Inside court: Testimony in Detroit bankruptcy trial wraps up for day

Emergency Manager takes stand again in city's Chapter 9 trial

By Rod Meloni - Reporter, CFP ®

DETROIT - Local 4's Rod Meloni is blogging from inside Detroit's bankruptcy trial.

9:45 a.m.

Detroit Emergency Manager Kevyn Orr is back on the stand and is being questioned by Lynn Brimer, an attorney for the Detroit Retired Police Members Association.

She has been showing a series of emails from the Jones Day Law firm and others from Orr's personal account discussing Detroit.

She is trying to establish a muddled timeline of when Orr left Jones Day and his communication with Jones Day's attorneys with the implication that Detroit's Bankruptcy was pre-ordained as early as January or February of 2013. 

She showed an email to Orr by a Jones Day attorney, to which Orr stated, "The state will probably will step up with this [handling the city's pensions in a Ch. 9] that thus far has failed to concede this point at all."

Brimer: Was it Possible bankruptcy was being discussed as early as January?

Orr: Anything's possible, yes.
Brimer: Is the state handling the city's pension obligations?

Orr: No.Brimer: It's a foregone conclusion as of January 28th bankruptcy was a foregone conclusion?

Orr: No.


Another attorney has come to question Orr: Barbara Patek, representing public safety unions.  

Patek: Was it true that working conditions for Detroit police were deplorable?

Orr: The working conditions were substandard.

Patek: Wasn't it true that the fire department was understaffed?

Orr: Struggled to answer and ended up saying he did not know.

Patek: was the staffing poor?

Orr: It was substandard 

Paddock moved on and started questioning Orr about his knowledge that police and firefighters were not included in social security. Orr said he was not aware early on, but is now.

Read previous blogs from bankruptcy.

Orr continues to be cross examined by public safety union attorney Patek.

She is spending considerable time discussing PA 436 and its provisions regarding collective bargaining. The act suspends collective bargaining for five years as the emergency manager arrives and Orr said he has told his team not to conduct any collective bargaining. The Detroit Transportation Department had language in their contract that apparently allowed for collective bargaining after the EM arrived.


Patek you knew one of the bigger jobs you had to deal with as emergency manager was the pension and legacy cost issue?

Orr: Yes

Patek: In order to address these issues you had a number of groups advising you on what needed to be done do address those issued?

Orr: Yes

Patek: Public Act 436 gave you 45 days to come up with a plan?

Orr: Yes

Patek: and you and your advisors needed every day of those 45 days right?

Orr; We used 45 days by there were analyses already in progress.

Patek condinues here cross examination. She is now showing a letter from the Detroit firefighters assoc.

Patek: wasn;t one of your goals to establish some uniformity with the city and its various unions?

Orr: yes.

Patek: With this letter, it came from the president off the four public safety unions, is that correct?

Orr: Yes

Patek: would it not have been beneficial to have uniformity in contracts with these four unions?

Orr: I might or might not be.

Patek: are you aware whether these groups had negotiated as a group before?

Orr: No. 

Patek: do you know whether you received a copy of this letter?

Orr: Yes

Patek: did you as emergency manager do anything about a response to this letter?

Orr: there was a lot of communication with unions and so I don't remember with specificity whether I responded or not.

Patek continues hammering home that the letter was offering or looking for ways to negotiate a settlement with the city.

She is now showing a Jones Day memo

Patek: Thank you for your letter of July 12, 20-13 and that you further for continuing to discuss in good faith pension issues. 

Orr: I instructed my team to continue cooperating and reaching out to the various stakeholders.

Patek: Did you ever consider using the opportunity to potentially extend the contracts as a bargaining tool to address the difficult pension and legacy issues for the city?

Orr: I do not recall doing so. 

Patek: the June 14th proposal, did it contain terms that could be accepted or rejected in the July timeframe.

Orr: They might have, they might not have.

Patek: there was no specific plan on how the vested pension benefits would be affected>?

Orr: No.

Patek: There was not a proposal with enough meat on them to get a settlement?

Orr: No

Patek: You certainly understood by June 14, that if the pension benefits were cut police and firefighters would not have the benefit if falling back on social security?

