Detroit Bankruptcy Judge Orders Disclosure of Barclays Fees

Abayomi Azikiwe, editor of the Pan-African News Wire, speaking at a rally outside federal bankruptcy court in downtown Detroit. (Photo: Valerie Jean), a photo by Pan-African News Wire File Photos on Flickr.

Federal Judge Rhodes Says Barclays Fees Must be Made Public on Proposed Swap Deal

Detroit continues to struggle against banks that destroyed city

By Abayomi Azikiwe
Editor, Pan-African News Wire

A potentially precedent setting decision by Judge Steven Rhodes has been handed down in the Detroit bankruptcy case. Rhodes ruled that under the provisions of the Freedom of Information Act (FOIA) the fees charged by Barclays bank in relationship to the refinancing of an interest-rate swap deal must be made public.

The formal eligibility trial ended on November 8 but additional hearings are being held on whether an interest rate swap deal to pay off both Bank of America and UBS through a financing plan crafted by Barclays will be allowed to go forward. No decision has been rendered yet by Rhodes on whether Detroit is actually eligible to proceed into Chapter 9 bankruptcy.

Kevyn Orr, the state-imposed so-called “emergency manager” is attempting to push a deal through to provide a $350 million payoff to Bank of America and UBS. The deal would if approved take the swap deal out of the final decision on bankruptcy eligibility.

This deal being pushed by Orr, who is a former partner with Jones Day law firm now representing the City of Detroit in the bankruptcy proceedings, would capture 20 percent on the income tax revenue paid to the municipality for six years (approximately $48 million annually). Such proposals are designed to perpetuate the unsustainable debt obligations on a city which has been the hardest hit by the ongoing economic crisis.

Attorney Jerome Goldberg argued in opposition to the sealing of a letter spelling out the fees related to the Barclays deal saying it was a violation of the state of Michigan’s Freedom of Information Act (FOIA). Goldberg noted that this deal involves public funds and should be subject to disclosure.

Judge Rhodes accepted this argument saying “The fact that Barclays for its own competitive reasons wants it to be confidential or thinks that it should be … is really quite irrelevant. It’s even irrelevant that the city may have agreed to keep it confidential.” (Detroit News, November 14)

The judge then added: “At this point in time, it’s clear enough that there is no such exemption from Michigan’s Freedom of Information Act and therefore this letter is not confidential.”

The overall Barclays deal announced in October was immediately opposed by the Moratorium NOW! Coalition which is advocating the total cancellation of the bank debt said to be owed by the people of Detroit. On October 21, members of the Moratorium NOW! Coalition and other organizations opposing the bankruptcy went before the Detroit City Council arguing that the deal should be rejected.

In the first decision by made by City Council opposing the bank-imposed austerity program for Detroit, the legislative body voted unanimously to turn down the Barclays deal. A resolution was passed on the issue and submitted to the bankruptcy court judge.

Demonstrations Continue Against the Imposed Bankruptcy Filing

Leading up to Judge Rhodes’ decision to unseal the fees related to the financing of the Barclays deal, three demonstrations took place on November 12 and 14. Two demonstrations were held on the 12th, one outside the bankruptcy court and the other in front of Bank of America headquarters, both in downtown Detroit.

The noontime demonstration outside Bank of America on Griswold in the financial district was jointly called by the Moratorium NOW! Coalition and Detroiters Resisting Emergency Management (DREM). This demonstration demanded the cancellation of the debt said to be owed by the City of Detroit and for the banks to pay reparations to the city for the destruction they have caused over the last several years.

In a joint statement issued by both the Moratorium NOW! Coalition and DREM it said that “Emergency Manager Kevyn Orr and Governor Snyder negotiated a sweetheart deal with Wall Street banks that would increase Detroit’s debt by $350 million, by paying $250 million to Bank of America (a client of Orr’s law firm Jones Day) and UBS. Barclays, the new lender, would then have a super-priority lien on Detroit’s assets and income tax revenue.”

This same statement goes on to stress that “Bank of America and UBS, two of the main predatory mortgage lenders who destroyed our neighborhoods with massive home foreclosures, and whose executives have been jailed (UBS) and indicted (Bank of America) for their municipal bond crimes, already have pocketed $250 million in profits off Detroit city tax revenues on this scheme, even before this new deal goes into effect. While City Council unanimously voted this deal down, Snyder and Orr are once again ignoring the democratic process.”

On November 14, the day of Rhodes’ decision to unseal the Barclays financing fees, members of the Moratorium NOW! Coalition held a demonstration outside the federal courthouse. The decision to disclose the fees for the deal provides additional impetus for building a massive campaign to oppose the Barclays deal which will be heard before the court on December 10.

The Moratorium NOW! Coalition is calling for a mass demonstration outside the federal court on December 10 to demand the rejection of the overall Barclays deal. The organization says that this decision is pivotal in the broader bankruptcy process where a decision on eligibility by the court will be handed down in the coming weeks.