens, Officer Edward French stopped McDonald because he matched suspect descriptions.

As Scheindlin notes, “McDonald was a black man crossing the street late on a winter night with his hands in his pockets, and as a black man he was treated as more suspicious than an identically situated white man would have been. In other words, because two black males committed crimes in Queens, all black males in that borough were subjected to heightened police attention.”

She noted that, in 2009, NYPD Officer Edgar Gonzalez checked “fits description” on 132 UF-250s (forms officers are supposed to fill out after every stop), though none of those stops were based on ongoing investigations or radio runs through which he might have learned a suspect description. “Nonetheless,” Scheindlin wrote, “Gonzalez’s supervisor, then-Sergeant Charlton Telford, testified that he was not concerned by this discrepancy,” insisting that the stops were based on “the race, the height, [and] the age” of suspects.”

A long campaign was conducted in the streets of New York against “Stop and Frisk” before ruling was handed down.

At the time of the stops, suspect description for burglaries was a male Hispanic (height 5’8″/5’9″), while robbery suspects were four to five black males ages 14 to 19, and shootings was a black male in his 20s. “Perhaps as a result of Officer Gonzalez’s reliance on this general suspect data, 128 of the 134 people he stopped were black or Hispanic,” wrote Scheindlin. “This is roughly in line with the percentage of 295 criminal suspects in his precinct who are either black or Hispanic (93%), but far exceeds the percentage of blacks and Hispanics in the local population (60%).”

“Thus, Officer Gonzalez’s 296 UF-250s provide a perfect example of how racial profiling leads to a correlation between the racial composition of crime suspects and the racial composition of those who are stopped by the police. By checking ‘Fits Description’ as a basis for nearly every stop, Officer Gonzalez documented what appears to be a common practice among NYPD officers — treating generic crime complaint data specifying little more than race and gender as a basis for heightened suspicion,” Scheindlin concluded.

New York Senator Eric Adams

She also noted Senator Eric Adams’ testimony that NYPD Commissioner Kelly once told him he targeted young black and Hispanic men “to instill fear in them that every time that they left their homes they could be stopped by police.”

Scheindlin said she found Adams’ testimony “credible,” especially because Kelly decided not to appear at the trial to rebut the claim. “In fact, the substance of Commissioner Kelly’s statement is not so distant from the City’s publicly announced positions,” said Scheindlin, who went on to add:

Mayor Bloomberg stated in April that the NYPD’s use of stop and frisk is necessary “to deter people from carrying guns. . . . [I]f you end stops looking for guns…there will be more guns in the hands of young people and more people will be getting killed.” At the same time, the City emphasized in its opening arguments that “blacks and Hispanics account for a disproportionate share of …crime perpetrators,” and that “90 percent of all violent crime suspects are black and Hispanic.” When these premises are combined — that the purpose of stop and frisk is to deter people from carrying guns and that blacks and Hispanics are a disproportionate source of violent crime — it is only a short leap to the conclusion that blacks and Hispanics should be targeted for stops in order to deter gun violence, regardless of whether they appear objectively suspicious. Commissioner Kelly simply made explicit what is readily inferrable from the City’s public positions.

Scheindlin said that an analysis of UF-250s revealed that at least 200,0000 stops were made without reasonable suspicion between January 2004 and June 2012. That being said, Scheindlin added that, “The actual number of stops lacking reasonable suspicion was likely far higher,” because UF-250s allow officers to articulate reasonable suspicion with a series of check boxes indicating vague reasons for stops like “furtive movements,” thus giving the officers the benefit of the doubt and failing to provide “individualized” proof. Continue reading →

BANKRUPTCY: HANDS OFF DETROIT! CANCEL CITY’S BANK DEBT!

A No Struggle, No Development Production! By Kenny Snodgrass

VOD videographer Kenneth Snodgrass

On Aug. 2, 2013, we demonstrated at the Federal Bankruptcy Court. On July 22, Federal Bankruptcy Judge Steven Rhodes, removed the order of Michigan Circuit Court Judge Rosemarie Aquilina, who earlier ruled the City of Detroit bankruptcy filing was unconstitutional insofar as it targeted city workers’ pensions, which are guaranteed under the state constitution, and stayed Michigan Governor Rick Snyder’s approval of the bankruptcy filing on that basis. However, Judge Steven Rhodes has not yet issued a ruling on the constitutional issue itself.