Orr: Yes.

Patek: Did you understand what that would do receiving as of June 14th, as to how significant pension cuts would affect disabled police and firefighters?

Orr: My understanding was there would have been impacts to some of their coverage and we were looking at ways of addressing those claims. 

Patek wrapped up her cross examinations.

11 a.m. 

Gregory Shoemaker: Jones Day now on redirect and showing parts of the June 14th presentations. He is asking Orr.

Shoemaker: When you became emergency manager an out of court solution was preferable?

Orr: Yes.

Shoemaker: Why?

Orr: It is extremely difficult to achieve in practice ... typically out of court solutions, often times, parties for a number of reasons are not interested or willing to do so.

In regard to an email from governor's Aide Richard Baird:

Orr: It was a sales pitch and puffing and made no legal conclusion. 

Ed McNeil: had you had any meetings with AFCSME and you couldn't recall. March 25th through June 13th, and you could not recall?

Orr: I do not recall  

Asking about a composite exhibit and lengthy one, 148 pages, provides the underpinnings of another document that has been put into evidence. The question has to do with communication with the AFSCME union regarding talks. Shoemaker is showing a letter from jones Day to Mr. Al Garrett president of the Southeast Michigan AFSCME union Council.

Orr: This letter was sent to Al Garrett and to the local presidents … 19 of them to the local Presidents and one council president

Shoemaker: Was this letter ever responded to by the unions?

Orr: No. 

Shoemaker showed a letter from AFSCME special assistant Ed McNeil, who had taped a letter to Orr's office door looking to negotiate a new contract. He then sent a letter to Orr regarding attempts to reach an out of court settlement and McNeil's letter said, "Please be advised that in accordance with Michigan law, we have no authority to renegotiate the tension or medical benefits that members of our union currently receive."

Trying to show that Orr reached out to the unions and received no cooperation in settling out of court. 

Shoemaker also attempted to show that the existing unions were not interested in helping retirees. He showed an email from Ed McNeil that said, "These locals do not represent retirees and and have no authority to negotiate on their behalf." 

Shoemaker asked Orr about his statement made in a public meeting at Wayne State University that pensions were sacrosanct:

Orr: Despite the implication, I wasn't attempting to mislead anyone. I believed that at that time they were going to have to be addressed.

Shoemaker: Were you attempting to mislead at that time?

Orr: No. 

At this point the Judge Rhodes weighs in.

Judge: What would you say to that retiree now about his rights?

Orr: I would say that his rights are in bankruptcy now and I would say they are subject to bankruptcy law.

Judge: That is a far cry from sacrosanct.

Orr: [gives extended answer defending his position and ended with saying "I have been in other cases where federal supremacy laws took affect. 

Shoemaker showed video from the public hearing.

Orr: "The way I am trying to do this is collaboratively because the city has suffered enough under the bile, vitriol, what have we achieved? More of the same."

Shoemaker asked what he was trying to say:

Orr: To put aside conflict and have a negotiated solution. 

Sharon Levine: AFSCME asked in rapid fire succession questions of Orr and his lack of having had any meetings with Ed McNeil regarding any kinds of talks .

Levine: Ed McNeill requested a meeting of you on the day you were appointed March 25 and you waited until May to respond. Orr: "I don't recall."

Orr: I don't recall.

Levine: On March 24 that the unions were taking the position regarding negotiating, you assumed there was no ability to negotiate on behalf of the retirees?.

Orr: I don't know.

Levine: Did you meet with Ed McNeill between March 25 or July 18?

Orr: Not that I recall

11:10 a.m.

Barbara Patek returned to question Orr once again. She was wanting to press him on previous testimony where he discussed the issue of negotiating a swaps adjustment.

It was a bad financial deal the city had struck with wall street regarding a loan taken on the pension system by Kwame Kilpatrick. Orr wanted to get out of that deal and negotiated at 25% haircut for the banks in exchange for the city having access once again to its vital casino revenues. Orr said he had negotiated that deal in roughly a month and felt he had negotiated with the investment banks as hard as he had with the unions. Patek was not convinced:

Patek: That's not accurate is it?

