(Video) Legal Precedent Set in Detroit Bankruptcy Case May Impact Municipal Pensioners Nationwide

Photo Credit-Voice of Detroit
City of Detroit Firefighters face a 90 percent reduction in pension
 benefits if U.S. Federal Bankruptcy Judge Steven Rhodes rules in favor
of Gov. Rick Snyder and City Emergency Manager Kevyn Orr
 Chapter 9 Insolvency Petition, December 3.

By Monica RW -Head Writer

IU News and Talk 

“On December 3, U.S. Federal Court Judge Steven Rhodes is scheduled to rule if the City of Detroit is eligible to file a Chapter 9 Municipal Bankruptcy case. Thousands of former and current workers for the City of Detroit await the final decision.”

Three weeks and a day before the holiday tradition of Christmas, the fate for City benefactors of defined pension guarantees will be revealed. 


If Judge Rhodes rules against the workers a result in a sharp reduction equaling ten cents

Photo Credit-The Detroit Free Press
U.S. Federal Bankruptcy Judge Steven
Rhodes

on the dollar of pensioners defined monthly income benefits could take place. A monetary pension, income of $2000.00 could be immediately reduced to $200.00 or less, by 90 percent.

Five months since the petition declaring Detroit insolvency to pay debts owed, questions has surfaced if no other options existed outside of filing for a Chapter 9 municipal bankruptcy in a U.S. Federal Court of Law. 

On July 19, Governor Rick Snyder (R), appointed Emergency Manager by Gov. Snyder, Kevyn Orr and Detroit Mayor Bing informed City, State and the Nations’ residents no other feasible financial options could take place except declaring Michigan’s largest City, bankrupt.


During Snyder and Orr Reinventing Detroit press conference, Orr made the following statement:

“The reality is in a bankruptcy, there are two types of creditors. There are secured and there are unsecured. And what you must do is treat people in their classes secured and unsecured, equality,” Orr said.

“We’ve said we are not going to impair the secured class, the DWSB and some others. We’ve said that we are going to treat everyone in the unsecured class equality because that’s what required under the law.”

Michigan Constitution contains statutory language designed to protect municipalities  benefit of a defined monthly retirement benefit guarantee for future pensioners. Using the meaning of is – is, Orr and Snyder effort seeks to circumvent state law, denying benefactors upwards to 90 percent in monthly income.

“STATE CONSTITUTION (EXCERPT) 

CONSTITUTION OF MICHIGAN OF 1963


§ 24 Public pension plans and retirement systems, obligation.Sec. 24.
The accrued financial benefits of each pension plan and retirement system of the state and its political subdivisions shall be a contractual obligation thereof which shall not be diminished or impaired thereby.
Financial benefits arising on account of service rendered in each fiscal year shall be funded during that year and such funding shall not be used for financing unfunded accrued liabilities.
History: Const. 1963, Art. IX, § 24, Eff. Jan. 1, 1964″

Governor Rick Snyder admitted during sworn testimony in Detroit’s Bankruptcy deliberations and email communications six days before July 19 official filing date, alternatives outside of reducing pensioners monthly revenue were not adequately considered. 

“Snyder disputed repeated suggestions by lawyers for city unions, pension funds and retirees that Orr is an agent of the state of Michigan who is guiding the city’s restructuring and bankruptcy on orders from the governor and senior members of his team. Nor would he say whether the state offered to help cover unfunded pension liabilities for city retirees….

In a July 12 e-mail, the governor’s counsel, Mike Gadola, suggested to Snyder’s key advisers that he consider placing conditions on a Chapter 9 bankruptcy petition for anything that could impact pension benefits, general obligation debt and the sale of certain assets over a pre-determined value.


“I favor this approach … primarily because I think we should exercise the governor’s ability under P.A. 436 to place conditions upon his authorization for a bankruptcy filing,” Gadola wrote six days before the city filed for bankruptcy. He suggested Snyder ask Orr to pursue “a more deliberative approach” to a process that rocketed to bankruptcy the next week.

The governor rejected attaching conditions to the filing. He testified that he concluded the bankruptcy, the largest of its kind in American history, would be further complicated and slowed by conditions likely to hinder efforts to get a so-called “Plan of Adjustment” confirmed in bankruptcy court.

“This is a problem that has been accumulating for 60 years and has not been solved before,” Snyder testified. In a statement released later, he added: “Bankruptcy was the last and only viable option to bring the financial crisis to an end and get the city back on a successful path. My job is to make the tough decisions to resolve the problems we face today, not ignore them.”

Snyder and Orr claimed Detroit’s deficit before the bankruptcy filing was approximately $18 million dollars. City Emergency Manager Orr’s former law firm Jones Day received $11 million dollars to manage the City’s insolvency proceedings in Judge Steven Rhodes court, thus far. A litany of other restructuring firms have received upwards of $95 million dollars in payments related to Detroit’s bankruptcy case.

“Approved contract amounts for Detroit’s restructuring firms, according to Orr’s office, with payments through Oct. 1, if available, in parentheses:
■ Conway MacKenzie, restructuring firm, Birmingham, $19.3 million. ($4.59 million)
■ Jones Day, law firm, Washington, D.C., $18 million. ($10.96 million)
■ Ernst & Young, accounting firm, Detroit, $8 million. ($4.17 million)
■ Miller Buckfire, investment banker, New York, $8 million. ($1.2 million)
■ Plante Moran, accounting firm, Southfield, $3.97 million. ($1.5 million)
■ Pepper Hamilton, law firm, Southfield, $850,000.
■ Miller, Canfield, Paddock and Stone, law firm, Detroit, $750,000.
■ Manhattan Institute for Policy Research, think tank, New York, and Bratton Group, public safety consulting firm, New York, $621,000 combined.
■ Milliman, actuary and consulting, Seattle, $332,000.
■ Christie’s Appraisals, art appraisal, New York, $250,000.
■ Duffey Petrosky, public relations, Farmington Hills, $186,000.
■ Abernathy MacGregor Group, public relations, New York, $120,000.
■ Stevenson Keppelman Associates, law firm, Ann Arbor, $100,000.
■ RR Donnelley, integrated communications technology, Detroit, $90,000.”

While payments are credited to corporate benefactors of Detroit’s Bankruptcy proceedings, Snyder and Orr deny ability exist to pay defined pension guarantees to thousands of City workers and retirees.

To date, no other municipally in America has been granted the opportunity to eliminate or drastically reduce the monthly retirement income benefit for employees. Employees across the state working 10-30 years for a City, Village, Township, County or State of Michigan pension income could be impacted if insolvent municipally files Chapter 9 bankruptcy petitions, reducing secured or unsecured creditor’s liabilities.

Judge Steven Rhodes ruling on December 3 granting Snyder and Orr pension request reducing monthly revenue benefit of City of Detroit current and former employees would set a nationwide legal precedent, as Michigan’s and other states’ Constitution defined pension langauge would be overruled by a U.S. Federal Bankruptcy Court of Law.

“A judicial decision that may be used as a standard in subsequent similar cases: a landmark decision that set a legal precedent.”

Follow Independent Underground News & Talk and Independent Underground Radio LIVE podcast for updates on U.S. Federal Judge Steven Rhodes upcoming ruling, Tuesday, December 3. 

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