A No Struggle, No Development Production! By Kenny Snodgrass, Activist, Photographer, Videographer, Author of 1} From Victimization To Empowerment… www.trafford.com/07-0913 eBook available at www.ebookstore.sony.com 2} The World As I’ve Seen It! My Greatest Experience! {Photo Book} 3}YouTube: I have over 447 Video’s, 276 Subscribers, over 200,000 hits, now averaging 10,000 monthly on my YouTube channel @ www.YouTube.com/KennySnod

Detroit retirees and supporters protest outside bankruptcy court hearing Aug. 2, 2013.

 Judge Rhodes gives early approval to revised retiree committee  

Sets breakneck schedule to determine eligibility 

Mandates Detroit pay committee,  fee examiner, noticing agent 

In previous Ch9 case, Rhodes barred citizens from intervening in takeover of public hospital 

By Diane Bukowski 

Aug. 10, 2013 

UPDATE: Regarding two lawsuits challenging the constitutionality of PA 436, pending in federal district court before Judge Steeh, the State through Attorney General Bill Schuette filed a “Notice of pending bankruptcy case” Aug. 7 in Steeh’s court and said it would not be participating in those suits as a defendant from that day on. Parties to the lawsuits are considering what action to take next, including asking Judge Steeh to rule against the state, at least in part. Story coming after Aug. 14, 2013. 

DETROIT – During the second court hearing Aug. 2 on the petition for bankruptcy filed by Detroit Emergency Manager Kevyn Orr and his former law firm Jones Day, U.S. Bankruptcy Judge Steven Rhodes gave them virtually everything they wanted.   

Rhodes granted Orr’s revised motion to form a retirees committee despite objections that it was untimely under bankruptcy law. He approved breakneck deadlines for proceedings prior to the eligibility hearing Oct. 23, and asked that parties submit secret “letters under seal” to him by Aug. 9 if they object to his appointment of Chief U.S. District Judge Gerald Rosen as Mediator. 

Rosen previously worked for Miller Canfield, a law firm which is assisting Orr in the bankruptcy proceedings. Rosen is also a member of the ultraconservative Federalist Society. 

Rhodes has now set an expedited date, Aug. 21, 2012 at 10 a.m. for a crucial hearing on Orr’s motion for a “forbearance agreement,” related to the city’s $1.5 billion Pension Obligation Certificate (POC) debt at the request of city creditor Syncora, Inc. (See separate story.) 

One weekly newspaper ran a misleading headline earlier, “The City of Detroit Did not File for Bankruptcy.” However, unfortunately Rhodes earlier ruled that Orr does represent the City of Detroit, despite the pendency of federal lawsuits challenging the constitutionality of Public Act 436, Michigan’s current “Emergency Manager” law. 

The breakneck schedule Rhodes approved for initial proceedings appears to be competing with hearings on those lawsuits, the first of which is set for Sept. 13. Rhodes has set a date of Oct. 23 for an eligibility hearing, with the date of commencement of the bankruptcy case to be July 18 if he overrules eligibility objections. Jones Day attorney David Heiman, representing the city, said he wants to file a plan of debt adjustment by Dec. 31, 2013, two months earlier than Rhodes proposed.

Orr has said, “Everything is on the table,” in the bankruptcy proceedings. He is targeting city retirees’ pensions, as well as what Jones Day attorneys called “non-core” assets, including the Detroit Water and Sewerage Department. 

RETIREES COMMITTEE FORMED IN POSSIBLE VIOLATION OF LAW 

The revised motion authorizing the U.S. Trustee to form the retirees’ committee says in part, “Nothing contained in the Motion or this Order shall be deemed an admission or a finding that the City has any obligation to provide any Retirement Benefits to any Retiree or other party.” (Click on DB Rhodes order on retirees committee for full motion.) 

David Sole, a party in the bankruptcy case, is at left holding banner outside courthouse Aug. 2, 2013.

Attorney Jerome Goldberg, representing city retirees David and Joyce Sole, moved to dismiss the motion as untimely during the hearing.  David Sole was previously president of UAW Local 2334, representing Detroit Water and Sewerage Dept. chemists, and his wife was a bus driver. (His full motion is at DB Sole motion re retirees committee.)