Orr: Why not?

Patek: Didn't you rely on the suspension of collective bargaining under PA 436 not to have robust, hard negotiations with the unions?

Orr: I would not agree with that as a characterization.

Patek: Are you testifying that you engaged in hard give and take negotiations with the unions?

Orr: "We reached out and expected responses that never came and we would have responded in kind.

Patek: You did not engage in tough, hard negotiations with the unions

Orr: I do now know how to answer your characterization." 

Patek then wanted to further discuss Orr's statements regarding the federal supremacy clause and the Judge cut her off. 

Judge Rhodes: "I think we've heard enough testimony about the supremacy clause and it is not within the scope of this trial." 

That is a telling statement for this trial because Orr has been hit hard regarding his statement that under the Michigan constitution vested pension rights are sacrosanct, and yet he believes the federal supremacy clause means that the pensions are not protected in a Chapter 9 proceeding. That, Judge Rhodes says, that is not within the scope of this bankruptcy eligibility trial means that the unions, hoping to hurt Orr and his assertions regarding pensions and underfunding get tougher. 

Orr concluded his cross examination and has left the courthouse.

11:23 a.m.

The City is ending its portion of its bankruptcy eligibility case. This is interesting in that we were told to expect testimony from Snyder aide Richard Baird and former State Treasurer Andy Dillon. That is not the case at this point. Jeff Irwin of Jones Day was the attorney to make that statement.

Jeff Irwin says preparations are underway for closing arguments. The objector unions still have witnesses they will be bringing. Irwin was looking for guidance from the Judge on how much time this will take:

Judge: I had decided in light of the importance of these issues not to set any time limits. Having said that, I will assume counsel will be responsible about this latitude I am allowing to them and that's my conclusion on it. Are you trying to say there should be time limits?

Irwin: No. We were wondering if the court wanted something from us?

Judge: No.

11:45 a.m.

The objector unions' case begins.

Attorney Ryan Plecha representing city employees union is asking the questions of the president. He is laying the foundation right now and he has called Shirley Virginia Lightsey to the stand. She is a tall African American woman in a black suit and black shirt and long grey hair. She has eyeglasses hanging from her sleeve. She is the President of the Detroit Retired City Employees Association.  

Plecha: Would you be negatively impacted by pension cuts in Detroit's Bankruptcy?

Lightsey: Yes.

Plecha: Have you taken financial planning measures should your benefits get cut?

Lightsey: Yes

She is a Wayne State University graduate; bachelor of arts in sociology. Final position with the city:  personnel manager, more commonly known today as human resources manager II.

Some of the departments when was responsible for in the water and sewer department: safety security personnel, training, administration that took care of Equal Employment Opportunity Commission and worker's comp issues. 

Plecha: What size budget approximately did the water and sewerage department

Lightsey: I don't know. My budget was a little over $3 million.

Plecha: Did you have a labor position?

Lightsey: Yes, I was a steward.

Plecha: What does DRCEA stand for?

Lightsey: "Detroit Retired City Employee Association

Plecha: What is it

Lightsey: An organization established in 1960, we are the eyes and ears of the general retirement system retirees.

P: How many members of your union?

Lightsey: 76-7800 members.

Plecha: Do your members pay dues. Is it a voluntary association?

Lightsey: Yes.

12:28 p.m.

Lightsey is being asked about her attendance at meetings with the city. She said she attended some meetings with the city and discussed how she found out about the possibilities of losing pension funding and also retiree healthcare. After she attended a pension board meeting where it was disclosed her membership was likely going to lose benefits she said she :"Immediately started looking for new healthcare and eyecare possibilities for our members." The purpose of the appearance was to establish that there was no contact with her organization other than attending a few meetings with the city regarding the reduction of benefits. 

When the city had its opportunity to cross examine Ms. Lightsey and Greg Shumaker was asking questions:

Shumaker Was there any attempt on the union's part [DRCEA] to elicit any permission from members to appoint drcea to reduce limit or abridge pension or healthcare benefits?

Lightsey: No

Shumaker showed a letter from the DRCEA saying "THE DRCEA would not attempt to solicit any action or obtain or solicit authority from its members to do something prohibited by the Michigan Constitution.

