Detroit Bankruptcy
2:43 pm
Tue October 29, 2013

Sharp exchange between bankruptcy judge and Detroit's emergency manager

It's Day 5 of the Detroit bankruptcy trial and the man at the center of the bankruptcy filing took the stand for the third time.

Detroit Emergency Manager Kevyn Orr filed the bankruptcy paperwork with the court last July.

Now Bankruptcy Judge Steven Rhodes will decide whether the city can be protected from creditors by entering into Chapter 9 bankruptcy. He's expected to make his decision sometime in mid-November.

Lawyers for those who stand to lose a lot if Detroit enters into bankruptcy have been questioning Orr about the timing and intent of the bankruptcy filing.

City of Detroit retirees are one of those groups that stand to lose a lot - their pensions.

Orr is a bankruptcy expert who was hired from the law firm Jones Day in Washington D.C.

Lawyers for Detroit's creditors are trying to prove that bankruptcy for Detroit was the plan all along. That there were no "good faith" negotiations going on prior to the bankruptcy filing. "Good faith" negotiations are required prior to a bankruptcy filing.

Anthony Ullman, a lawyer for Detroit retirees, asked Orr about conversations between his law firm and state leaders.

From the Detroit Free Press:

Ullman showed Orr an email that said Jones Day evaluated whether the state’s emergency manager law could withstand a challenge if an emergency manager decided to file bankruptcy on Detroit’s behalf.

“I just learned now that Jones Day had involvement in March 2012,” Orr said. “I never heard it from anybody at Jones Day.”

A lawyer representing the UAW argued that pensions were being targeted prior to the bankruptcy filing.

Upon cross examination, Kevyn Orr used a phrase often heard in trials, "I don't recall."

The line of questioning led to a confrontation between Bankruptcy Judge Rhodes and Kevyn Orr.

Here's how it went down according to Robert Snell of the Detroit News (Peter DeChiara is a lawyer for the UAW):

“Have you ever spoken to the governor about having the state assume some or all of the city’s pension liabilities?” DeChiara asked.

Orr has estimated the city’s pension funds have a $3.5 billion shortfall.

“I don’t recall,” Orr said.

“You don’t recall having done that?” the lawyer asked.

“I don’t,” Orr said.

“So you may have, but don’t recall?” DeChiara asked.

“Yes,” Orr said.

At that point, Rhodes interrupted.

“You do not remember asking the governor to write a check for $3.5 billion?” the judge asked.

“This is the problem with a yes or no,” answer, Orr said. “The number may not have been $3.5 billion but the question might have been for some assistance. I don’t remember it in that context.”

Snell writes that Judge Rhodes gave Orr a "terse scolding" for not answering questions with a simple "yes" or "no."

Michigan Radio's Sarah Cwiek is at the hearing and has been sending tweets. She characterized the judge's comments this way:

Orr apologized, to which the judge said he would accept his apology "if you accept my advice and your attorney’s advice."

As the questioning continued this afternoon, Orr faced tough questions about his attempts to negotiate with Detroit's retirees.

Chad Livengood at the Detroit News jotted down that exchange between city pension fund attorney Jennifer Green and Orr:

When Green asked whether the city mailed retirees information about this proposed pension cuts, Orr replied: “I don’t know.”

Green then asked if the city attempted to divide up retirees in subgroups to negotiate concessions.

After a long pause, Orr fell back on his safety answer: “I don’t know.”

Michigan Radio's Sarah Cwiek will have more for us later today.