Detroit thread. Post Kwame, Monica, and $1 houses here.

[CountDeMoney]

He's got a hot as balls wife.  He's already won.

[Savonarola]

Here's a quick explanation of why the City of Detroit pensions aren't insured, and why the situation is more dire for city pensioners than those of the automotive companies:

Susan Tompor: Pension safety net won't help City of Detroit retirees

The city of Detroit's financial crisis will chug along on many of the same roads taken by big-name companies that underwent major bankruptcies. Tough talk with creditors, unsettling restructuring moves, unhappy times for retirees.

But unlike big business, the city of Detroit's pension problem doesn't have the backstop of the Pension Benefit Guaranty Corp.

There's no so-called rescue ahead for retirees by the PBGC. It's all about emergency manager Kevyn Orr reaching a negotiated compromise, settling the score in bankruptcy court or taking on a longer legal battle to deal with pension payments, the experts say.

Sad to say, the PBGC is nearly as well known as the EPA in many Michigan households after many companies over the years ran into the financial skids and turned pension obligations over to the PBGC.

Private company pensions can be protected up to certain limits by the PBGC.

Big names like Delphi hourly workers, Rouge Steel, Awrey Bakeries and Hayes Lemmerz International had pension plans turned over to the PBGC. Many Michigan plans landed with the PBGC after the 2008-09 financial meltdown.

In 2012, PBGC paid about $384.3 million to more than 46,000 Michigan retirees in failed plans.

As we hear more about the prospect of a Chapter 9 bankruptcy filing for the city of Detroit, it is key to understand that the PBGC will not be a safety net for those retirees. It's just not in the PBGC's wheelhouse.

The PBGC also insures 915 ongoing pension plans sponsored by Michigan companies, covering more than 1.5 million people. But again, not municipal workers.

Nationwide, the PBGC reported, the agency paid for monthly retirement benefits, up to a guaranteed maximum, for nearly 887,000 retirees last year in 4,500 single-employer and multi-employer pension plans that cannot pay promised benefits.

The PBGC was created by the Employee Retirement Income Security Act of 1974. It does not receive money from taxpayers. Instead, it collects insurance premiums from employers that sponsor insured pension plans, earns money from investments and receives funds from pension plans that it takes over.

For a state or municipal pension, the taxpayer is typically the backstop. Yet Detroit's finances are in such a hot mess that raising taxes or finding another revenue source to fund pension promises is highly unlikely. Dramatic changes regarding pensions and retiree health care seem inevitable, even with any possible brutal legal battles ahead.

The National Association of State Retirement Administrators noted that about 43 states have made changes to benefit levels or contribution rate structures, or both, between 2009-11. Many local governments have made similar fixes to their plans.

I've heard from many who question why a Detroit employee could retire at 48 or 50 years old with a pension for what could be another 40 years. Yes, young retirement is part of the problem. But it's also true that it's tough to tell someone who is 75 and retired that they're going to lose thousands of dollars now in retirement, either through cuts in health care or pensions.

It's easy, of course, to point to other businesses and communities that have changed the rules of the retirement game. Many McLouth Steel retirees, Delphi retirees and others quickly say, "Look at the sacrifices I had to make.

The challenges for making up the gap remain difficult for any retiree who has large amounts of debt or little personal savings. Yes, it's another reminder that many people who are working need to make saving for retirement a priority, as well.

Take one extreme example: If a 65-year old retiree loses a pension worth say $2,000 a month, it would mean that they'd need $500,000 or more in personal savings to make up that gap, said Timothy Wyman, managing partner for the Center for Financial Planning in Southfield.

Many retirees just don't have that kind of money sitting around waiting just in case their old employer marches into bankruptcy court.

[Savonarola]

Pugh still hasn't surfaced, but his staff has said they've heard from him.  More on the story from the FREEP:

Students say Charles Pugh wanted to help kids; accounts different than mother's allegations


Charles Pugh / Kimberly P. Mitchell/Detroit Free Press
By Matt Helms and Joe Guillen

Detroit Free Press Staff Writers

Two former students who were in Charles Pugh's mentorship program at a Detroit high school and two men who mentored its young men said Friday that allegations against the City Council president for an allegedly inappropriate relationship with one of the boys bears little resemblance to what they've seen in or out of the classroom.

"Charles never interacted with the kids in an inappropriate way," said Truevonte Whitsey, 17, a west-side Detroiter who just graduated from the Frederick Douglass Academy for Young Men this month and said he had been in the Charles Pugh Leadership Forum at the school for most of this school year.

