To Kathryn CONTENTS Prologue: 4:06 p.m Introduction CHAPTER The Nerd CHAPTER Deal of the Year CHAPTER Kevyn Orr CHAPTER Project Debtwa CHAPTER Chapter CHAPTER Sacrosanct? CHAPTER Swaps Saga CHAPTER Pills Over Picasso CHAPTER You Can’t Eat Principles CHAPTER 10 Haircuts CHAPTER 11 Fixing the City CHAPTER 12 “Get the Damn Buttons” CHAPTER 13 The Empty Cabin CHAPTER 14 One Bullet, Two Creditors CHAPTER 15 The Rhodes Test Acknowledgments Note about Sources Notes Index PROLOGUE: 4:06 P.M July 18, 2013, was a bad day for Bill Wertheimer’s 2005 Saturn Vue to overheat The crossover vehicle lumbered westward on Interstate 96 in mid-Michigan, its overworked engine straining to make the ninety-mile trek from the Motor City to the state capital of Lansing As Wertheimer eased off the accelerator, United Auto Workers general counsel Mike Nicholson typed furiously on a laptop in the back seat, putting the finishing touches on a legal brief supporting an emergency effort to block the City of Detroit from filing the largest municipal bankruptcy in U.S history The two labor attorneys—longtime friends who had marched in picket lines together and spent their careers fighting for union rights—were determined to undermine any attempt by the city to use a bankruptcy to cut benefits for retirees and active workers With two hundred thousand miles on the odometer, Wertheimer’s Vue sputtered along the pavement, the urgency of the moment unrecognized “We pay you enough—get a new fucking car!” Nicholson screamed Even for a city whose descent was half a century in the making, minutes still mattered Detroit emergency manager Kevyn Orr—who had been installed four months earlier by Michigan governor Rick Snyder as the all-powerful de facto CEO of the city’s government—was poised to thrust Detroit into Chapter bankruptcy Orr, a Democrat, reported to the technocratic Republican governor Not the City Council Not the mayor Elected officials had been rendered powerless under a controversial state law that allowed the governor to seize control of cities in fiscal chaos The emergency manager had the authority to sever union contracts, dramatically overhaul city government, dispense of city assets, and control the budgeting process The son and grandson of African Methodist Episcopal ministers, Orr, a bankruptcy attorney before becoming emergency manager, spent the first several months of his appointment preaching the same sermon over and over: Detroit’s financial position is not sustainable, the government is broken, and the city’s neglected residents deserve better By now the strategy was set Earlier in the week, Orr had requested the governor’s permission to file for bankruptcy and mapped out a plan to file the official documents with the court at 10:00 a.m on Friday, July 19 Bill Nowling, Orr’s mustachioed senior advisor and spokesman, had even sketched a blueprint for a media blitz involving Orr and the governor immediately after the filing They would barnstorm Michigan news media and the national press in an effort to define the bankruptcy filing as a fresh start for the city, rather than a dead end Attorneys for Jones Day, the city’s lead restructuring law firm, teed up the appropriate legal documents “Not uncommonly, when you’re preparing for a bankruptcy you circle a target date for a filing, and we did that here,” said Jones Day lawyer David Heiman, the city’s lead attorney in the case “In Chapter 11, we call it a soft landing, so that you continue the operation of a corporation on the day you file as though there was no filing and everything continues to