“The Bankruptcy Code Sec. 1102(a)(1) states the U.S. Trustee can appoint a committee after an order for relief, which comes only after the eligibility question is resolved,” Goldberg said. Rhodes has set a trial on whether the city is eligible to file for bankruptcy for Oct. 23, 2013. 

Law firm says no Ch9 committee can be selected until after eligibility determination.

“This is a plain violation of the law,” Goldberg explained. “One of the critical issues in eligibility is the applicability of this state’s constitutional protection of public pensions. This case will have a national impact, because 24 other states have similar provisions. . . Our concern is that this will dampen the rights of all interested parties, including individual retirees, to be represented. Right now everybody is vying against each other for who will be on the committee.” 

Goldberg’s arguments were echoed by several other retiree-side attorneys, but they passed over the issue as “a law-school” concept.

The July edition of the “Jaffe Update” published by the law firm of Jaffe Raitt Heuer & Weiss PC before Orr filed for bankruptcy, answers a question about appointment of a creditors’ committee.

“Yes, the U.S. Trustee is charged with appointing a creditors’ committee, but no committee can be appointed until after the determination that the municipality is eligible to be a Chapter 9 debtor,” says their article, titled “Guide to Chapter 9 of the Bankruptcy Law.” Guide to Chapter 9 of the bankruptcy code

Attorney Jerome Goldberg speaks to opponents of EM law before Orr’s “public meeting” June 10.

Rhodes responded that the statute doesn’t say he can’t appoint a committee beforehand. His order cites only 1102(a)2 of the Bankruptcy Code, ignoring the section Goldberg cited. (See complete Section 1102 at US Bankruptcy Code Section 1102.)

Rhodes also ignored Goldberg’s key “point of correction” regarding Orr’s earlier claim that only the City of Detroit can alter pension benefits, not the pension boards or other parties. 

In his motion, Goldberg said, “In fact, Section 47-4-4 of the Detroit Municipal Code expressly states that the City of Detroit is prohibited from making amendments to the Pension plan ‘which shall deprive any participant or beneficiary of any then vested benefit under the Plan.’”  (Click on DB Sole motion city code for full document.) 

PENSION PLANS, UNIONS, ASSOCIATIONS ASK TO BE ON COMMITTEE 

AFSCME Council 25 attorney Sharon Levine speaks with media after first bankruptcy hearing July 24.

AFSCME Council 25, the UAW, the Detroit Retired City Employees Association, the Detroit Police and Fire Retirees Association, the Detroit public safety unions, and the city’s two pension systems all asked for representation on the committee during the hearing.  Several associations claimed retirees’ interests were contrary to those of the unions, a point Judge Rhodes appeared to seize on. 

Rhodes also appeared concerned about the size of the committee. While it is to be chosen by the U.S. Trustee, Rhodes has ultimate authority over the committee’s proceedings. His ultimate scheduling order ignored objections by the parties that it did not give enough time for constitution of the committee and its proceedings. 

Michael Karwoski, a retired Law Department attorney, said each individual retiree should receive notice of proceedings in the bankruptcy case, in accordance with due process. 

“The largest creditors, the bondholders and insurers, all the large dollar interests want less money allocated to the retirees,” he said. “There are about 24,000 retirees as compared to 100,o00 creditors. One of the issues is the alleged indebtedness of the retirement systems, $3.5 billion on pensions and $6 billion on health care costs. Retirees’ pensions average only $19,000 a year or less.” 

ALL RETIREES LISTED IN STOCKTON FILING 

Karwoski said that during the ongoing Stockton, CA bankruptcy filing, each of the 2,000 retirees is listed as creditors. He said mailings to them are done via the pension systems, which have their addresses, to avoid unnecessary public exposure. 

The U.S. Trustee has just posted a  notice of formation of the Retiree Committee and a Detroit Retiree Committee Solicitation form on the court’s website at http://www.justice.gov/ust/r09/docs/general/emi/Detroit_Retiree_Committee_Solicitation.pdf. The general website for the court, which includes a link to Detroit bankruptcy filings, is at http://www.mieb.uscourts.gov/.

The notice  can also be downloaded at Detroit_Retiree_Committee_Solicitation.

