Detroit emergency manager testifies that he never promised to file for bankruptcy if hired

DETROIT – Detroit’s emergency manager testified Friday that he did not promise to seek bankruptcy protection for the city as a condition of getting the job.

Kevyn Orr’s testimony came on the third day of a trial to determine whether the city is eligible to fix its finances in bankruptcy court.

Detroit must show it is broke and tried in good faith to negotiate with creditors. Unions and pension funds with much money at stake claim the city didn’t hold genuine talks and therefore the case should be thrown out. Attorneys for those groups have tried to build a case that bankruptcy was a predetermined course or inevitable outcome.

Orr, who was appointed emergency manager in March, decided in July to make Detroit the largest municipality to file for bankruptcy. After taking the job, he saw firsthand the high crime, blight and deplorable conditions of police equipment and facilities, he said Friday.

“Basically everything that I had read was substantiated in very stark relief,” Orr said.

Orr, a bankruptcy expert who represented automaker Chrysler LLC during its successful restructuring, has said the city is saddled with $18 billion in long-term debt. He and Police Chief James Craig both testified on the trial’s third day about the city’s dire straits.

Orr will return to the trial on Monday, where he’s expected to be grilled by attorneys representing groups who oppose bankruptcy.

Craig, who started his job in the same month Detroit filed for bankruptcy, began his career in Detroit but worked 28 years for the Los Angeles Police Department. He has worked for or led several law enforcement agencies across the country.

He said department morale is lower than anywhere else he’s worked, including his stint as a police officer in Detroit in the 1970s. Among other things, he said, officers blame pay cuts and 12-hour shifts brought on by budget shortages.

Craig said he’s made many organizational moves since taking office, including cutting the mayor’s executive protection unit from about two dozen to six and reassigning an officer whose “sole assignment was to gas and wash my car.” He testified that his department had 2,400 officers when he took over, but having “3,000 would help tremendously.”

Friday’s hearing began with testimony from Ken Buckfire, a banker whose firm serves as the city’s investment bank. Judge Steven Rhodes denied a motion by lawyers opposed to the bankruptcy to strike much of Buckfire’s testimony from the day before because they believed it offered too much opinion.

Buckfire said he had concluded by May that the city was insolvent, meaning it was unable to pay its debts when they were due, but his position in the weeks and months leading up to the July filing was that “bankruptcy is to be avoided at all costs” but should be “studied as a last resort.”

Buckfire also said state constitutional protections of pensions weren’t “relevant” to the crafting a bankruptcy proposal that could cut those benefits. He said the pension protections are a covenant, as are creditors’ claims.

“(Retirees) were being treated no worse and no better than any other creditor of the city,” Buckfire said.

Buckfire testified that talks broke down between the city and Detroit Institute of Arts officials about finding common ground over ownership and the possible sale of some artwork. He and others sought to explain at a meeting that the city owned some of the museum’s art and the building, and wanted to reach a deal to “create value” for the financially troubled city.

Considered one of the nation’s top art museums, the institute has about 60,000 pieces. New York-based Christie’s international auction house is appraising city-owned pieces.

Republican Gov. Rick Snyder also is expected to testify Monday. The trial could end next week, but a decision on Detroit’s eligibility appears to be several more weeks away. The judge has set a Nov. 13 deadline for lawyers to file legal briefs on certain issues.


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