operate smoothly That’s what you strive for.” Wertheimer, Nicholson, and attorneys for the city’s two pension plans were hell-bent on injecting chaos into the equation by outmaneuvering the city’s legion of restructuring lawyers, consultants, and bankers before the case could begin They seized the chance to blast a hole in Orr’s orderly plans around midday Thursday, July 18, when the Detroit Free Press reported on its website that a Chapter bankruptcy filing could come at any time They figured, correctly, that they had a limited window for a surprise attack Fearing the prospect of unprecedented pension cuts—which Orr had already threatened to help balance Detroit’s books—the attorneys immediately devised plans to seek a temporary restraining order, or TRO, preventing the city from filing for bankruptcy Nicholson and Wertheimer jumped into the ramshackle Saturn Vue and set out from the UAW’s Solidarity House headquarters in Detroit—the same complex where, four years earlier, labor leaders had navigated the historic bankruptcies of General Motors and Chrysler—on a course to the Ingham County Circuit Court in Lansing When Nowling discovered that the Free Press was set to post a story, he alerted Orr They headed to Cadillac Place, a palatial state government complex in Detroit that at one time had served as the headquarters of GM, to revise their game plan They feared that after the Free Press story hit the Internet, it would prompt creditors to pursue a TRO to block the case “We were very nervous about it,” Heiman said And for good reason That’s exactly what the city’s opponents had set out to With no knowledge of the efforts to block the filing, Orr and Nowling called Snyder and urged him to sign a letter immediately authorizing the filing on the assumption that creditors would act after reading about the city’s plans for Friday But the governor resisted accelerating his timeline, embracing a methodical approach to the historic process despite a natural proclivity for expediency “I’m committed to my process, and this is what we’re going to do,” Snyder, who had already been reviewing Orr’s request for about two days, said on the call Nicholson, who once directed the UAW’s efforts to protect workers in auto-supplier bankruptcies, knew that a bankruptcy could devastate vulnerable Detroit retirees and union members Although the union’s direct involvement in Detroit city labor negotiations was minimal, UAW president Bob King had taken a special interest in the city’s plight and personally directed Nicholson to help fight pension cuts On their way to the courthouse, Wertheimer and Nicholson bounced ideas off each other, tweaking their emergency request and strategizing for their appearance before Ingham County Circuit Court judge Rosemarie Aquilina An ethical quandary quickly presented itself They had no legal obligation to alert the City of Detroit or the governor’s Republican allies in the Michigan attorney general’s office to their sneak attack “Mike, you think we should notify the state?” Wertheimer said Reluctant to relinquish the element of surprise, Nicholson nonetheless believed they had an ethical responsibility to say something “Yeah, Bill,” he told his friend “It’s not in our interest, but I think we have to that That’s the right thing to do.” They figured that as soon as they placed the call, Orr’s team of bankruptcy lawyers would devise a counterattack “We knew damn well what would happen,” Wertheimer said “But we didn’t feel like we could be in front of Aquilina without giving them notice We didn’t think we could that