Orr: "It seemed to me after going through negotiations, and lawsuits denuding us, I had made a pledge that I would move forward quickly. No one was coming forward. I was running out of time…
with litigation there was no way to come to an orderly resolution."
11:30 AM --
Shoemaker: "Were you aware of hearings in the Flowers lawsuit scheduled on the 22nd?"
Shoemaker: "When did you make your final conclusion to file Chapter 9?"
Orr: “I reached my final conclusion the week before.” Speaking of the letter he sent to the governor Orr said “when I sent it I was ready to file.”
Shoemaker: “Did you know how the governor would receive the letter?”
Orr: "I did not know what the governor’s response would be."
Orr went on to testify that he received the governor’s letter allowing for the Chapter 9 from a staffer that either received an email or fax. He said he immediately instructed his attorneys to prepare.
Shoemaker: "Why do this?"
Orr: "City operations and work rules had for a long time, there was a period to try and solve these issues. They were not being addressed. None of them met. There were attempts in 2012 and 2013, three different reviews, financial distress, financial emergency specified and nothing was working ... we were running out of time and I had to make a difficult decision."
Orr went on to list the city’s problems and the failed attempts at trying to resolve them and said “amazingly necessary reforms” had not been made. He felt it was in the city’s best interest to file for bankruptcy.
Shoemaker: "What is next if the city is not found eligible for bankruptcy."
Orr: "A free fall of crises. This city for 10 years lost a city the size of Wyandotte, it would be in free fall flight. Services have been degraded, to put the city in status quo we would be borrowing more debt upon debt ... this city will continue to fail."
As Orr went into his litany of the city’s problems and the chaos that would ensue should Detroit not be found bankruptcy eligible an objector union attorney objected citing this was Orr’s opinion. Judge Rhodes overruled. At that, Orr’s testimony on direct came to an end. Up next the opposition and the tough questioning that is likely to last more than a few hours.
12:20 p.m. --
Kevyn Orr’s comfort is about the end. After receiving the opportunity to make his case and tell why he took the city into Chapter 9 bankruptcy, the objection union attorneys are lying in wait looking to hang Kevyn Orr either on his own words or his own actions.
Up first to question Orr was Anthony Ullman who represents the pensioners. He started out his questioning by asking Orr whether Kevyn Orr has any experience running a city. Not to be pushed around he answered “no and most governor’s have not either.” Ullman asked him to explain whether outside of being a bankruptcy attorney he had no particular financial expertise to which Orr, after sparring with Ullman said “I think your question is a fair representation."
Ullman trotted out the Jones Day pitch book used to sell the city of Detroit on hiring Jones Day [where the governor and his staff discovered Kevyn Orr. He was looking to have Orr admit that the book uses the threat of a Chapter 9 filing as leverage against creditors as a way to gain concessions, reluctantly Orr admitted it did. Orr said “your implication is that this was a threat it was not.”
Ullman then started pressing Orr on the oath of office he took which swore to uphold the U.S. and Michigan Constitutions:
Ullman: "Did you take the oath truthfully?"
Ullman then pressed Orr on when he decided pensioners would have to have a reduction in their pension payouts considering such reductions are against the state constitution: Orr said on May 12, 2013 he said it became obvious that “all stakeholders would have to be adjusted, that vested pension benefits would have to be cut back.”
Ullman asked if Orr was aware of the pension clause in the Michigan constitution? Orr, who had been admonished by the judge to simply answer the questions as asked instead of embellishing his answers, Orr said, “I think I said yes.”
From there Ullman pressed Orr on his understanding of the Michigan Constitutional pension clause and on how his June 14, 2013 proposal dealt with pension cuts. The answer was yes but Orr did not want to simply give that answer saying contributions to the pensions would be cut but “I don’t’ want to say there would be no more pensions.” He also said the June 14th proposal has changed since then “The fact that this has been proposed, that has evolved."