Jones Day is Detroit's turnaround firm, even without contract approval

Detroit Emergency Manager Kevyn Orr was once part of Jones Day bankruptcy law firm; City Council wonders if conflict of interest exists

By Rod Meloni - Reporter, CFP ®

DETROIT - In January, the Jones Day law firm sent a six-member team -- which included Kevyn Orr -- to Detroit to try to become the financially-burdened city's turnaround counsel.

City attorney Edward Keelan was there for the pitch. He was so impressed with Jones Day that he backed Mayor Dave Bing's decision to pick the law firm.

"(Jones Day is) in a position to evaluate whether we can restructure without the need of going into Chapter 9 or the debt reorganization process, or not. That may sound like a simple question but it's very complicated," said Keelan.

However, it was at that January meeting when the Michigan governor's office had a light-bulb moment: Orr, a University of Michigan graduate and experienced bankruptcy attorney, would make for an impressive emergency manager for Detroit.

The wheels started turning almost immediately. Orr quickly resigned from the Jones Day pitch team in Detroit, and then left the firm all together.

"The process by which Jones Day was selected for this position operated independently of the process by which Mr. Orr got selected to be EM, and I was part of the process whereby Jones Day got selected. I can vouch for the method by which they got selected," said Keelan.

The Detroit City Council still has questions on whether Orr's affiliation with Jones Day and the firm's affiliation with the city have created a conflict of interest. Councilman Ken Cockrel Jr. has another concern: Jones Day already is on the turnaround job.

"Are we to assume that that work since this contract hasn't been approved yet? That the work that they have done thus far is going to be pro bono, so they're going to be billing for that?" said Cockrel.

The Jones Day contract is set for six months at just less than $3 million. One of the other questions is whether Orr, who was a partner at Jones Day for a couple of months in 2013, would make money as a partner with Jones Day.

Keelan said it's likely he will get a pro-rated share of Jones day profits.

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