Courtroom blog: Snyder takes stand in Detroit bankruptcy trial

3 months after bankruptcy filing, trial will determine whether Detroit really is eligible for Chapter 9

By Rod Meloni - Reporter, CFP ®

DETROIT - Local 4's Rod Meloni is inside federal court for day 4 of Detroit's bankruptcy trial.

9:30 AM --

Vastly different morning here at the federal courthouse than the past several. While we await the testimony of Detroit Emergency Manager Kevyn Orr and Governor Rick Snyder today, there were no protestors present, the observer crowd that has been in the overflow room virtually nonexistent and yet the security is markedly higher. Extra U.S. Marshalls are pacing the sidewalk around the building. There are more police vehicles present and there was one I haven't seen in a while. Detroit Police brought in their portable security tower. It is a retractable guardhouse with tinted windows that extends at least three of not four stories into the air. It is obviously designed to deal with crowd control. The last time that piece of equipment was here was for the underwear bomber's trial and sentencing. Clearly executive protection is considered vitally important today. The courtroom is full of attorneys and we await the judge's arrival. You

9:40 AM --

Judge Rhodes took the bench @ 9am sharp. Kevyn Orr was already on the stand. Greg Shoemaker of Jones Day started the direct examination. He asked Orr to talk about the city's services and how they are provided. He started with an anecdote that said one day the EMS ambulances were all busy and he and the union president had a meeting that day at City Hall. A woman ended up having a seizure in the building and the president had to tend to her because no one else could.

Orr spoke of substandard equipment, lots of calls, they range from people who call 911 saying they fell asleep and their arm had fallen asleep too… to shootings and stabbings.

On the subject of street lights he said 40% of the city's lights are out, large swaths for the city do not have lights. Deferred maintenance has caused the system to become obsolete. Most of the equipment is 1970's vintage, the grid is overworked and antiquated. It is so bad that private contractors the city has attempted to bring in to fix the problems will not allow their employees to work on the grid as it is unsafe. He said "No other large municipality that is of comparable size has these kinds of problems."

On the subject of blight Orr said it is prevalent, causes lots of problems, is in insurance terms an "attractive nuisance" leading to crime like rape. He said a Skillman foundation study showed 50% of Detroit school children are afraid of everything and to cope they pick up "a stick or a rod to protect themselves. To give you an idea of how combative this day might become, an objector union attorney objected to Orr's testimony as hearsay. Judge Stephen Rhodes overruled the object and allowed testimony to continue.

Orr said "City workers work very hard for the most part" and he went on to further talk about the lighting department's troubles. He said in one neighborhood there were five homes getting power and the rest were businesses. He said the city ended up subsidizes power for institutional services. Of the lighting grid itself he revealed "it is a patchwork of repairs. The grid went out last summer when a test was conducted and tripped the grid and turned off lights for two and a half days." He said $12 million has been put into a fund to fix the lights and another $1.8 million  were found to run it. He said he is trying to get a lighting plan.

Shoemaker asked Orr is anyone had ever said city services were adequate. Orr's answer was "no one has ever said services are adequate."

Orr revealed the City has declared a Blight emergency which abolished the requirement of "class b" licenses to demolish a home 35' or less and he is trying to go after residential blight. The program apparently has worked well enough that he is now attempting to go after "class a" or buildings larger than 35' high.

Shoemaker asked him if the financial emergency is still in effect. He said it is.

On the city's financial condition, when Orr took office he said the cash situation was dire. The city was a billion dollar budget, the city in the middle of June the city was going to have on hand $7 million. The revenue situation was trying. The city had seen a period of decline. The revenue collections were still challenging and it was trying to make up for cash flows. The City's liabilities were significant. I had read that the statements of liability being with with legacy costs at $12 billion, that grew to $14 billion. During my tenure and the work done after I got there it was $4 billion higher. His reaction: "I knew things were bad, it was shocking , just how dire things were." I was informed that our cash flow was so tight that we were close to being unable to make payroll. Often the city was paying its bills on a schedule that went as long as 108 days or later. The city was "bumping along" in a set of very bad situations.

