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

[Tonitrus]

Malice    I like his mom's style.

My favorite kids' names from when I worked at the DNA lab:  Nemesis and Chewbacca

I bailed out a Dacron once.

A recently stumbled across an Airman with the first name "Cheetarah".  What generation of parents can we kill for that? 

[Eddie Teach]

An airman and not an airwoman or airperson? Poor guy.

[Tonitrus]

An airman and not an airwoman or airperson? Poor guy.

"Airman" is gender neutral.  Pretty sure it's a female. 

[The Brain]

I hate cheetarahs.

[Savonarola]

And another major Detroit industry in in jeopardy 

Detroit uses bankruptcy threat to spur settlements

Robert Snell
The Detroit News

Detroit— The city's legal department is using the threat of bankruptcy to pressure people who have sued City Hall into accepting settlements, including a recent $249,000 payout in a civil rights case, lawyers said.

The tactic, along with a crackdown by Emergency Manager Kevyn Orr on frivolous lawsuits and settlements that last year totaled about $22 million, is an unexpected side effect ahead of a possible Detroit bankruptcy.

Plaintiffs fear their cases would be put on indefinite hold in bankruptcy court or that an unpaid settlement would be placed at the end of a long line of unsecured creditors. The recent payouts, however, eat into what little cash the city has left and come at a time when Orr has stopped payments to some creditors, including the city pension funds.

In recent weeks, the city paid $125,000 to a Livonia man who said he was sucker-punched by an officer inside the MGM Grand Casino — an incident captured on surveillance camera — and $249,000 to a Detroiter who alleged he was unlawfully arrested and imprisoned.

"That's the number one hammer they're using in settlements because the threat is if you don't take our settlement and don't get paid in the next 60 days, go ahead and get the biggest verdict you want, it'll be discharged in bankruptcy court," Berkley attorney Wolfgang Mueller said.

Pending lawsuits against the city would be put on hold if Detroit files Chapter 9, unless a bankruptcy judge grants relief. The cases could resume after Detroit emerges from court, said Douglas Bernstein, a Bloomfield Hills attorney and expert on municipal bankruptcy.

Orr, a lawyer, did not authorize the city's legal department to use bankruptcy in its dealings, but sees the wisdom.

"I just think this is lawyers being smart if they see an opportunity to settle a case and save potential increased costs down the road," Orr spokesman Bill Nowling said.

People and companies with unpaid claims and settlements would be lumped in with other unsecured creditors and likely recover pennies on the dollar.

It gets worse, Bernstein added. A bankruptcy judge could recoup a portion of settlements paid within 90 days of a bankruptcy filing.

"It's a harsh remedy but it makes sense," Bernstein said. "The goal of bankruptcy is to have an equitable distribution among creditors. People are in for a rude awakening."

Even with the threat of bankruptcy, it is virtually impossible to collect on a civil judgment against the city, Southfield-based attorney Geoffrey Fieger said.

The Detroit City Council must sign off. Then Orr must approve the deal, a process that can delay payment in a city that lawyers say is notoriously slow to cut checks.

"We can't get money out of (Orr)," Fieger said. "He's not signing off. I would rather have a bankruptcy judge ultimately making those decisions than City Council and Orr. You can't squeeze blood out of a rock."

The Detroit News analyzed city records in 2010 and found more than $39 million was paid out in police lawsuits between July 2006 and June 2009.

About half of that — $19.1 million — was traced to police misconduct allegations, including $7.3 million in payouts for 18 people shot by police. The payouts ranged from $2.5 million for a man who survived after being shot in the head to $25,000 for a woman shot in the leg at a backyard party by an officer aiming at a charging dog.

Last year, the city paid out settlements totaling approximately $22 million, Nowling said.

Detroiter Michael Bolden settled his malicious prosecution and unlawful arrest and imprisonment case against the city for $249,000 in late May or early June, his lawyer said.

According to the federal lawsuit, Bolden was arrested outside a Detroit gas station without probable cause and charged with firearm offenses. He spent almost two years in jail, though a Wayne County Circuit Court judge later vacated the conviction and dismissed the charges.

"I was not happy with the settlement," Bolden's lawyer Ben Gonek said. "The City of Detroit's financial condition obviously impacted my client's willingness to settle the case."

Orr has clamped down on settlements in what he perceives are frivolous lawsuits and has rejected several deals since arriving in March, Nowling said.

Orr told the city's new top lawyer Portia Roberson the law department wasn't litigating some cases aggressively and signaled he would not automatically approve settlements, Nowling said.

Orr's approach, and the prospect of bankruptcy, complicates the likelihood of collecting money, Fieger said.

"I try more cases than anybody," Fieger said, "and if you settle today, it won't matter. You won't get it. They will be in bankruptcy court."

Some plaintiffs cashed in early. Livonia resident Patrick Poisson pocketed a six-figure check this spring after being punched out at the MGM Grand Casino in 2011.