ethically.” The pair waited until about 3:35 p.m before placing a call to alert the attorney general’s office that Aquilina would hold a hearing at 4:00 p.m Back in Detroit, Orr was initially unaware of the emergency hearing He had spent the last several days fending off a steady barrage of lawsuits challenging his appointment, the potential bankruptcy, and the city’s decision to stop paying its unsecured debts Orr had concluded that rehabilitating Detroit without bankruptcy was impossible He needed a U.S Bankruptcy Court’s protection from the onslaught of lawsuits and creditors Orr’s team had grown impatient at his efforts to entice retirees and financial creditors to reach settlements in lieu of bankruptcy “Their view was: ‘It’s nice you’re trying to this Kumbaya thing and get everybody to work together But it ain’t workin’, they ain’t listening, and you’re starting to lose momentum and the initiative,’ ” Orr said Even so, cities are creatures of state government Federal bankruptcy law still requires cities to obtain state approval to file for Chapter Still unaware of the attempt to undermine his plans, Orr joined a preplanned conference call with Snyder in the three o’clock hour to discuss the course of events for the next day’s bankruptcy filing, even though the governor had not yet signed the authorization letter Suddenly, the door to the governor’s meeting room in Lansing burst open Snyder’s lawyer, Mike Gadola, was panting He caught his breath and spilled the news: Aquilina was poised to hold a hearing that could culminate in an order prohibiting Detroit from filing for bankruptcy “As your legal counsel,” Gadola told the governor, “I advise you to sign the authorization letter.” Snyder, realizing he may have only had minutes to spare, decided he had thought about it enough He grabbed a pen and signed the already drafted authorization letter approving the bankruptcy filing “We’ll fax it,” the governor’s advisors told Orr’s team over the phone Nowling sprinted from the emergency manager’s suite in the Cadillac Place building to the other side of the sprawling complex to wait by the fax machine A minute went by Another minute went by The emergency hearing was fast approaching He dashed off a frantic text message to Greg Tedder, the governor’s liaison to the emergency manager’s office: “I’m standing right by the fax machine.” The liaison called “They were concerned the fax machine didn’t have the right time stamp on it,” Tedder told Nowling Tedder scanned the document onto the governor’s computer and emailed it to Orr’s team with a verifiable digital time stamp of 3:47 p.m Nowling hurried back to Orr’s office and printed out the authorization letter Orr signed it in a rush and called Heiman “Let’s file,” the emergency manager instructed With the pre-prepared bankruptcy filing in hand, Jones Day attorneys rushed to log onto the web filing system called Public Access to Court Electronic Records, commonly referred to as PACER As they uploaded the digital documents, the antiquated recordkeeping system crashed “Unable to upload file,” PACER blared “We only filed sixteen pages, but something happened,” Heiman said Desperate for a solution, associates based at city hall stuffed hard copies into their briefcases and took off on foot for the federal courthouse, a few blocks away in downtown Detroit At the Cadillac Place complex, attorneys furiously scrambled to reboot the system to take a second crack at an electronic filing Meanwhile, the attorney general’s office stalled, making a request for extra time to get to the hastily