9:50 AM --

Kevyn Orr continues to testify. Attorney Jones Day Jeff Shoemaker of Jones Day continues asking Orr to lay out the city's financial problems. Orr said as soon as he took over in March 2013 said the city's cash position was $900,000 at year's end saying it was below the margin of error on a billion dollar budget. That meant the city had a negative cash flow.

Later Orr said as of April 26, 2013 the city had actual cash of $64 million and $226 million in obligations. At that time he said the city was deferring payments and it intended to continue to defer obligations to avoid running out of cash. It was at this point Orr said he felt the city was "clearly insolvent on a cash flow basis", which is one of the requirements the city is obligated to show as part of its bankruptcy filing. Once again Orr said "No one on a serious basis ever said the city was not insolvent."

He was asked about an appearance on WWJ-AM radio where he said "the public can comment… this isn't a plebiscite" .he offered one plan a financial and operating plan that was the plan he was required by law to create. He called it a true summary and a true status of the city's situation.

Of a presentation he did at Wayne State University in early June he said the city was not paying $100 million pension payments along with deferrals to reimbursable accounts. He showed a slide from the presentation that said "Detroit spends more than it takes in. It is insolvent. This path is not sustainable."  

Kevyn Orr was then asked to discuss his proposal for creditors given on June 14th 2013 at Metro Airport.

Shoemaker: "Did you tell anyone that the plan was non-negotiable?"

Orr: "No."


10:07 AM --

Why do you believe this reinvestment is necessary: "This is not the way any city in America should look or operate"

Blight is unacceptable. Our response times are poor. Orr once again reiterated: "I've heard no one say this is a way a city should operate."

Shoemaker asked Orr about his quote of this not being a plebiscite that it applied to the June 14th restructuring proposal is that true?:

Orr:" anyone who says that is taking that out of context."

After the June 14th restructuring plan's release shoemaker asked: Did you not want to negotiate with the city's unions as part of this plan?

Orr: "Absolutely not! We were looking to negotiate the next week. We were looking forward to counter proposals." He went on, and he said "All interested parties had opportunities to prepare for his presentation. We anticipated sophisticated parties had two years to prepare and would be coming to us with proposals. None ever came."

Shoemaker showed on a screen in the courtroom the June 14th turnaround plan Orr gave creditors at Metro airport. They went over page 61 section 9 of the proposal. Orr said "It sets out a timetable how we are going to set out information. We were going to evaluate those discussions in mid-July or so."

Shoemaker: "How much time do you think you had."

Orr: "I said I was running out of time. The powers expired Sept. 2014. Anyone paying attention we had been the time had come to make some decisions. We were in a financial emergency."

Shoemaker: "On June 14, 2013 did you think the city had to file for Chapter 9?"

Orr: "No. I thought that given the state of affairs in the city, given the apparent condition of the city, the bumpers in the police cars were falling off, you cannot say nothing can be done." He said he thought a negotiated settlement was possible.


10:15 AM --

Shoemaker wanted to know if the city's financial condition had improved at all. He asked "is the city still deferring payments?"
Orr: "Oh yes. Payments to trade creditors are still behind, payments to parts suppliers and supply contracts. There are contractors that helped build the new Detroit Police Headquarters."

Shoemaker is not in the process of breaking down the complicated Syncora "swaps" deal. Orr is trying to set up a way to free up casino revenue being captured by a couple of banks as a way to rebuild the city by having two banks take 25% haircuts on their swap deals struck during the Kilpatrick administration. The city council voted against this deal last week. Orr is now testifying that he traded "nastygrams" with Syncora attorneys who were fighting the deal. He said as much difficulty as he was having with Syncora attorneys who wanted to prevent or scuttle the deal he decided he needed to sue in court. He filed a complaint for a temporary restraining order against Syncora and was able to get it. Orr said in winning that case it started casino revenue streaming back into city coffers. Shoemaker asked "if the city had not gotten that TRO what would have happened?

Orr: "It would have been catastrophic."" We would have lost $132 million dollars in casino money. " "It would have been very dire."

