Testimony ends in Detroit bankruptcy trial

November 7, 2013 • Business
FILE – This Sept. 19, 2013, file photo, shows the city of Detroit from midtown. Testimony has ended in a trial to determine whether Detroit is eligible to slash billions of dollars in debt in bankruptcy court. Closing arguments are set for Friday, Nov. 8, 2013. (AP Photo/Carlos Osorio, File)

DETROIT (AP) — A police union leader who was the last witness in a trial to determine Detroit’s next step in bankruptcy testified Thursday that city officials were not interested in give-and-take negotiations before the historic filing.

Detroit wants to slash billions of dollars of debt in the largest bankruptcy in U.S. history. But before any numbers get crunched, it [auth] must prove to a judge that it’s eligible for Chapter 9 by passing several key steps, including evidence of good-faith talks with creditors early last summer.

Unions and pension funds claim emergency manager Kevyn Orr and his legal team planned bankruptcy for months and really had no desire to strike a deal. They are also pointing to the Michigan Constitution, which says public pensions can’t be altered.

Closing arguments are set for Friday.

Mark Diaz, president of the Detroit Police Officers Association, was asked about meetings held between June 14, when emergency manager Kevyn Orr offered just pennies on the dollar to creditors, and the bankruptcy filing on July 18.

“At one of the meetings it was definitely portrayed to me these were not negotiations,” Diaz testified.

A consultant for city pension funds, Bradley Robins, says Orr’s team didn’t allow a reasonable amount of time to negotiate possible changes to retiree health care. He said he didn’t have access to critical data until June 21, less than a month before the bankruptcy filing.

But on cross-examination, Robins said he wasn’t personally authorized to negotiate for the pension funds. He also acknowledged that “it would be our starting point” that pensions can’t be touched.

During four days of testimony, Orr defended his actions with creditors and said four weeks were plenty to make progress. The timing of the Chapter 9 filing was also affected by a lawsuit in state court that was aimed at derailing the process.

Orr, a bankruptcy expert who was appointed emergency manager last March, has said Detroit has at least $18 billion in long-term debt, including $3.5 billion in pension shortfalls.

If Detroit is found eligible to stay in bankruptcy, the case would turn to how to solve the debt. The city has said it could propose a plan by the end of the year. Meanwhile, a team of mediators has been meeting with all sides with the hope of reaching an out-of-court compromise.

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