Among other declarations, the notice describes the committee as follows:

Powers and Duties of Retiree Committee. Members of the Retiree Committee appointed under section 1102(a) of the Bankruptcy Code will be fiduciaries representing all Retirees without regard to any differences in the types of claims that individual Retirees or the members might hold against the City. Section 1103 of the Bankruptcy Code provides, among other things, that the Retiree Committee may consult with the City and participate in the formulation of a plan for the adjustment of the City’s debts.

VOD has a question in to the Trustee, who is  Daniel J. McDermott, and his assistant Marion J. Mack, regarding how many retirees have been duly notified to submit this form. Clearly, not every one of the city’s 23,500 retirees is aware of the website posting and the details of the bankruptcy case. Many have moved to other cities or states. Many who are elderly may not even use computers. Additionally, giving “fiduciary” power to a committee that does not hold the assets of the Retirement Systems is open to question.

From U.S. Eastern District of Michigan bankruptcy court website.

Orr has challenged the funding levels of the retirement funds. PA 436 give him the power to remove the current pension boards of trustees if funding levels fall below 80 percent. Giving “fiduciary” power to the Retirees’ Committee may mean he intends to use it to replace the Boards. There will certainly be a legal battle if that happens.

 VOD is also asking McDermott whether he will intervene regarding the legality of forming the Retirees Committee prior to an eligibility trial. According to an article on the Ohio Federal Bar website, “Generally, the U.S. Trustee becomes involved in cases where he perceives parties are engaging in practices that violate the Bankruptcy Code or Federal Rules of Bankruptcy Procedure. The U.S. Trustee seeks to consistently and fairly enforce the bankruptcy laws as drafted by Congress and prevent fraud and abuse whether committed by debtors, creditors, attorneys or bankruptcy petition preparers.”

McDermott represents Region 9, which includes Ohio and Michigan among other areas.

Rally outside courthouse Aug. 2, 2013

In his order, Rhodes said sufficient notice had already been given, and approved Orr’s revised motion in toto, with the addition that the city will provide funding for the retirees’ committee as well as a fee examiner.

DRECA website

Despite Rhodes’ funding order, the DRCEA has since sent out a letter asking its members to contribute funds to defray their costs, and to sign consent letters agreeing to appoint the officers of the association as their representatives. 

In a separate order, Rhodes also appointed Kurtzman Carson as claims and noticing agent, usually the responsibility of federal court personnel. They are to provide notices on the city’s website. (See DB Rhodes order Kurtzman Carson.)

Orr/Jones Day revised the city’s original motion significantly after the unions, pension systems, and retiree associations objected that only the U.S. Trustee has the power to appoint committees under bankruptcy law, not the debtor city. 

Orr originally set out a detailed process for appointment of members of the committee by the city, and contacted various retiree associations prior to the Aug. 2 hearing to ask them to recruit members. They were doing so as early as a July 20 DRCEA luncheon. 

BREAKNECK SCHEDULING ORDER 

Over the repeated objections of various unions and retiree associations that the schedule was too “aggressive,” Judge Rhodes approved a slightly altered schedule for further proceedings in the case, based on that submitted by Jones Day. His scheduling order says that if no objections to eligibility are filed, or if he overrules such objections at a hearing Oct. 23, 2013, the commencement date for the bankruptcy case will be moved back to July 18, the date of filing. 

Rhodes said Rule 1 of the Federal Rules of Civil Procedure requires a “just, speedy, and inexpensive determination” of the case. During her presentation, the UAW’s attorney emphasized the disposition must be JUST. 

The attorneys above are the five Jones Day sent to Detroit to represent the city on “debt re-structuring” matters. Brogan is the managing parter (i.e. CEO) of the mammoth law firm. Heiman, Lennox and Bennett have appeared in bankruptcy court.

In addition to the deadlines below, Jones Day attorney David Heiman (on behalf of the city)  told Judge Rhodes that he wants to submit a plan of debt adjustment by Dec. 31, 2013, two months before that earlier proposed by Rhodes.

Bankruptcy attorney Robert Gordon of Clark Hill represents Detroit’s two retirement systems.

“We want to move swiftly. Time is our enemy,” Heiman said. “The facts are not going to change no matter how long we wait.”

Attorney Robert Gordon of Clark Hill, representing the city’s two retirement systems, said repeated announcement that the city is broke are a “catchy sound bite.”

But he countered, “The city is meeting its payroll obligations. While everything needs to move with due speed — we understand that — it should not be used as an excuse to move faster than reasonable.”