convened hearing in Lansing Several minutes passed The judge and the attorneys waited Wertheimer and Nicholson had arrived with minutes to spare—no thanks to the Vue—having left Detroit so fast that Wertheimer had no time to change out of the jeans he was wearing “Excuse me, your honor,” Wertheimer said “I apologize for my dress.” “I don’t care how people are dressed,” Aquilina responded “It’s more important that you are here.” But 4:00 p.m passed, and the state’s attorneys were nowhere to be found Minutes later, Thomas Quasarano, an assistant attorney general, entered the courthouse, and the hearing officially began at around 4:10 p.m It was too late for the objectors Detroit’s bankruptcy filing had dribbled into PACER while the attorney general’s office stalled The official time of the filing: 4:06 p.m A law clerk dashed off a note to Aquilina, notifying her that the bankruptcy was official “Aquilina, of course, was pissed,” said Clark Hill lawyer Robert Gordon, lead attorney for the two pension funds that joined Nicholson and Wertheimer in the attempt to block the filing Federal bankruptcy law provides debtors a shield against lawsuits The filing had rendered Aquilina powerless to stop the city’s Chapter petition “It was my intention to grant your request,” she told the objecting attorneys Heiman, the city’s attorney, was relieved “I think our heart skipped a beat for a while there,” he recalled later At 4:06 p.m., July 18, 2013, Detroit hit rock bottom At 4:06 p.m., Detroit finally had hope On the city’s bankruptcy petition, moments before the filing was scanned and digitally submitted, someone had crossed out the “9” in “July 19” with a pen Orr had quickly scrawled “8,” bumping up the bankruptcy filing by a day and changing the course of Detroit’s future DETROIT RESURRECTED Bush, George H W., 74 Bush, George W., casino gambling tax, 2, 28, 29, 61–62, 92–93, 99, 105–6 casinos, 28 Catalyst Acquisition Group, 168 Ceccotti, Babette, 77 Center for Retirement Research, 69 certificates of participation (COPs); see also interest-rate swaps decision not to make payments on, 49, 60–62 European investors in, 103 FGIC and, 134 and grand bargain, 214 interest-only payments on, 27 intricacy of, 91 legality of, 92, 102, 105–7, 166, 205 Steven Rhodes and, 110, 166 strategy behind, 23–28 Chandler, Bill, 93 Chapter bankruptcy advantages of, 14–15, 65–66 Bruce Bennett and, 81 challenges to constitutionality of, 78 and Chapter 18 bankruptcy, 156 creditors and, 134 Eugene Driker and, 131 duration of, 66–67 eligibility of Detroit for, 88, 89 exit of Detroit from, 240 inevitability of, judges influence in, 66 legal threshold for, 75–76 municipalities filing for, 65 necessity of utilizing, 70, 80 and public services, 96 purpose of, 234–35 stakeholders in, 64 and UTGO projects, 163, 164 Chapter 11 bankruptcy, 65 Chapter 18 bankruptcy, 156 Chicago, Illinois, 14, 56, 193 China, 168 Christie’s, 125–27, 167, 168, 171, 172 Christmas Eve Massacre, 211 Chrysler, xi, 4, 9, 27, 32, 60, 73, 89, 134, 153 Churchill, Winston, 73, 74, 142, 144, 242, 243 Churchill Factor, The (Johnson), 242 Cincinnati, Ohio, 86 Circuit Court of Appeals, 72 Citigroup Global Markets, 191 city services, 50, 87, 178–80, 182, 184, 186–91, 216, 231–33 Clark Hill, 55, 77 Clean Water Act, 182 Cleveland, Ohio, 45, 46 Coar, David, 132 Cockrel, Ken, Jr., 25, 27 Cohen, Weiss and Simon, 77 COLA (cost-of-living-adjustment) increases, 158, 159 Coleman, Tim, 163–64 Collins, Barbara-Rose, 24–25 Collins & Aikman, 72 Community Foundation for Southeast Michigan, 137, 148, 174 Community Ventures