10:31 AM --

June 20th meeting We are working hard to try to get come concessions, were working with Bank of America and Merrill Lynch [in the swaps deal], as well as our willingness to default on the "Cox payment". "I thought we were on a very tight timetable and we were serious about what we said and it was a time table we were going to stick to.

Shoemaker: "Did you tell them you would negotiate with them?

Orr: "No, what I told them was we would not waive our rights under the statute regarding collective bargaining for five years." "We would be willing to have discussions short of calling it collective bargaining." "I was trying to tell everyone the same thing… we are not waiving our rights under the statute. We want to have talks and negotiations."

Shoemaker: "Did you ever tell any creditors you were not willing to negotiate?"

Orr: " No." "If anything, we told people were looking to hear counter proposals." "What I said if there are any serious proposals I would be a phone call away. I would get phone calls I was involved in every stage in this process."

Shoemaker: "Did you negotiate in good faith?"

Orr: "Yes I did."

Shoemaker: "Did your team?"

Orr: "Yes"

Shoemaker: "Were you available at this time?"

Orr: "Yes."

Shoemaker: "Did creditors send counter proposals?"

Orr: "Yes. A group of creditors led by Ambac [the municipal bond insurer] and another group of creditors I think."

Shoemaker: "Did you receive any union proposals between June 14th to July 15th."

Orr: "No."

Shoemaker: "Pension funds, retirees?"

Orr: "No."

Shoemaker: "Any other stakeholders?"

Orr: "No."

11 AM --

Shoemaker: In Late June or early July your team went into Chapter 9 preparations, why?

Orr: "It was a contingency. You pray for peace and prepare for war. Not to do so would not be responsible."

More: Detroit EM Kevyn Orr says bankruptcy filing unavoidable

Shoemaker: Did Chapter 9 preparations hurt your ability to negotiate in good faith?"

Orr: "No. We were ready to hear any counter proposal that came over the transom"

Shoemaker: "There were a number of lawsuits filed. Did the show you were not showing any interest in negotiating a settlement."

Orr: "We continued to say we would negotiate even in this litigious area. We continued to try and move the negotiations forward as the situation was growing precarious and out of control."

Shoemaker then moved on to Orr's recommendation to the governor, showing his letter to the governor and asked him why he sent it:

Orr: "I believe at that time a rising level of conflict, we were running out of time."

Shoemaker: Did any of the unions make counter proposals to your restructuring plan?

Orr: "Ambac and another creditor gave written proposals but other than that no."

Shoemaker: "Why send this letter?"

Orr: "I wanted to get the authority in hand, considering the condition of the city, the deficits, growing liabilities, the growing financial emergency ... I felt it was time to make a decision."

Shoemaker: Why did you send the letter?

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?"
Orr: "Yes."

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?"

Orr: "Yes."

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."

12:43 PM --

Ullman moved into another uncomfortable area that lasted for roughly ten minutes where they sparred over the questions and answers: whether on June 14, 2013 [when he gave his restructuring proposal the creditors; did he have the ability to impose a reduction in pensions if the retirees did not agree to it.
Ullman: "What was your authority under [Public Act] 436? [the emergency manager law]."
Orr: "436 did not give the authority."
Judge Stephen Rhodes watched the lengthy exchange and weighed in "It's an extremely tough question." Part of the reason for that is that Orr explained it is a technical legal question and since he is not acting as an attorney he has not looked up nor does he know how this tricky legal issue will play out or might play out in court.
Ultimately Ullman took Orr back to a deposition he gave earlier in the case and statements made to the Detroit Free Press where Orr's position becomes clear: Orr believes PA 436 and the state constitution can be trumped by federal law.

Ullman move on to even thornier issues: "Can you identify any case law indicated that an emergency manager could take a municipality into Chapter 9. Orr said " There is no case law."
Ullman: "did you try to use Chapter 9 to trump the constitution>?
Orr: "I did not want to use it… at some point I felt federal law would trump state law."
This line of questioning went on for some time, Orr later being asked about the levels of pension underfunding and where he came up with his numbers. He said he relies on his staff of consultants including Milliman actuarial that gave him the numbers.
As the morning questioning ended Judge Stephen Rhodes had a pointed question of his own but not to Kevyn Orr, he asked attorney Ullman, "is it your position that the city cannot negotiate pension benefits based on the constitution?"