Poisson, 39, sued the city and two Detroit Police officers in federal court in 2011. The lawsuit stemmed from an incident a few months earlier at MGM Grand in which Detroit Police investigated a report that Poisson inappropriately touched a waitress and would not leave a casino bar.

According to the lawsuit, Poisson started leaving the bar, and then turned to Officer Arthur Dudal.

The men stood face to face — a standoff captured by the casino's video cameras.

"Suddenly, and without warning, Dudal threw a roundhouse right hand punch, striking (Poisson) squarely on the nose, fracturing it," Mueller wrote in the lawsuit. "(Poisson) was driven to the ground, temporarily knocked out. However, before (Poisson) hit the ground, Dudal followed with a left hook to the head, driving plaintiff to the floor."

Dudal also punched Poisson on his right side, breaking two ribs, according to the lawsuit.

Poisson received $125,000 in April. He said he can appreciate the pressure the threat of bankruptcy puts on plaintiffs who have sued the city.

"I just followed my lawyer's advice," Poisson said.

Royal Oak attorney Jonathan Marko will be in a Wayne County courtroom today to enforce $280,000 worth of settlements. One of the cases involves a city paramedic who accused a colleague of sexual assault.

The Detroit City Council signed off on the paramedic's $190,000 settlement in April, Marko said. Orr approved it June 6.

"Every step of the way, in every city case, all we're hearing is bankruptcy, bankruptcy, bankruptcy," Marko said.

The settlement, which hasn't been paid, required the paramedic's resignation.

"She took the settlement so she could start a new life," Marko said. "If the city gets tied up in bankruptcy court, she's going to be jobless, too, and completely screwed."

From The Detroit News: http://www.detroitnews.com/article/20130712/METRO01/307120042#ixzz2YxxRv6jq

[Scipio]

Malice    I like his mom's style.

My favorite kids' names from when I worked at the DNA lab:  Nemesis and Chewbacca

I bailed out a Dacron once.

A friend of mine once settled a massive PI case for the mother of Shithead (pronounced Shatheed), Lemongello, and Orangello Smith.

[DontSayBanana]

A friend of mine once settled a massive PI case for the mother of Shithead (pronounced Shatheed), Lemongello, and Orangello Smith.

I was going to drop some Shitheads into the mix as soon as I figured out a place to put them, but that sets the bar further than I could reach.  Also, that's a first on that pronunciation- usually, the ones I've met pronounce it shi-THAY-ud.

[stjaba]

And another major Detroit industry in in jeopardy 

Detroit uses bankruptcy threat to spur settlements

Robert Snell
The Detroit News

Detroit— The city's legal department is using the threat of bankruptcy to pressure people who have sued City Hall into accepting settlements, including a recent $249,000 payout in a civil rights case, lawyers said.

Interesting. Generally, debts resulting in "willful and malicious injury" to creditors are not dischargeable in bankruptcy. I would think civil rights violations and employment discrimination would be considered "willful and malicious" and therefore not dischargeable...

[alfred russel]

Unions will also be affected, as they have a bunch of DB plans as well.

As to whether this change will result in illusory security or not is not something I'm qualified to really argue.

So I asked my wife... and she said that in this VERY PARTICULAR case it's true, but...

Most DB plans these days are not single employer plans (so you need more than one company bankruptcy to trigger the scenario in question, and that makes it less likely);

Secondly, most DC plans are - by the measures applied to DB plans - underfunded as well. Most people don't contribute more money to their plan when their investments turn negative (or merely under perform) for example; they usually just hang on and hope that things will turn around soon, or maybe they'll shuffle their investments around hoping to trigger a better performance.

As well, most people, even the ones who get a good return on their DC investments don't really know where that leaves them - if you retire with $100K or $500K or 2$M in your DC account, what does that mean? Some people understand, but many do not.

But yeah, if the choice is between a DB plan that's underfunded and being wound up and paying out less than promised against a well managed DC plan, then the DC plan is better.

But on a society level DB plans tend to be much better managed compared to DC plans. For the elite - like derspiess et. al. - DC plans are preferable; but on a society level requiring people to be good financial planners and investment managers to retire comfortably means that most people won't retire comfortably. Most people simply don't have the required skills.

As an aside, apparently these days there are also hybrid plans that combine both DB and DC - but they are even more expensive than pure DB plans.

From an employer side, DC is obviously better than DB because it's cheaper. For some employees, a DC plan is better too because they happen to be good managers of their money; that's not most employees though, and that will result in significant hardship in retirement for many people.

A lot of US companies have underfunded US plans and overfunded European plans. There are two reasons:

1) it tends to be relatively easy to recover funds from plans outside the US in an overfunded status. I'm not a DB expert by any stretch, but it is a consideration that in the US it is difficult to recover overinvested amounts. That creates a bias to stay underfunded--otherwise you might end up with an asset you can't touch.
2) US tax laws result in money "trapped" overseas: meaning that all things being equal funding pension plans is easier outside the US for a lot of multinationals (who are struggling to find ways to invest their money).

[Darth Wagtaros]

Malice    I like his mom's style.