program, 244 Conway MacKenzie, 44, 178 Coopers & Lybrand, 8–9, 10, 132 COPs, see certificates of participation corruption, 18, 46–47, 51–52 cost-of-living-adjustment (COLA) increases, 158, 159 Cox, Sean, 132, 182, 183, 188 Craig, James, 86–87 Crain, Keith, 123 creditors Ken Buckfire and, 89, 229 “good faith” negotiations with, 76 Kevyn Orr’s initial proposal to, 48–50, 129, 130, 133–34, 140 secured, 49–50 crime rates, 45, 86–87 Cullen, Tim, 101 Curland, Ed, 93 customer service, 47 Daddow, Bob, 183, 187, 189 Daniel, Wiley, 131 Davis, Sylvester, 80 debt, secured vs unsecured, 29 “deficit elimination bonds,” 15 Democratic Party, 194, 197 Dentons (law firm), 77, 206, 215 Department of Transportation, 47 Detroit Blight Removal Task Force, 260n40 Detroit City Council and Belle Isle, 177 consent agreement signed by, 16 and emergency manager, 38 and exit from bankruptcy, 240 and grand bargain, 197, 206, 239 Kwame Kilpatrick and, 22–25 pension bonuses outlawed by, 54 restructuring specialists hired by, 43 and water system, 182 Detroit Free Press, xi, 20, 120, 139, 147, 149, 184, 282n229 Detroit Future City (report), 98 Detroit Industry murals (Rivera), 172 Detroit Institute of Arts (DIA), 113–28 as anchor of Midtown Detroit, 245 Ron Bloom and, 135–36 Ken Buckfire and, 14, 116–20, 124, 125, 127–28 as centerpiece of showdown, Christie’s assessment of works at, 125–27, 167, 171 Elaine Driker and, 207–8, 212 Annmarie Erickson and, 115, 119, 121–22, 124–26, 150, 152–53, 169, 172–73, 175, 238 FGIC and, 215, 218–20, 229 foundation funding for, 138, 140–50, 153–54 and grand bargain, 149–58, 167, 170, 194, 204, 218–20, 223, 237–38 Stephen Hackney and, 168, 173–74 as host for day of reconciliation, 241–43 leadership of, 119–22 Bill Nowling and, 120–23 operation of, 116–17 origins of, 113–16 Kevyn Orr and, 117–25, 127, 130, 150, 160, 168–69, 194 press coverage of, 120–21, 203 purchase offers for collections at, 168 Steven Rhodes and, 127, 150, 170, 173–75, 238 Gerald Rosen and, 130–31, 133, 167, 241–43 Rick Snyder and, 118–19, 122, 151–52 Steve Spencer and, 231 A Alfred Taubman on, 122 taxpayer-financed purchases by, 123–24 Wiener’s assessment of works at, 172 Detroit Medical Center, 178 Detroit Museum of Art, 113–15, 123, 170 Detroit News, 136, 282n229 Detroit Police Department appointment of James Craig to lead, 86 under Kwame Kilpatrick, lack of basic equipment in, 50 murders solved by, 45 and 1967 riots, 40 and response times, 3, 45 Detroit Public Schools, 244 Detroit Red Wings, 230, 245 Detroit Retired City Employees Association, 3, 83, 84, 155, 196, 201 Detroit Retirement Systems Funding Trust, 24 Detroit-to-Windsor tunnel, 225–27 Detroit Water and Sewage Department (DWSD), 135, 181–83, 185, 189–91 Detroit Water Brigade, 190 Dewey & LeBoeuf, 59 DIA, see Detroit Institute of Arts DIA Corporation, 117, 120, 237 Dillon, Andy, 13, 15, 16, 33, 35, 118–19 Dobrzynski, Judith H., 125 Driker, Elaine, 207–10, 212, 213, 227, 235 Driker, Eugene background, 131 and foundations, 137–38, 142–44 and grand bargain, 200, 207–10, 212, 213, 235 and Gerald Rosen, 205 Syncora’s attack on, 213, 214, 227 DTE Energy Foundation, 154 Dubrow, David, 105 Duggan, Mike, 178–81, 188, 190, 197, 232–33, 234, 239 DWSD, see Detroit Water and Sewage Department Education Achievement Authority, 244 Eisenhower, Dwight, 123 emergency city manager, ix–x, 15–17, 16, 80; see also Orr, Kevyn Engler, John, 13 English, Caroline Turner, 105, 106, 107 EPIC-MRA, 282n229 Erb Foundation, 146–47, 148 Erickson, Annmarie and bond insurers, 175 on Christie’s appraisers, 126 and grand bargain, 