Ullman hesitates momentarily and then nodded and said yes, that is his team's opinion.

Kevyn Orr finished his testimony for the day but it is a long way away from completion. He will be coming back tomorrow to continue his testimony. He gave way to Governor Rick Snyder who will take the stand at 1 p.m.

The governor is expected to be testifying for the rest of the afternoon. There is a sizable protest brewing outside the federal courthouse now.

1 PM -- Recess

Gov. Snyder takes the stand. He is sworn in.

He was wearing a dark suit, a white shirt and red and white striped tie.
Flowers attorney William Wortheimer is asking the judge for permission to leading questions. The city's attorneys did not object. Motion granted.

Snyder questioning begins. Wortheimer asks when the governor was elected. He got the answer wrong saying January 1, 2013. Wortheimer asked when he took office and he corrected himself saying he was elected in November 2011 and took office in January 2012. Wortheimer asked if the governor understood the oath of office he took to uphold the governor. He said he did. Especially the part about the pension clause in the constitution and he said yes. Wortheimer asked of the governor had discussed the governor's position regarding whether the state should not take on Detroit's debt. Snyder said he did not.

Judge: Did you ever tell Mr. Orr your position as to whether the state has any obligation to take on any of Detroit's Debt? He invoked attorney client privilege.

It was a legal question for the courts to decide. If I had an opinion it would be a legal question that would have to be dealt with anyway.

Wortheimer had asked many of these questions in the governor's deposition where he invoked attorney client privilege and he spent a lot of time trying to establish whether the governor is changing his mind on that. He isn't so he moved on.

Wortheimer: "How important is Detroit's financial situation"
Snyder: "This has been a large issue for 60 years."

Wortheimer want to know who Ken Buckfire was working with the City, who paid him. Snyder said he was one of a group of people who offered unsolicited advice. Wortheimer asked if he advised the state or the city.

Snyder said, "I perceived it as them trying to get hired for an engagement ... I am not going to speculate by whom."

Wortheimer: "Weren't you the one calling the shots on the city's restructuring."

Snyder: I didn't really had anything to do with it, the city ended up hiring Jones Day."

Wortheimer: Wants to know about the meetings the governor has had with Ken Buckfire and Jones Day: "They met with you to talk about ways to deal with the city of Detroit yes?" Snyder: "Yes"

Do you recall jones Day or Buckfire people talking to you about the constitutional protection of pensions? Snyder answered I don't recall."

Wortheimer: Did you interview Mr. Orr? Snyder: Yes.

Wortheimer: How many other interviews did you do?

Snyder: At least one.

Wortheimer: During the interview process with Mr. Or ... did you discuss vested pension benefits could be cut in a Chapter 9 proceeding?

Snyder: "I don't recall."

Do you remember discussing anything regarding pension benefits?

Snyder: "No."

There was laughter in the courtroom as the governor said he was trying to get better and just answer questions yes or no but found himself answering the last question as, "I don't recall."

1:30 PM --

Wortheimer was attempting to figure out who was paying for Kevyn Orr's expenses. There was an objection from city and State attorneys. The Judge asked the governor where the money came from Snyder answered "a Separate non profit that was set up to help with government.

Wortheimer then started asking about Kevyn Orr's turnaround plan. Snyder said "it was intended for negotiations."

"It was a preliminary proposal."

Wortheimer: Were you aware that pension benefits in the City of Detroit are not covered by the Pension Benefit Guarantee Corp.?

Snyder: "Yes"

Wortheimer: Were you aware of the bondholders in Detroit having insurance?

Snyder: "I did not know who had insurance."

Wortheimer Do you recall Mr. Orr making a statement that federal law would trump the Michigan constitution?"

Snyder said "I had heard that from you in a deposition."
Wortheimer: Has Mr. Orr ever said anything that would indicate that he has any intent to honor the state constitutional obligation as part of a plan? [objection]

Snyder asked to have question.
Wortheimer: "Has Mr. Orr ever communicated to you either directly or indirectly that he is going to propose a plan that is not going to affect the retirees?"