Shumaker: Did you have authority from your membership to bind or otherwise enter into a contract with the city that would reduce pension or health benefits?

Lightsey: I have never had the authority to make a binding and have never asked.

The point Shumaker was looking to make was that the unions have never come to the table with any kind of counter offer to Orr's June 14th turnaround plan. Lightsey's testimony ended and we are now in the lunch recess.

1:45 p.m.

On the stand now is Donald Taylor. He is being questioned on direct examination [the beginning of the case] by Thomas Morris of the retiree association.

Taylor is a retired 26 year veteran of the Detroit Police Department and President of the Retired Police and Firefighters Association.

Taylor says he has a long record of fighting for his membership's rights including registering as a lobbyist, assisting in drafting legislation that would protect pension benefits.

He has been involved in several lawsuits and also has agreed to reduced health care benefits for police officers. Taylor testified he had face to face meetings with Andy Dillon, former House Speaker and Treasurer where they discussed numerous issues regarding police pensions. Later Taylor met with Detroit emergency manager Kevyn Orr, and Orr told him directly he would have face to face meetings with him in the future. He was told to speak with Ken Buckfire later to discuss what might be accomplished. Mr. Buckfire later told me they would set up meetings for a later time.

Moore: Did you attend one on one meetings with Mr. Buckfire?

Taylor: No

Moore: "Did you attend other meetings with the city?

Taylor: Yes, I attended a meeting with a couple hundred people involved with the city's unions. 

Taylor said he attended several other meetings were discussions regarding what would happen with retiree benefits.

At a later meeting he testified there was discussion of changing health care benefits. Taylor said he was offered two options from blue cross and two options from hap that would alter healthcare benefits.

Taylor is asked about a letter to the city from the unions and he said there was an agreement to have the Police Officers' Association president talk with the city and lead those negotiations.

Moore: Did the city ever make a proposal specifically to police and fire retirees?

Taylor: No, not to our organization.

Moore: Could negotiations with the RPFA happen in the future?

Taylor: Yes

On cross examination, Jones Day Geoffrey Irwin is asking Taylor if he ever has had, asked for or tried to find a way to negotiate with the city.

Taylor said, "Why would I ask to negotiate an offer I had never received?"

Homing in on pension issues:

Irwin: Is it not true Mr. Taylor your organization is not empowered to represent retirees with the city?

Taylor: "Yes."

Taylor went on to say his membership could vote on a negotiated settlement as long as his organization has outside help getting to that.

3 p.m.

Donald Taylor has stepped down. The objector unions now have called Mr. Stephen Kreisberg, who is the vice president in charge of the AFSCME national contract bargaining.

Sharon Levine, the AFSCME attorney, is now asking questions at an exceptionally rapid pace. She is trying to get out of her witness what he knows about the tentative agreement negotiated with the city prior to Mr. Kevyn Orr's appointment and even before the consent agreement, a concessionary agreement including wages.

Levine: Was this tentative agreement put into effect?

Kreisberg: No.

The judge jumped in:

Judge Rhodes: What state officials?

K: Andy Dillon and Rich Baird.
Levine: That was for tomorrow your honor.

Levine resumed her questioning

L: "On the June 14 presentation were there any negotiations."

K: "We were told it was not a negotiation. The leaders of the meeting, city officials and their attorneys."
L: "Was Kevyn Orr there?"
K: "Yes he was."

L: "How many city negotiations have you attended."

K: "Hundreds or even thousands."

L: "In your opinion was the June 14th presentation a negotiation?"

K: "No."

L: "Did you attend other meetings?"

K: "Yes."

L: "Was Mr. Orr Present?"

K: "No."

L: "Were you told in any of these meetings these were negotiations?"

K: "We were told they were not negotiations."

L: "In your opinion were they negotiations?"

K: "No."

L: "What is the Poverty level for a family of three?"

K: "$19,000."

L: "For a family of one?"

K: "$11,000."

L: "What is the average pension for a Detroit AFSCME employee?"
K: "$18,000."

We are finished with today's testimony. We will resume in the morning.

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