Another former student, 19-year-old Tevin Hill, awaiting his sophomore year at Bowling Green State University in Ohio, said Friday that he credits Pugh and other mentors in the program with helping him survive a rough freshman year at the school south of Toledo. He said he nearly dropped out because he ran out of money for books and had trouble with a math class.


Pugh, learning of the math difficulties, immediately arranged for himself and other mentors to tutor Hill via Skype, Hill said, adding that Pugh sent him $100 to help pay for books. Hill said he worked in school dining halls making minimum wage to pay the remaining costs of books.

"My own flesh and blood was telling me I was going to fail, that I wasn't going to make it," Hill told the Free Press. "They (mentors) lifted me up and made sure I got through my freshman year."

Examples like these that emerged Friday contrasted deeply with troubling accusations against Pugh made by the mother of a now 18-year-old Frederick Douglass graduate. The mother accused Pugh this week of conducting an inappropriate relationship with her son, and Pugh has been out of the public eye since just days before the allegations surfaced.

Those close to him say Pugh is devastated by the allegations and fearful for his future. Some openly doubt the validity of the allegations, wondering why the mother went to lawyers and not to police.

The mother's lawyers have declined to reveal details about text messages they say Pugh sent the boy; she only would call them disturbing. Lawyer Ivan Land said he expects to file a civil suit against Pugh, the City of Detroit, the Detroit Public Schools and the academy as early as Monday.

Land said Friday that the boy's mother worried that police wouldn't investigate the case fairly because of Pugh's power in the city, now greatly diminished because emergency manager Kevyn Orr stripped him of all pay and authority after repeated, unexplained absences from work.

Land said his clients are out for justice and not trying to cash in or take advantage of Pugh.

"That is totally not true," Land said. "You'll see when the lawsuit is filed."

Legal experts said the case against Pugh has been undermined because the accuser's mother told her story to lawyers first and not police. Detroit attorney Ray Paige said that move makes the lawsuit look like a money grab.

"The mom has a duty, not to run to a lawyer, but to protect her son," said Paige, who has no connection with the case but has represented hundreds of clients in criminal defense cases. "The natural procedure would be, not to run to some civil lawyers first, but to go to police."

Paige said it is possible authorities have launched an investigation on their own, although the Detroit Police Department and Wayne County Prosecutor Kym Worthy's office said Friday they had yet to be notified of any formal complaints or investigations in the matter.

A criminal investigation could be compromised if a civil suit on the same issue is filed against the suspect before or during the police investigation, said Michael Komorn, a 20-year local criminal defense attorney who also is not involved in the case.

"A detective doesn't want the witness talking to a lawyer first," Komorn said. "That's the kiss of death."

Komorn said it is unfair to judge Pugh now because so much is unknown.

"We really don't know what's going on. When allegations like these are being made, they have a tremendous impact on someone's integrity, whether they're true or not," he said. "All we've heard are veiled generalities, nothing specific."

The mother and her lawyers said Pugh gave the young man cash, a cell phone and clothes for prom, and that Pugh and the boy met without the mother's knowledge off school grounds, at times during school hours, something the mother says the school district should have prevented. DPS officials say they are investigating the matter.

The mother and Land have not alleged that there was a sexual relationship.

Michigan's age of consent is 16. Under state law, however, it is a third-degree felony for school volunteers to engage in sexual penetration with a student under 18 if the volunteer status was used to gain access to, or to establish a relationship with, the other person.

Paige said Pugh's position as mentor could make it criminal for him to inappropriately touch any of the students.

"He's part of a mentoring — i.e. teaching — program. He cannot lawfully have contact with these boys," Paige said. "If there's an allegation he touched these boys, then he's got a real big problem."

Still, there were doubts about the allegations among Pugh's supporters, many of whom have been reluctant to come forward.

One who did speak out Friday was DeAndree Watson, 23, a policy analyst for Pugh who had worked with the council president in the mentoring program for more than a year and has interacted with the boy whose mother is planning to sue Pugh.

Watson said the program can be intense and personal at times, and many of the activities happen after school and off school grounds. He said the openly gay Pugh begins each year by telling the students he's gay and asking whether that would be a problem for any of them. Beyond that, Watson said, Pugh infrequently brings up the matter.