Snyder: Invokes attorney client privilege.

1:38 PM --

Wortheimer: wanted to know what conversations had been had with the Attorney General regarding the constitution and the pension benefits

Snyder said he had a conversation with the attorney general understanding he had a job requirement to do so and appreciated his opinion.

Wortheimer: wanted to know what the governor knew about the lawsuits being filed to prevent [the flowers case] regarding an injunction hearing being taken on July 22nd. Snyder: He had seen the papers but was not certain what the suits were going to include.

Wortheimer: discussion of emails needing to be found, the governor found the email. It was provided to Wortheimer. Wortheimer is not homing in on the time permission was granted to Kevyn Orr to file for
Chapter 9 and it was 3:47pm.

Wortheimer wanted to know when Kevyn Orr intended to file Chapter 9 bankruptcy. Snyder said he could not recall but generally it was around the time

Wortheimer: Did the state become involved in drafting the request for Chapter 9? Snyder: no.

Wortheimer wanted to know about the conversations between the governor's office and Orr's regarding the Chapter 9 filing and the governor invoked attorney client privilege.

Wortheimer is now looking into Wednesday July 17th, showing a rollout of bankruptcy filing provided by Orr's office to the governor. Asked the governor if he recalls the document. Snyder said yes.

Woethwimer: On Wednesday the rollout said the filing would occur on the 19th. Snyder: "yes" Wortheimer: the filing didn't happen on the 19th did it? Snyder: No. Wortheimer is discussing how the paperwork was changed to reflect the 18th. The governor said he only knows based on the fact that Wortheimer showed it to him.

Wortheimer: Is it correct that a judge placing restrictions on you that you transmitted your ok at 4:57 at the 18th.

Snyder: as I said deposition that the lawsuits shows they weren't going to make a settlement.

Wortheimer: when you said lawsuits in that answer would you have been talking about the flowers lawsuit and the websuit and the pension lawsuit.

Snyder: Yes and many others.

2:05 PM --

Wortheimer is showing an email involves Mr. Dillon's role with the Detroit problem. City objects on hearsay grounds. State objects, too.

Judge: What's at issue is the city's good faith in filing, so I would question how the good faith of the governor is relevant at all.

Wortheimer: We will be providing evidence that the state helped Kevyn Orr draft the memo on July 16.

Judge: How does this memo bear upon the city's good faith at all?

Wortheimer: The city with all due respect to Mr. Orr that he was operating at the behest of the state. Pulling strings may be strong but the state of mind of the two principals is important. Judge rules he will allow testimony. Now state objects. And judge overrules.

Objections fly back and forth ... Judge over rules and admits the document.

Wortheimer questions the governor again about emails between his staff, legal counsel and himself.

Judge asks governor if he has seen the email before: said he had not read it or needed to read it.

Wortheimer: Now wants to go through the email ... it involves former Treasurer Andy Dillon, Richard Baird.

Wortheimer: Wants to know what investigation the governor took in between the time of Kevyn Orr's request to file for bankruptcy and when you agreed?

Snyder: "I wanted more time. I wanted to sleep on such an important decision. I know you didn't like this in the deposition but I literally I went back through the time I became governor, walked through the relationship with Dave Bing, all the paperwork. I didn't find independent parties for this, I read the file and I made the decision."

Wortheimer: Took the governor through answers in a deposition regarding whether the governor only relied on the file and discussions with lawyers as to whether Wortheimer shows how the staff wanted "a more deliberative approach" to chapter 9.

There was much discussion of an email that recommended the governor go slowly on the chapter 9 filing and suggested being careful with the pension situation.

Email; "I favor this approach for a number of reasons but primarily because I think we should exercise the governor's ability under PA 436 to place conditions upon his authorization for a bankruptcy filing. It talks about pre-approval for anything having to do with pension benefits."

This was the end of the Wortheimer questioning of the governor.

2:14 PM --

Now questioning Governor Snyder is Peter Dechiarra from the United Auto Workers.

Dechiarra: Did you believe there should be large cuts in pension liabilities?

Snyder: I believe this is speculation right now.

