AFRICANGLOBE – Nothing reveals more openly the criminal looting of Detroit by the wealthy elite than the hundred million dollars being paid out to well-connected law firms, accountants and consultancy businesses, which prepared the city’s bankruptcy. The fee bonanza has been underway as least since early 2012 and accelerated immediately after Michigan Governor Rick Snyder signed a revised emergency manager law on December 27, 2012.
Snyder’s anti-democratic act—the measure had been rejected by Michigan voters in the previous November election—cleared the way for the appointment of former Jones Day attorney Kevyn Orr as Emergency Manager of Detroit in March. Hired at an annual salary of $275,000, Orr proceeded rapidly to sign “core restructuring advisers” to lucrative city contracts and intending all along to push the city into Chapter 9 bankruptcy.
Well before they were awarded city contracts several of these firms were already employed by the state of Michigan. According to court documents, the Jones Day law firm provided more than 1,000 hours of consulting work for top Michigan state officials before being officially retained by the city as a “restructuring counsel” in March 2013. This included encouraging state officials in early 2012 to expedite a bankruptcy filing before voters could defeat the emergency manager law.
Orr and his advisers were so confident that the federal courts would approve the July 18 Chapter 9 petition that multi-million dollar and long-term contracts with advisory services were concluded well before the filing. Meanwhile, as the contract documents show, services such as analyses of Detroit’s financial condition, valuation of the city’s assets, the development of a restructuring plan and
preparations for management of the bankruptcy process had long been underway
It is clear from the documents publicly available that Orr and his emergency management team moved in late spring and early summer of 2013 to extend the length of service and increase the financial commitments with the firms that were originally contracted by the City Council on January 16, 2013.
During the five-month legal process that ended with Judge Steven Rhodes’ decision in favor of a court-supervised bankruptcy on December 3, the hired guns emerged as outspoken advocates of Chapter 9 approval. Many of them appeared on behalf of the city as expert witnesses during the bankruptcy trial. The exorbitant fees—expected to reach more than $100 million—are seen as justified compensation for services rendered to protect and enhance the wealth of the city’s richest individuals and Wall Street investors.
While city employees and retirees are being told that their jobs, incomes, pensions and other benefits will be cut and Detroit’s assets, like the artwork of the DIA, sold off, fees as high as $1,000 per hour have been paid to those organizing the plundering operation. While the political and media establishment is on a mission to convince workers and residents that there is no money—according to a confidential document dated December 13, 2013—more than $41.6 million has already been disbursed to 30 restructuring firms on city contracts.
The following is a review of four companies collecting the restructuring fees under contract with the City of Detroit. These are just the most prominent of the many firms, which are cashing in from the carve-up of the city
Jones Day
Washington, DC law firm specializing in corporate bankruptcy
$18,000,000 contract / Approved July 17, 2013 for 14 months
- As of December 13, 2013 Jones Day has been paid $8.2 million with outstanding invoices of $7.5 million.
- Because of its work during the Chrysler bankruptcy reorganization in 2008—where Kevyn Orr played a prominent role and his firm billed $43 million for its services—Jones Day was well known to the Democratic and Republican Party political establishment in Detroit, Michigan and Washington, DC.
- In early 2011, Jones Day published “Pensions and Chapter 9: Can municipalities use bankruptcy to solve their pension woes?” a strategy document on how to raid retiree pension funds in cities in financial distress and on the brink of municipal bond default.
- Kevyn Orr officially resigned from Jones Day when Governor Snyder named him as Detroit’s Emergency Manager in March 2013. The following month, in a blatant conflict of interest move, Orr signed Emergency Manager Order No. 4 retaining Jones Day and enabling his former boss Stephen Brogan to lead a team of lawyers to renegotiate the city’s debt obligations.
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Stephen Brogan, Jones Day partner and Kevyn Orr’s former boss, is the contract signatory with the city of Detroit Bruce Bennett came from the Los Angeles office of Jones Day to run day-to-day legal strategy and lead the litigation and debt restructuring of the Detroit legal team. Previously working for the Dewey LeBoeuf law firm, Bennett has municipal bankruptcy experience with the 1994 restructuring of Orange County, CA at that time the largest ever financial collapse of a local government in the US. He is paid $1,050 per hour for his services.
- Jones Day’s original contract was approved by the City Council on April 29, 2013 for $3.35 million. Emergency Manager Orr expanded the scope and increased the city’s commitment to $18,000,000 on July 17, 2013.
Conway MacKenzie
Birmingham, Michigan consulting firm specializing in restructuring and crisis management
$19,300,000 contract / Approved June 1, 2013 for 16 months
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Bruce Bennett, Jones Day partner from LA who worked on the 1994 bankruptcy of Orange County, CA, is paid $1050 per hour for his services As of December 13, 2013 Conway MacKenzie has been paid $4.6 million with outstanding invoices of $3.4 million.
- Michigan-based Conway MacKenzie was a consultant in the Obama administration’s forced bankruptcy and restructuring of GM and Chrysler in 2009. It has been a restructuring adviser for auto companies and their suppliers impacted by the crisis of the industry going back to the 1980s, aiding the companies in the destruction of hundreds of thousands of jobs.
- Senior Managing Partner Charles Moore—who has been Conway MacKenzie’s leading representative on the City of Detroit contract—was called as a witness for the city on September 18 during the bankruptcy trial. Moore’s testimony regarding the dysfunction of city services and its financial problems was cited by Judge Rhodes to justify the Chapter 9 bankruptcy.
- A 22-year-old financial analyst for Conway MacKenzie billed $275 per hour for services rendered during a two-week period in July 2013 totaling $26,000. In all, 11 Conway MacKenzie analysts charged the city $288,671 during the same period.
- Conway MacKenzie’s original contract with Detroit was approved by the City Council in January 16, 2013 for $4.2 million. The contract was amended by Emergency Manager Orr on June 1, 2013 and increased to $19,300,000. The amended contract provides for up to $400,000 in “Bi-weekly Advisory Fees” plus expenses to be “due and payable” to Conway MacKenzie by the third business day following each bi-weekly period.
- Part Two
