Detroit workers, retirees and community activists protest the forced bankruptcy of the city on October 23, 2013 outside federal court., a photo by Pan-African News Wire File Photos on Flickr.
Lawyers, state planned Detroit bankruptcy long before
Alisa Priddle and Tresa Baldas, Detroit Free Press 6:47 p.m. EDT October 25, 2013
If it is authorized, Detroit's bankruptcy would become largest municipal bankruptcy in U.S. history.
DETROIT — Nine months before one of the world's largest law firms secured a contract with the city of Detroit, Jones Day and the state of Michigan were discussing filing bankruptcy for the struggling city.
Investment banker Kenneth Buckfire, one of the country's top restructuring advisers, testified Friday that he knew as early as March 2012, that the state and Jones Day, hired in December to restructure Detroit's finances, had been contemplating filing bankruptcy. But he never disclosed that information to the city council or Mayor Dave Bing, he acknowledged during cross examination.
Responding to questions from creditor lawyers, Buckfire said it became evident to him around May 7 that the city couldn't pay its debts. But "I didn't decide the city was insolvent."
Buckfire dominated much of Friday's testimony in the federal trial to determine if the city is eligible for Chapter 9 bankruptcy. He also acknowledged that he recommended the city hire Christie's auction house to evaluate the city-owned Detroit Institute of Arts' collection, but he denied telling the museum to expect the city to file for bankruptcy in July.
The city is paying Christie's $200,000 to value the collection, and the auction house is in the middle of its work. No efforts have been made to sell pieces to satisfy creditors.
Buckfire was one of three consultants who testified for the city that deep financial and operational troubles plagued Detroit in the weeks, months and years leading up to its bankruptcy filing.
Detroit Police Chief James Craig, appointed by the city's emergency manager this summer, said the police department was in such dire straits when he assumed his post that it couldn't afford high-quality bullet proof vests. So he brought his own from his previous job.
“I didn't decide the city was insolvent.”
— Kenneth Buckfire, investment banker
Craig also cited stories about police vehicles that have to get pushed to get started and bodies left at fire scenes because no one found them.
Detroit has problems he's never seen elsewhere, the chief said. Police often drive injured victims to the hospital because emergency medical services don't show up.
He was able to fix one problem, shrinking the unit assigned to protect the mayor from 26 officers to six, he said.
At the end of the day, Kevyn Orr, whom Michigan Gov. Rick Snyder tapped as Detroit's emergency manager March 14, briefly took the stand to talk about his decision to seek bankruptcy protection for the city. Orr is a partner in Jones Day.
If U.S. Bankruptcy Judge Steven Rhodes approves of the filing, Detroit will have the largest municipal bankruptcy in U.S. history.
Initially, the trial to decide whether Detroit is eligible for Chapter 9 bankruptcy was expected to last five days, but testimony has been moving more slowly that Rhodes expected. Snyder is scheduled to testify Monday afternoon.
Detroit filed for bankruptcy July 18 but must prove that it meets the criteria for bankruptcy, comes with the power to pay creditors pennies on the dollar.