152–53, 238 on meeting with Bruce Bennett and Ken Buckfire, 119 on museum collection as “perpetual charitable trust,” 121–22 on possibility of having to sell parts of museum collection, 172–73 on possibility of pension cuts, 124–25 on raising endowment funds, 150 on trustees’ gift of museum to city, 115 on value of DIA for Detroit, 169 Ernst & Young, 44 Exxon, Farrakhan, Louis, 42 federal bailouts, 4–5, 27, 132–33, 193–94 Federal Bureau of Investigation (FBI), 20, 45, 52 federal disaster relief funds, 46 Ferguson, Bobby, 20, 182, 257n14 FGIC, see Financial Guaranty Insurance Company Fiat Chrysler, 153 Financial Guaranty Insurance Company (FGIC) and casino collateral, 29 and Detroit Institute of Arts, 135, 167–70, 172, 215, 218–20, 229 and grand bargain, 202, 204, 205, 211, 214–21, 223–26, 228–30 as insurer of COPs, 24, 61 as insurer of interest-rate swaps, 25, 61 and legality of COPs, 102 and Official Committee of Retirees, 133–36, 156, 157 opposition to swaps settlement by, 108, 165–67 potential impact of losses on, 94 Steve Spencer and, 42, 49 fire department, 50, 180 firefighters, 158, 202 “fiscal stabilization bonds,” 21–22 Fitch (ratings agency), 26 Ford, Edsel, 138–39 Ford, Henry, 138 Ford Foundation background of, 138–39 and Detroit, 6, 145, 246 and Detroit Institute of Arts, 124, 141 endowment of, 144 and grand bargain, 147–52 Ford Motor Company, 9, 153 Ford Motor Company Fund, 153 Fort Lauderdale, Florida, 31 foundations, 207, 217 Fox, Stacy, 178–80 Francesco’s Barber Shop, 163–64 Frankie (barber), 163–64 Gadola, Mike, xiii, 68, 264n62 Galazka, Gerald, 160 Gallagher, John, 149 gambling taxes, see casino gambling tax garbage collection, 178 Gargaro, Gene, 119, 127, 151–53, 194, 241–42 Gateway, 10–11 General Motors (GM), xi, 4, 9, 10, 27, 73, 134, 153 General Retirement System (GRS), 51–52 Gilbert, Dan, 5, 153–54, 245 Glengariff Group, 282n229 GM, see General Motors GM Foundation, 153 Goldberg, Jerome, 107–9 Gordon, Robert, xv, 55, 78, 83, 105–6, 154 grand bargain city unions and, 198 Detroit Institute of Arts and, 149–58, 167, 170–74, 194, 204, 218–20, 223, 237–38 Michigan Legislature and, 193–99 Kevyn Orr and, 154–58, 162, 194, 197, 199–202, 234 retirees and, 158–61, 196, 199–202, 207, 217 Steven Rhodes’ ruling on, 234–43 Syncora and FGIC and, 165–67, 170, 204–5, 207–9, 211, 214, 215, 218–19, 228–30 as term, 149 and UTGO bondholders, 162 “Grand Bargain Express,” 243 Gray, William, 114 Great Depression, 115 Great Lakes Water Authority, 191 Great Recession, 1, 15, 18, 65, 134 Greektown Casino, 28 Green, Jennifer, 77 Griffin, Robert, 74 Hackney, Stephen background and early career, 60 and city lighting controversy, 97, 98 and Detroit Institute of Arts, 168, 173–74 and gambling taxes, 61–62 and Jerry Goldberg, 108, 109 and grand bargain, 165–66, 204, 205, 208, 210–11, 216–18, 229 and Jones Day, 63 and Steven Rhodes, 100, 213 and service corporations, 107 strategy of, 94–95 and swaps settlement, 110–11, 165–66 and Syncora, 60–61, 97 “Haircut at the Haircut,” 162–65, 216 Hamilton, Robert, 97 Harris, Joseph, 22, 28 health care benefits, cuts in, 76, 159 HealthMedia, 11 Heiman, David and Ryan Bennett, 166 and Detroit Institute of Arts, 122, 130–31, 169 on filing for bankruptcy, x, xi, 81 and “Haircut at the Haircut,” 162–64 and Jones Day, 34, 59, 60 and Kirkland & Ellis, 210, 225 on necessity of city services, 50–51 and Steven Rhodes’ initial rejection of bankruptcy settlement, 111 Hemingway, Ernest, 18 Hertzberg, Robert, 170 Historic King Solomon Baptist Church, 155 Hollins, Harvey, 41 Hostess, 59 Houlihan Lokey, 42, 