RHODES’ PREVIOUS CH9—ADDISON COMMUNITY HOSPITAL

This is only the second Chapter 9 bankruptcy case Rhodes has handled. In 1994, he handled the bankruptcy case of “Addison Community Hospital Authority.” In that case, Rhodes barred the “Concerned Citizens for Addison Community Hospital” from intervening as a group. Addison is located just south of Jackson, Michigan.

Protesters at rally against EM law March 14, 2013 demand “Power to the People.”

In addition to specific creditors’ concerns, they cited fears that the bankruptcy could result in the transfer of the hospital to a “private profit-making entity.” 

Rhodes ruled, “Congress has explicitly stated in the legislative history that the courts do not have jurisdiction to interfere with the political and policy choices a municipality makes in running its organization; rather, courts are limited to approving or disapproving proposed plans for debt adjustment.” (Full ruling at Rhodes previous CH 9.) 

In barring the Concerned Citizens from intervening, he said, “This Court should not be so liberal in granting applications to be heard as to overburden the debt adjustment process.” 

Despite the closure of the hospital, however, the Authority opted to pay off workers’ pensions, not dissolving until 2011. http://www.lenconnect.com/article/20110502/NEWS/305029965.

Slavemaster Gov. Rick Snyder goes after Black cities in Michigan under EM laws.

But in the current bankruptcy case, the State of Michigan has usurped the role of the City of Detroit, which is actually allowed under current Chapter 9 law, and made clear what decisions IT wants to make on behalf of Detroiters — to cut public pensions and sell-off or lease city assets.

In 1977, when the City of Detroit proposed the privatization of Detroit General Hospital, founded as a public hospital in 1917, the Concerned Citizens for Detroit General Hospital initiated a broad petition campaign to put the matter on the ballot. They cited similar concerns regarding the provision of health care for all without regard to profit, and collected hundreds of thousands of signatures which were certified by then City Clerk James Bradley. 

A judge later ruled that the case for privatization involved financial concerns and therefore should not be subject to referendum.  Detroit General became Detroit Receiving Hospital under the non-profit Detroit Medical Center, which is now a for-profit venture of Tenet, Inc.

The same argument was used again when Michigan Gov. Rick Snyder and the state legislature included an appropriations clause in Public Act 436 to prevent the people from overturning that law after they repealed Public Act 4. 

BEWARE, DETROIT RETIREES, WORKERS AND RESIDENTS: DANGER AHEAD!  RE-CLAIM YOUR POWER!

For further info, contact the Stop the Theft of Our Pensions committee at 313-680-5508.

There is also a petition to support retirees vs. Wall Street up at http://www.standwithdetroit.org/. Please sign.

Orr threatened Detroit firefighters over their actuary’s claim that their system is 96.1 percent funded. Here they protest outside first bankruptcy hearing July 24, 2013.

  Detroit’s Current Pension Assumptions Fall Within Standards: Morningstar

By Caitlin Devitt, The Bond Buyer | August 2, 2013 |

A new analysis from Morningstar weighs in on the debate over the size of Detroit’s pension liability, suggesting that current pension fund assumptions fall mostly within accepted industry standards.

Detroit EM Kevyn Orr announced July 19 at this press conference that he would propose “retirees committee” to subvert role of pension systems in bankruptcy filing. Photo: Diane Bukowski

The fate of the city’s pension benefits will be a key battle if Detroit enters into Chapter 9 bankruptcy. Pensions are protected under the Michigan constitution, but Detroit emergency manager Kevyn Orr and Gov. Rick Snyder have proposed dramatic cuts, and whether or not federal bankruptcy will trump state law could have reverberations beyond Detroit.

The debate over the size of the pension debt began a month before the July 18 bankruptcy filing, when Orr warned that a new analysis showed that the size of the unfunded liability totals $3.5 billion. That’s five times larger than previous estimates of $650 million.

Orr said he came up with his new number by using a different set of actuarial assumptions than the current ones, which he has said are overly optimistic.

Orr’s revised figures make the pension debt the city’s second-largest debt, behind a $5.7 billion retiree healthcare tab.

Rachel Barkley (l) of Morningstar.

Representatives from the city’s two retirement systems say Orr is exaggerating the size of the debt.