Watson said mentors attend student athletes' games, take them to pro sports events, tutor them and regularly help out to buy them things their families may not be able to afford — from clothes to lunch on field trips. Classroom topics range from professional job etiquette and the importance of succeeding in school, to proper attire and how to treat women with respect. The mentors said Pugh brings in female staffers to discuss what girls want from boyfriends — well-dressed, successful, goal-driven young men, not burnouts in baggy pants.

"The purpose of the program is to emphasize leadership among young men, particularly young men from the inner city of Detroit," Watson said, describing many of the students as from poor families, often without a father in the home.

Part of being able to relate to the boys "is not only about preparing for college, discussing academic excellence or professional etiquette," Watson said. "It's also important to have frank and open dialogue about issues that are facing them growing up in this community. So have discussions with them about teen violence. We have conversations about the impact that growing up in single parent households may have. We talk about the risks involved in having children at an early age. ... We're committed to producing well-rounded young men, and that doesn't stop in the classroom."

Of Pugh's interactions with the students, Watson said he "never had any reason to believe he would think about doing anything inappropriate with any of the young men."

Land said he wasn't surprised supporters would publicly defend Pugh and disparage his clients' intentions.

"That's what supporters do," Land said.

But Watson and another mentor who has worked with Pugh for several years but did not want to be identified said they find the allegations hard to believe.

"As far as I'm concerned, he has my full support," Watson said. "I believe he's completely innocent. I believe he was just trying to be the best mentor he could be, and was trying to provide the support and guidance that young man needed at the time. And I stand behind him 100%."

Marshall Mathers (Eminem) said that his mother only worked a job for a few months when he was five.  The rest of his life she lived off of America's legal lottery.  Eventually she sued her son for ten million dollars.  She ended up settling for $25,000, but, in the fine tradition of American justice, her lawyers got everything but $1600.  In any event, while it's possible Pugh is guilty of an inappropriate relationship with this young man, it's not at all implausible that it's just a woman looking for a payoff.  Pugh, though, is not doing himself any favors by hiding.

[CountDeMoney]

Should've used a 401k.

[Admiral Yi]

Michael Komorn, a 20-year local criminal defense attorney who also is not involved in the case.

[Barrister]

Michael Komorn, a 20-year local criminal defense attorney who also is not involved in the case.

As in he's been a criminal defense attorney for 20 years.

[Admiral Yi]

D'oh!

[Capetan Mihali]

   Doogie Howser, JD.

[The Brain]

20 years at the same job seems insane. 1-2 years and I'm bored out of my skull.

[Savonarola]

Want to buy a Van Gogh:

Caught in a political web, DIA ponders fate amid complex bankruptcy talks



The Thinker by August Rodin in front of the Detroit Institute of Arts in Detroit, MI on Thursday, May 30, 2013. Romain Blanquart/ Detroit Free Press / Romain Blanquart/ Detroit Free P

By Mark Stryker

Detroit Free Press Staff Writer

It's hard to look at the magnificent bronze casting of Rodin's "The Thinker" that watches over the front steps of the Detroit Institute of Arts and not wonder whether this pensive figure, chin resting on a curled hand, isn't pondering the fate of the museum behind him.

Will the DIA survive the city's financial crisis, or will collateral damage from the march toward bankruptcy leave the museum mortally wounded?

The DIA's troubles — as has often been the case during its roller-coaster history — lie at the volatile intersection of culture, politics and economics. With Detroit emergency manager Kevyn Orr enmeshed in multilateral negotiations with the creditors who hold the city's $18-billion debt, the DIA finds itself a pawn in a high-finance chess match fraught with subtle gamesmanship and serious consequences.

At risk are irreplaceable treasures in the DIA's city-owned collection and $22 million in annual support from the regional property tax millage approved by voters last year. DIA officials fear a domino effect: They say if the museum were forced to raise cash for Detroit by selling art or embracing various rental ideas, future donations of art and money would disappear. They also think they could lose the millage revenue.

DIA executive vice president president Annmarie Erickson said that would lead to a "death spiral" and a crippled museum of limited hours, exhibitions and programs.

Orr has said repeatedly he has no plans to sell art, but his spokesman, Bill Nowling, said this week that the complexities of Orr's negotiations with bondholders, unions and other creditors preclude taking any city assets off the table.