49, 134, 157, 214 Hudson-Webber Foundation, 147, 148 Ibargüen, Alberto, 139–40, 143–48, 175, 217 Ilitch, Mike, 5, 245 income tax, city, 2, 13 Indubitable Equivalents, 71 Ingham County Circuit Court, xi–xiii insolvency definition of, 85 sources of, 15–16 interest-rate swaps, 25–26, 28–29, 61–62, 91–95, 99–112, 211–12 Jackson, Dorothy, 30–31 Jackson, Jesse, 39, 42 Jacksonville, Florida, 182 Jarrett, Valerie, 132 Jefferson County, Alabama, 65 job cuts, 2, 23, 25, 27 Joe Louis Arena, 230 Johnson, Boris, 242 Johnson & Johnson, 11 Jones, Brenda, 197, 234, 239 Jones Day (law firm); see also Bennett, Bruce; Heiman, David; Lennox, Heather and auto-dealership franchise laws, 89 and bankruptcy filing, x, 93 and Chapter bankruptcy, 163 and Detroit Institute of Arts, 117, 122, 130–31 and interest-rate swaps settlement, 100, 101, 109, 111 and Kirkland & Ellis, 61, 210 Kevyn Orr and, 32–36, 55, 100, 165 and Kevyn Orr’s “sacrosanct” remark, 84, 85 and PACER, xiv and pension cuts, 88, 140 Pepper Hamilton and, 170 restructuring strategy of, 44, 47, 69 Syncora lawsuit filed by, 63 top attorneys at, 59 Kellogg Foundation, 146, 148 Kennedy, John F., 30 Kerr, Sue, 10 Kieselstein, Marc, 221–23 Kilpatrick, Kwame, conviction of, for criminal conspiracy, 38–39 and COPs, 23–25, 27, 42, 49, 60, 91, 105, 165 corruption of, 20, 21, 52, 182 financial failures under, 20–21 fiscal stabilization bonds issued by, 21–22 job cuts made by, and pension funds, 22–25 and sexting scandal, 20 and shell corporations, 23–24, 166–67 King, Bob, xii Kirkland & Ellis; see also Bennett, Ryan; Hackney, Stephen; Sprayregen, James H M and Detroit Institute of Arts, 210, 241 and grand bargain, 224–29 and Jones Day, 61, 210 Kevyn Orr on, 63 strategy and tactics of, 94, 97, 208, 214–15 Klein, Christopher, 88 Knight, Jack, 147 Knight Foundation, 138–40, 145, 147, 148, 175, 217 Kopacz, Martha, 232 Kresge Foundation, 138, 140–42, 144, 146, 148, 149, 246 Lawson, David, 132 Lazard (investment bank), 77, 134, 136, 157, 184 LeBlanc, Claude, 94, 241, 242 Le Monde, 121 Lennox, Heather, 34, 47, 55, 59, 140, 217 Levin, Carl, 132 Levin, Sander, 74 Levine, Sharon, 77, 78 Lewis & Munday, 26 LGTO (limited-tax general obligation) boldholders, 165 LIBOR rate manipulation scandal, 106, 109 Lightsey, Shirley, 3, 84–85, 90, 155–57, 160–61, 196, 201 limited-tax general obligation (LTGO) boldholders, 165 Lippitt O’Keefe Gorbein, 161 Los Angeles Dodgers, 59 Lowenstein Sandler, 77 Macomb County, 40, 182, 186 Mandela, Nelson, 147 Marisse, Henri, 115 Markell Test, 215 mass transit, 183 McCarthy, Eugene, 74 McGregor Fund, 148 Meet the Press, 37 Mercado, Victor, 182 Merrill Lynch, 23, 27, 28, 29; see also Bank of America Merrill Lynch Metro Times, 203 MGM Grand, 28 Michigan, State of, 13, 69, 106, 130, 160, 194–95, 232, 236 Michigan Building and Construction Trades Council, 198 Michigan Gaming Control and Revenue Act, 99–100 Michigan State Constitution, 83 Michigan State Legislature, 15, 193–99 Michigan State Senate, 195–96, 199 Michigan Supreme Court, 113 Midtown Detroit, 245 Miller Buckfire & Co., 14, 44, 99, 109, 182–83, 226 Miller Canfield, 44, 191 Milliken, William, Milliman (actuarial firm), 56 Milwaukee, Wisconsin, 45, 46 Montgomery, Claude, 77, 85 Moody’s, 26, 56 Moore, Chuck, 44–45, 50, 53, 178 Morris, Thomas, 83 MotorCity Casino, 28, 240 Motown, Mott Foundation, 144, 146, 148 Muchmore, Dennis, 187 municipal bonds, Michigan law on, 23, 24 murder rate, Nacos, James, 93 National Action Network, 38 National Association of State Retirement Administrators, 56 National Center for Education Statistics, 244 