DeChiarra: What about at the time. Let me simplify. Do you agree with the position that there need to?

Snyder: It depends on the plan and a judge's plan.

DeChiarra: Do agree with that position?

Snyder: "I don't know that there have to be and in any rate it is not my decision to make."

DeChiarra: Did you take up any investigation as to what that proposal would have on the retirees of the city of Detroit?

Snyder: Yes

DeChiarra: "What was that?"

Snyder: "Went back and looked at Kevyn Orr's letter discussing why he felt the cuts were necessary."

DeChiarra: You do not know what he had in mind for cuts?

Snyder: Yes

Dechiarra: Did you ask him about how big the cuts were supposed to be?

Snyder: Invoked attorney client privilege.

State objected: arguments ... Judge ruled to have DiChiarra move on.

Dechiarra: He is now asking about.

Snyder: It would be a significant discount.

DeChiarra: Interest or principal Did you know when you approved the filing the notes of the interest or not.

Snyder: No.

2:25 PM --

More: Snyder: Lawsuits led to bankruptcy filing

The questioning continues to delve into what the governor knew about the cuts in pension benefits would happen.

Snyder: "I had seen accounts in the press as to what."

Did you rely on them?

Snyder: Yes.
Snyder: Thousand to two thousand dollar a month range.

There was a series of fiery objections as to what the governor understood about what would happen to pension benefits for retirees at the time of the Chapter 9 filing or in the days before.

DeChiarra on arguing his part of allowing his questioning he said to the judge, "for the state to say whether they have food on their table or can pay the rent is irrelevant is in correct."

The judge poured water on this fire by asking:
Judge: "Your objection to eligibility is whether it will have impairment on pension liability ... it's not impact but on the grounds of the constitution ... objection sustained."

DeChiarra then went on: wants to know whether the governor knew that a sizable section [40 percent] of retirees were attributable to the water and sewer department. Snyder said he did not know that at the time. This is important because while Kevyn Orr calls retirees unsecured creditors, but the employees in the water and sewer department would NOT fall under that category because there are funds directly attributable to them [that is the definition of a secured creditor].

DeChiarra: Under law you could have put a contingency on the approval and make the filing contingent on whether pensions were affected?

Snyder: Yes.

DeChiarra: "You chose not to exercise it?"

Snyder: Yes.

Did you speak to Mr. Orr at any time about eliminating pension benefits?

Is invoked attorney client privilege ... two times.

2:30 PM -- Court in recess

3 PM --

Sharon Levine from AFSCME is not questioning the governor. She started out by asking about the tentative agreement with the city in December 2011.

Levine: Do you know why the city did not approve the tentative agreement reached with 30 unions.

Snyder: I don't recall.

Levine is now inquiring about the The Pension Benefit Guarantee Corp. and its protections for private pensioners. She wants to know his understanding of the average pension payments. She is also asking about the governor's understanding of Kevin Orr's turn around plan.

Levine: "Do you know what the Underfunding amount is for Detroit's pensions, you don't know what it is."

Snyder: "It is speculative."

Levine: "On June 14th and you're a retiree you cannot tell what your, and I'm speculating here, $18,00 is going to be reduced to, you don't know what your pro rata share will be and you don't know what you can do to negotiate this."

Snyder: "The first two questions the answers are yes, the third is speculative."

Levine: If you don't understand it, how is the 86-year-old retiree supposed to understand it."

Snyder: "That would have been handled in the negotiating process and I believe Mr. Orr was going to have people representing the retirees in negotiations."

3:15 PM --

Ron Kane who is a retiree attorney questioned the governor. He wanted to know mostly about the impact of the Chapter 9 filing on pensioners.

In his final question he wanted to know why the governor, who had the option to put in a contingency that would have saved retiree pensions, he did not. Here is a portion of his answer.

Snyder: "I made the decision not to put any conditions. We were in crisis mode… these are serious issues and could cause delays. I have confidence in the judicial process. In fact I put a line in the recommendation about making sure when a chapter 9 is filed the resulting restructuring plan be a legal plan in the help with the implementation. The problem has been accumulating, a problem that's happened over 60 years and to the extent it is a national it had not been solved before."

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