“The pension liability is highly contested and could have wide reaching implications,” Morningstar analyst Rachel Barkley said during a webcast the company held Thursday on the city. “How these benefits are treated in the bankruptcy may set a precedent for how pensions are treated going forward, especially by distressed municipalities.”

In a recent commentary, Municipal Market Advisors also noted that how the bankruptcy court ends up sizing the city’s pension liability could lend some clarity to the thorny issue of determining pension liabilities.

Detroit’s pensions funds have long been considered relatively well funded, at around 91%, largely because of a $1.5 billion pension certificate borrowing in 2005 and 2006.

Orr bases his contentions on Detroit’s pension funds on an unpublished report by Milliman. Inc. Here, their top officers meet with officials in Dubai, where they are setting up shop. They stayed in the world’s most expensive hotel there.

Orr has called into question the current funds’ assumption of an 8% annual return on investment, its seven-year smoothing period — the period over which a pension fund recognizes market returns — and its 30-year amortization rate.

Orr has not revealed his revised assumptions, though he has said that a 7% return on investments, down from 8%, is more realistic.

Morningstar said it considers the current pension assumptions to mostly fall within industry standards.

“We feel an 8% investment return may not be conservative but definitely would be defensible by the city,” Barkley said.

A 30-year amortization rate is also well within typical standards, Barkley said.

AFSCME Local 207 protests attack on pensions July 25, 2013 in downtown Detroit.

But the city’s current use of a seven-year smoothing period falls outside the norm, Barkley said. Five years is more typical.

Until Orr reveals his own set of assumptions, it is difficult to judge which liability is more accurate, Barkley said.

“The validity depends on his assumptions,” she said.

Morningstar also analyzed recent trading on Detroit bonds, saying yields show the market is differentiating between types of security and bond insurer.

Limited-tax general obligation bonds backed by a pledge of distributable state aid, which is accompanied by a statutory lien, is seeing lower yields than insured unlimited-tax or limited-tax GO bonds, said Jeff Westergaard, director of municipal analysis for Morningstar.

Detroit Wastewater Treatment Plant worker during strike Sept. 30, 2012.

The city’s water and sewer revenue bonds are also trading with lower yields than the insured GO debt.

“Clearly in our opinion the market is placing a credit risk benefit to the bonds that are secured by either the enterprise revenues or the DSA revenues, so that security pledge is definitely showing up in terms of what’s going on in market activity,” Westergaard said.

On the insurer side, buyers are favoring Detroit bonds that carry Berkshire Hathaway insurance over Assured Guaranty or MBIA Inc., according to the Morningstar analysis. 

For more information on related topics, visit the following:

Ohio State Teachers’ Post 13.7% Return in FY 2013

Massachusetts’ Pension Reaches 12.7% Return, $53B Assets

North Carolina Pension Heralds 9.25% Return for FY ‘13

Oakland County, Mich., Sets OPEB Deal Despite Detroit Turmoil

Chicago Faces Investors After Its Steep Downgrade

VOD related articles:

http://voiceofdetroit.net/2013/07/31/orr-wants-detroit-bankruptcy-judge-to-replace-elected-pension-boards-with-appointed-retirees-committee-hearing-aug-2-10-a-m-protest-9-am/

http://voiceofdetroit.net/2013/07/29/war-retirees-workers-residents-v-wall-street-in-detroit-bankruptcy-judge-throws-out-state-claims/

http://voiceofdetroit.net/2013/07/23/detroit-bankruptcy-snyder-orr-want-retirees-suits-dumped-while-creditor-ubs-announces-high-profits-hearing-wed-july-24-10-a-m-judge-rhodes/

http://voiceofdetroit.net/2013/07/21/orr-jones-day-aim-bankruptcy-gun-at-detroit-retirees-let-wall-street-off-hearing-mon-july-22-9am/

http://voiceofdetroit.net/2013/07/06/orrs-phony-victory-on-casino-taxes-and-u-s-bank-na/

http://voiceofdetroit.net/2013/07/03/sign-petition-to-request-us-doj-fraud-investigation-of-ubs-re-predatory-1-5-billion-detroit-loan/’

http://voiceofdetroit.net/2013/07/01/orr-milliman-attack-on-detroit-pensions-a-very-rough-preliminary-guesstimate/

 SUPPORTERS PACKED COURT, BUT FANNIE MAE WON OUT 

Baxter Jones (center) takes part in rally against EM takeover of Detroit June 6, 2013. Photo Diane Bukowski

By Will Forgrave MLive.com

August 9, 2013 

JACKSON, MI – After fighting for three years to keep his home, disabled former teacher S. Baxter Jones now has until the end of the month to leave it.

