Filings in Detroit's bankruptcy are getting personal

Aug 29, 2014

A recent order from the court reads like a Facebook argument.

Detroit bankruptcy judge Steven Rhodes.
Turns out federal judge Stephen Rhodes can write a piece of legal smack down when he wants.
Credit John Meiu / Detroit Legal News Publishing LLC

It started with Syncora, a major bond insurer that claims Detroit owes it more than a billion dollars.

The company filed an objection to the “grand bargain” that’s been coming together to save the Detroit Institute of Arts and protect the city’s pensioners.

Basically, Syncora says it and other Wall Street creditors are getting treated like the bad guys, while the DIA and the pensioners are clearly the hometown favorites.

If true, that would be a failure of “good faith” on the city’s part, because any bankruptcy plan is supposed to treat creditors equally, at least when they’re owed similar amounts of money.  

Big creditor says it’s not getting a fair shake  

To prove its point, Syncora went after the federal mediators themselves: Chief United States Judge Gerald Rosen and attorney Eugene Driker.

Syncora says the mediators are “agenda-driven, conflicted mediators who colluded with certain interested parties to benefit select favored creditors to the gross detriment of disfavored creditors and, remarkably, the city itself.”

But the company doesn’t stop there.

It goes on to talk about Mr. Driker’s wife. “Neither Judge Rosen nor Mr. Driker ever disclosed any biases or conflicts of interest…While Syncora takes no pleasure in saying it, both [mediators] were biased and conflicted from the beginning.”

Mr. Driker's wife is a longtime member (now emeritus) of the Board of Directors of the Detroit Institute of Arts.”   

Federal judge: Really? 

Now, federal judge Stephen Rhodes is issuing a scathing response.

Not only were the Drikers up front about their DIA connection, he says, but Syncora is being "scandalous and defamatory" and asks the company's lawyers to tell him why he shouldn’t impose sanctions on the company.

Finally, Rhodes says Rosen and the Drikers deserve an apology.

But he won't force Syncora to apologize, because "a coerced and therefore insincere apology is not a true apology at all."