Weeks before a state financial review team found Detroit’s fiscal condition so dire that Gov. Rick Snyder would soon appoint an emergency manager, discussions behind the scenes indicated that officials and lawyers discussed bankruptcy for the city might be the best option, according to e-mails reviewed by the Free Press' Matt Helms.
The e-mails were obtained by labor activist Robert Davis in an ongoing lawsuit against the Snyder administration over whether the appointment of emergency manager Kevyn Orr violated the state’s open meetings laws. They show that top Snyder aides had approached Orr and his law firm, Jones Day, in January and were urging Orr to take the job.
Davis interpreted the e-mails as calling into question whether Orr, Jones Day and the state actually believed at any point that a bankruptcy was avoidable, though Snyder and Orr constantly said they wanted to solve Detroit's financial problems short of bankruptcy virtually up until the time the city filed Chapter 9 documents Thursday afternoon.
Davis questioned the commitment of Orr and Jones Day to negotiating out-of-court settlements since the law firm stood to earn millions more in legal fees once the city filed for bankruptcy.
The e-mails, writes Helms, offer an extraordinary glimpse into the private discussions taking place as state and city officials braced for a controversial state intervention in Detroit that ultimately led to the largest municipal bankruptcy filing in U.S. history last week.
One January email shows Orr and a colleague, Dan Moss, at their Jones Day law firm discussed providing a larger national context for the work Orr and Jones Day would do in Detroit, saying that “making this a national issue is not a bad idea,” according to an email from Moss to Orr.
“It provides political cover for the state politicians,” Moss wrote. “Indeed, this gives them an even greater incentive to do this right because, if it succeeds, there will be more than enough patronage to allow either (Mayor Dave) Bing or Snyder to look for higher callings — whether cabinet, Senate or corporate. Further, this could give you cover and options on the back end to make up for lost time here.”
Orr spokesman Bill Nowling released the following statement Monday afternoon:
"The emails mentioned by Mr. Davis show nothing more than the proper due diligence between the city, a potential vendor and a candidate for emergency manager. The notion that a Chapter 9 filing was a forgone conclusion is absurd. Kevyn Orr held more than 100 meetings with creditors, stakeholders and unions in the last three months before deciding that the best course for restructuring the city was to seek federal bankruptcy protection."
Bing released this statement:
“I did not cut any type of secret deal with Lansing. Throughout this process, I have been very vocal about being against an Emergency Manager.
“When it became obvious that Lansing had made the decision to bring in an Emergency Manager, I thought the best choice was for the City to work in partnership with Lansing to protect the interests of the citizens of Detroit.
“To that end, I thought it very important to keep my Executive Team in place to carry out the day-to-day operations and continue to implement our restructuring initiatives.
“I wanted to maintain my key executives at their existing salaries, since they, along with other city employees, already had taken a 20-percent pay reduction.
“Our intent was to develop an understanding for a working partnership between the City, State and EM. There was never any intent to create a formal, signed agreement.
“To underscore the fact that this was not a formal agreement, note that the State has not kept my executive team intact; they did not support maintaining the federal transit funding for DDOT; there is no lease deal for Belle Isle; and the State has not released the necessary funding to move our initiatives forward, as outlined in the e-mail document.“