My favorite kids' names from when I worked at the DNA lab:  Nemesis and Chewbacca

I bailed out a Dacron once.

A recently stumbled across an Airman with the first name "Cheetarah".  What generation of parents can we kill for that? 

What kind of monster would do that to their kid?

[citizen k]

President Obama: "If I had a hometown it would look like Detroit"

Detroit goes into Ch. 9

[Admiral Yi]

If?  He has a hometown. 

[Barrister]

If?  He has a hometown. 

He wants to downplay the fact his hometown is Jakarta... 

[Savonarola]

Not quite yet, maybe tomorrow:

Detroit prepares to file for bankruptcy as soon as Friday

The City of Detroit is expected to start the bankruptcy process as soon as Friday. / Romain Blanquart/Detroit Free Press



The City of Detroit is in final preparations to file for federal bankruptcy as early as Friday morning, several sources told the Free Press today.

The filing would begin a 30- to 90-day period that will determine whether the city is eligible for Chapter 9 protection and define how many claimants might compete for the limited settlement resources that Detroit has to offer. The bankruptcy petition would seek protection from creditors and unions who are renegotiating $18.5 billion in debt and other liabilities.

Detroit emergency manager Kevyn Orr, who in June released a plan to restructure the city's debt and obligations that would leave many creditors with much less than they are owed, has warned consistently that if negotiations hit an impasse, he would move quickly to seek bankruptcy protection.

Gov. Rick Snyder would have to sign off on the filing. A spokeswoman did not immediately return telephone calls today.

Orr's spokesman Bill Nowling would not confirm today that the filing is imminent. However, he said, "Pension boards, insurers, it's clear that if you're suing us, your response is 'no.' We still have other creditors we continue to have meetings with, other stakeholders who are trying to find a solution here, because they recognize that, at the end of the day, we have to have a city that can provide basic services to its 700,000 residents."

This week, the city's two pension funds (which have claims to $9.2 billion in unfunded pension and retiree health care liabilities) filed suit in state court to prevent Orr from slashing retiree benefits as part of a bankruptcy restructuring.

Ambac Assurance Guaranty, which insures some of the city's general obligation bonds, has also objected to Orr's plan to treat those bonds as "unsecured," meaning they're not tied directly to a revenue stream and would receive pennies on the dollar of their value. Ambac, and other creditors, have threatened to file suit.

Sources agree that Orr's deal with creditors, widely reported to be Bank of America Corp. and UBS AG, to pay a $344-million swap with a $255-million debtor-in-possession loan, is instrumental in the timing of the potential bankruptcy filing.

The deal gives the city access to $11 million a month in casino tax revenues that Orr has said is key to maintaining city services while negotiations, in or out of bankruptcy court, take their course with other creditors and unions.

Plunkett Cooney bankruptcy lawyer Doug Bernstein, who is not involved in the bankruptcy and is not representing any parties related to it, said today he had no direct information about whether or when the city would file, but said he understands the strategy if the city were to do so Friday or perhaps over the weekend.

On Monday, an Ingham County Circuit Court judge is scheduled to hold a hearing on the city workers' and retirees' challenge to stop the city from filing bankruptcy.

The employee groups, and separately the city's two pension funds in another lawsuit, argue that the governor — who under Michigan law must authorize any bankruptcy filing — cannot do so if the filings include plans to reduce pension benefits, because the state's constitution explicitly protects public pensions.

Bernstein said preventing the court hearing on Monday is likely a key part of the strategy behind a Chapter 9 petition by the city, because a ruling in favor of the employees could put a halt, at least temporarily, to any moves by Orr and Snyder to proceed with a bankruptcy petition. A bankruptcy filing immediately stays all such court proceedings.

"The stay kicks in as soon as the filing, whether it's Friday or Monday," Bernstein said. "The key is taking advantage of the automatic stay. Because of the lawsuit filed by the pension funds and the hearings coming up Monday, it became a factor, so to the extent that (Orr) wanted to continue negotiations with creditors, now the city is forced to" file a Chapter 9 petition.

The 30- to 90-day eligibility fight could be prolonged beyond that time frame if creditors mount a significant challenge to Detroit's eligibility for bankruptcy. In other communities that have filed for Chapter 9 protection, such fights have extended the process a year or more, including Jefferson County, Ala., and Stockton, Calif., two of the largest municipal bankruptcy filings so far in the U.S.

Detroit's would be by far the largest municipal bankruptcy in U.S. history, in terms of the city's population of about 700,000 and the amount of its debts and liabilities, which Orr has said could be as high as $20 billion. Because of the stakes involved, and the impact on residents statewide, as well as 30,000 current and retired city workers and Detroit's ability to stay in business, the case could be precedent setting in the federal judiciary. It could also set an important trajectory for the way troubled cities nationwide settle their financial difficulties.

Bernstein noted that Orr has said repeatedly his office would "negotiate with creditors until and unless we find that the negotiations won't bear fruit, with the understanding that the city has a limited amount of time" for those talks.

[The Brain]

What will da feds do? Nothing? Something? A lot?