"We can't come out and say to the museum you're protected, and we found a place for you in heaven," said Nowling. "The moment we do, every creditor is going to say, 'You're not broke, and if you're not broke, then I'm not taking 10 cents on the dollar.' "

How it started

No major American museum has been more intimately tied to the political and financial fortunes of its city than the DIA. Its collection and building are owned by the city but run by a nonprofit. The structure, unique among top museums, has existed in its present form since 1998, but effectively dates to 1919, when a cash-strapped DIA gave up its independence to become a city department.

This is the museum's original sin, a trade-off that haunts it to this day. In good economic times, the DIA soared; but in bad times it faltered, nearly closing on more than one occasion and frequently getting beat up in the rough-and-tumble of Detroit politics.

"That problem has never gone away," said Jeffrey Abt, a Wayne State University professor of art and author of a history of the DIA. "The DIA is forced to operate in context very different than any other museum, and the current problems reflect that reality."

Orr's deputies, including New York investment banker Ken Buckfire, warned DIA leaders at a closed door meeting in May that the collection was a city asset vulnerable for sale, and that a comprehensive financial restructuring plan could require the museum to funnel hundreds of millions of dollars into city coffers over the next decade. DIA director Graham Beal and Nowling both said no formal proposals were made, but confirmed that the figures floated were at least $20 million per year.

A bill of that size would be a de facto order to sell art, said Erickson. "If people have the idea that the DIA can raise $20 million a year, I can assure them we've already explored everything we could do short of selling the art, and we can't come anywhere near that number," she said.

Nowling said that the $20-million figure was just a starting point for discussions and that the conversation also included ways of monetizing art beyond selling. One idea would have the DIA lease the collection back from city hall. Another would be sending major portions to other institutions on long-term loan.

"All of this is about how do you justify a fair value should you go into court," said Nowling. "You want to be able to say this is an asset that you rationalized at a fair value. A judge will look at it and say 'Yes it is' or 'No it's not.' If we had a $1 dollar lease, I'm pretty sure the creditors would say that it's worth far more."

Some of the DIA's most influential patrons said the forced sale of any art or other plans that subsidized the city would force them to reconsider their support. Once the door was open to selling, there would be no way to close it, said Robert Jacobs, owner of Buddy's Pizza and a major collector of African art.

"I would have to reassess what I would give, because like anyone I want to give to something that's really special. The dilemma that everybody has is the quandary of where all of this is going."

Selling art, lending schemes or other ideas for monetizing DIA assets would almost assuredly create a backlash among county commissioners and voters, especially anti-tax factions in Macomb and Oakland. Macomb County Executive Mark Hackel said many would move quickly to rescind the millage if art were sold or county tax money was used — or perceived to be used — to subsidize the city.

"There would be legal review, and the question would be: Is this what was intended when the public voted to support the museum?" he said.

The tax funds about 70% of the DIA's annual budget, liberating it from the burden of raising $12 to $15 million a year for operations. The 10-year millage gives the DIA the breathing room it said it needs to raise several hundred millions of dollars in endowment funds to sustain its business after the millage expires.

Orr is keeping his cards close to the vest. The restructuring plan he released to creditors two weeks ago did not include the sale of art, but the report did not rule out the possibility the DIA would be asked to contribute revenue as plans evolve. Craig Barbarosh, a California-based lawyer who worked on municipal bankruptcies in Orange County and Stockton, said that making sure everyone knows the art is in play might be the best strategy for protecting it. But there are no guarantees.

"The ultimate deal is likely to be meaningfully different than what was originally put on the table," said Barbarosh..

As emergency manager Orr has authority to sell or monetize city assets as part of a restructuring plan pitched to creditors. If he can't forge a deal and Detroit enters Chapter 9 bankruptcy, neither creditors nor a federal judge can force the liquidation of assets. However, a judge and creditors can apply pressure by refusing to OK a plan that appears to be hiding assets — and the result could still be a sale.

The DIA has hired a bankruptcy attorney, and officials said they'll fight any move on the art. The DIA maintains that it holds its collection in public trust, a legal argument reinforced in a formal opinion issued by Michigan Attorney General Bill Schuette. Professional codes governing museums prohibit selling art except to buy other art or to maintain the collection.

However, bankruptcy experts have told the Free Press that because the city owns the art, it would be difficult to convince judge to void a sale.

DIA officials are mindful of the difficult politics of declaring their institution off-limits when pensioners, policemen and creditors are all taking it on the chin in Orr's restructuring plan. Leaving aside loftier arguments about the DIA's role as a civic and cultural beacon, museum leaders say that they take $30 million off the city's books annually because the museum supports itself with essentially no city funds.