Surrounded by more than 50 friends and supporters, Jones was evicted under court order and must vacate the Napoleon Township property by Aug. 31.

Jones appeared before Judge Michael Klaeren in 12th District Court on the morning of Thursday, Aug. 8. He has been in eviction proceedings since 2010, after falling behind on his house payments.

Baxter Jones and supporters outside courthouse Aug. 8, 2013. Photo Will Forgrave

Jones said he had few other options but to take his case to court after becoming severely disabled in a car accident in 2005 and losing his job in 2010. Jones is a former middle school physical education teacher and track coach at Fisher Magnet Middle School in Detroit.

He said his mortgage company – federal giant Fannie Mae –would not work with him after the accident. Fannie Mae owns the house in the 8000 block of Rexford Road.

“No loan modification, no forbearance,” he said. “I told them I was going to be on Social Security soon, but fell behind when they wouldn’t work with me.”

S. Baxter Jones and Dave Sole were among 22 who testified at a hearing on Fannie Mae evictions May 20, 2013.

Jones and attorney Jerry Goldberg requested a relief of judgment and a freeze on the eviction Thursday. Fannie Mae lawyer Josie Lewis requested the case be closed and Jones evicted.

“The eviction has been delayed at least one or two times already,” Klaeren said. “I don’t see that what we have here constitutes misconduct that mandates a relief of judgment. If I would rule in Jones’ favor, and this case would be used as a precedent, our justice system would come to a halt.”

Jones, 57, bought what he called his “dream home” in 2002. After he lost his job in January 2010, Jones said he was able to make payments until October 2010 before he ran out of money.

“My client requested forbearance on his payments in October 2010 when he was pursuing Social Security disability,” Goldberg said. “When he was awarded disability we would have asked for a modification, but was never given the chance in the first place.” 

Jerry Goldberg of Moratorium Now Coalition speaks against banks at Detroit Financial Review Team meeting March2 26, 2012/ Photo by Diane Bukowski

Jones, who now resides in Detroit with friends, has been in a wheelchair since he was rear-ended on the freeway when returning from a trip to Kentucky. He suffered a severe closed head injury, can no longer keep his balance and his speech is slow and slurred.

Goldberg said the decision by Klaeren was “tragic.”

“Fannie Mae is not just a big corporation but the federal government,” he said. “They’re using our tax dollars to evict an individual that is disabled and who has worked within their rules to try and get his house back.”

According to court records, Jones filed for bankruptcy in February and was offered an exemption on his eviction until Friday, Aug. 9. During bankruptcy proceedings, the house was assessed to be worth $58,000.

“We have since put an offer in on the house for that amount with the help of nonprofits and donations,” Goldberg said. “(Jones) isn’t looking for a handout, he’s just asking that Fannie Mae allow him to buy his house back.”

Lewis said Jones’ argument was flawed during the proceedings Thursday.

Protest in downtown Detroit.

“(Jones) isn’t looking for a handout, he’s just asking that Fannie Mae allow him to buy his house back.”

“The defendant argues that he can get a judgment set aside due to unfairness with no need for legal precedent,” she said. “My client is not required to sell the property. They have ownership, and they can do with the property what they wish.”

Jones’ 50-some supporters took two buses from Detroit and rallied in front of the court beginning about 9 a.m. Thursday. The majority of his supporters are with Moratorium NOW!, a Detroit-based coalition that is fighting for a stop to foreclosures in the state.

“Since 2008 we’ve advocated for a two-year moratorium on foreclosures,” group member Erik Shelley said. “Everyone in foreclosure needs some time to straighten everything out.”

Shelley said Jones’ foreclosure case is just one example in a “statewide epidemic.”

Detroit resident and organization member Carol Kronberg agreed.

“Fannie Mae was bailed out and now they’re turning around and the people are getting put out,” she said. “It’s sickening.”

Contact Will Forgrave at wforgrav@mlive.com or 517-262-7554. Follow him on Twitter at @WillForgrave.