Will such arguments be enough for Orr, creditors or a bankruptcy judge? That's another puzzler for Rodin's thoughtful dreamer.

There are two issues that make this even more awkward for the DIA.  The first is that if the DIA were to sell any of it's artwork in order to pay off the city bonds it will lose its accreditation.  That will make it impossible for the DIA to get traveling exhibits, (and also make donors far less likely to support it.)  The second is, as noted in the article, the museum is supported largely by the residents of the neighboring counties.  The property tax increase to fund it was controversial and barely passed in the largely blue collar Macomb County.  Orr's arrangement would probably kill that deal.

I've donated money to the DIA in the past (as well as the Zoo and Historical Museum, both of which operate under the same scheme.)  Naturally I was upset when I first heard that their assets wouldn't be protected and that bankruptcy was likely; but I should have known that any money given to the city of Detroit or any of its entities will eventually be stolen.

[The Brain]

Not reading long articles but can you legally hide assets in a bankruptcy?

[Admiral Yi]

It's an interesting article.

[CountDeMoney]

I could see some Russian making that Rodin into his mailbox holder.

OPULENCE I HAS IT

[Savonarola]

Detroit merchants capitalizing on popularity of city's style
Laura Berman


Here it is: You can now buy stuff in Detroit. Especially in Midtown, where stores are opening faster than they were closing 20 years ago.

The opening of Shinola last Friday was a signal moment: The shop — with its gleaming concrete floors, rustic brick walls and self-assured aesthetic — pushes forward the idea of Detroit style in the way only a team of marketing geniuses from somewhere else could.

You can buy a gleaming $2,500 bicycle at Shinola, or a $550 Runwell watch, or a sleek set of colored pencils in a black metal box for $15. There are linen- and leather-covered journals, $75 leather cellphone cases, $99 cotton shirts. All of it has an earthy, rustic, authentic feel that echoes the way Detroit sees itself — raw, gritty, metal-smithy — and then polishes it, and stamps it with metal ID badges that attest to craftsmanship and uniqueness.

It's the Detroit that Sergio Marchionne reinvented with Chrysler's "Imported from Detroit" campaign — an assertion of authenticity and American craftsmanship as interpreted in watches with artisan-crafted leather bands and sleek but solid bicycles, leather goods and what Shinola President Jacques Panis refers to as "curated goods."

"We love Detroit," Panis said. "This is where Shinola's home is. ... We discovered that 'Built in Detroit' resonates more with people than 'Made in America.'"

Two years ago, you could joke when travel magazines talked about stores like Canfield's Nest and City Bird that there were no stores like those: Those were almost the only shops around. Now, those stores have actual neighbors, including both Hugh and Nora on Cass at Alexandrine, or The Peacock Room and Emerald on Woodward.

Within a few blocks, you can eat crepes or sushi or dim sum or (soon) tapas or Thai, or indulge in an elaborate feast at the Whitney.

Detroit's business districts are sharpening their focus at the very moment that Detroit's on the verge of bankruptcy: This is the first time in decades you could blindfold a tourist or two, drive them to Midtown and entertain with lunch and shopping, and all the accoutrements of urban life — Great Lakes Coffee, Avalon Bakery, the Detroit Institute of Arts and the Museum of Contemporary Art-Detroit — and make a convincing case for Detroit as a living, breathing city.

The high-end Shinola store, which deliberately uses its Detroit headquarters to impart authenticity, is sure to be a beacon for other retailers. For years, "Detroit" has been a slur of a city name. Out of the wreckage of what was once the city's most notorious neighborhood, it's beginning to stand for something else.


From The Detroit News

This might not sound like a lot to residents of a city less dysfunctional than Detroit, but there were only a couple dingy bars, ghetto Chinese restaurants and liquor stores in Midtown a decade ago.  The change came about, in part, because the city offered workers incentives to move to Midtown, and, in part, because the current incarnation of the city council and city bureaucracy isn't as able to stymie and delay progress while waiting for bribes as their predecessors.

[DGuller]

You're nuts. The 401k is maybe the best thing our government created in the 20th century. 

As an investment vehicle, it's not bad.  I'm certainly doing very well with it.  As a social insurance vehicle, which is what pensions are supposed to be, it's a disaster.  In a few decades we'll have a huge class of retirees barely subsisting on their Social Security checks.