National Public Finance Guarantee, 163 Neale, Donna, 32, 37, 104 Neville, Carole, 77, 103, 107, 206, 210, 215 New York City, 14, 184 New Yorker, The, 147, 184 Niblock, Beth, 180 Nicholson, Mike, ix–xii, xiv, 49, 130 1967 riots, 40 Noland, Mariam, 136–39, 144, 146, 151, 174 Nowling, Bill and announcement of bankruptcy filing, x, xi background of, 41 and Detroit Institute of Arts, 120–23, 125, 126 on financial restructuring, 64 and governor’s bankruptcy filing authorization letter, xiii–xiv and grand bargain, 199–201, 235 visit to mayor’s office, 176 Oakland County, 40, 182, 183, 184–89 Obama, Barack, and administration, 4, 37, 132, 134 Official Committee of Retirees creation of, 77 and grand bargain, 158, 196, 201 Shirley Lightsey and, 84–85, 90, 155–57, 160–61, 201 on negotiating in good faith, 82 Carole Neville and, 103, 206 and swaps settlement, 94–95, 133–36 and water system, 184 oil crisis, 19 Olson, Beverly Knight, 147 Orange County, California, 59, 65, 81 Origins of the Urban Crisis, The (Sugrue), 39–40 Orr, Allen Eugene, 30 Orr, Kevyn, 30–42 appointment of, as emergency manager, ix–x, 35–40, 82 background and early career, 30–32 bailout funds sought by, 132 and bankruptcy eligibility trial, 82–84 and bankruptcy filing, xiii–xv, 67–68, 79 and Belle Isle, 177–78 and city budget, 232 and city services, 50, 178–80, 182, 184, 186–91, 232–33 and COPs, 92, 167 and Detroit Institute of Arts, 117–25, 127, 130, 150, 160, 168–69, 194 on Detroit’s future, 240–41 and District Court ruling on settlement, 234 and Mike Duggan, 178–81 and FGIC, 230 and grand bargain, 154–58, 162, 194, 197, 199–202, 234 and Stephen Hackney, 166 and health care cuts, 159, 200 initial meeting with creditors, 48–50 initial proposal to creditors, 129, 130, 133–34, 140 initial skepticism of, 34–35 and interest-rate swaps, 99–104, 106, 107, 109, 112, 165, 214, 226, 228 and Jones Day, 32–33, 59 and pensions, xi, xii, 54–57, 76–77, 88–89, 154–58, 196, 200–202, 217, 221 and police department, 86 and racial tensions, 39–41 and Steven Rhodes, 85, 87–89, 240 “sacrosanct” remark of, 83–85, 196 and Rick Snyder, ix, xi, xiii, 37–38, 47, 67–68, 176, 181, 235, 236, 240 strategy of, x, xiii, 5, 38, 41, 42, 46, 47, 69 and streetlights, 95, 98 team of, 43, 44 and unsecured debt, 60–64 oversight commission, 197 PACER (Public Access to Court Electronic Records), xiv, xv Patterson, L Brooks, 184–89 Pension Benefit Guaranty Corporation, 76–77 pension boards, 52–54 pension cuts, xii, 76–77, 154–55, 195, 196–98, 216–18, 229–30 pensioners, 167, 205 and calls for liquidation of DIA, 155–56 and grand bargain, 199–202 pension funds, 19–20, 22, 23–29, 91 pension obligations, 69, 162–63 pensions as “absolute” contracts, 83 as contractual obligations, 69 pension shortfall, 51–57 Penske Corporation, 153 Pepper Hamilton, 170 Perez, Alfredo, 102, 214, 220–21, 223–24, 229 Perris, Elizabeth, 131, 164, 243 Phelps, Kathy Bazoian, 72 Philadelphia, Pennsylvania, 14 Phoenix Management, 232 Picasso, Pablo, 117 Pittsburgh, Pennsylvania, 45, 46 plan confirmation hearings, 215, 218 plan of adjustment, 66, 68, 154, 155, 159, 162, 181, 186, 190, 191, 207, 209, 215, 216, 217, 221, 224, 225, 232, 234, 237, 239, 261n47, 274n160 Plecha, Ryan, 123, 161 Plummer, Michael, 171–72 Plunkett Cooney, 72, 174 Poisson, Gerald, 186 Police and Fire Retirement System (PFRS), 51–52, 158 police department, see Detroit Police Department police officers, 31, 158 police response times, 3, 45 police union, 202 Poly International Auction, 168 population, decline in, 3, Pottow, John, 79, 87, 88, 96 PricewaterhouseCoopers, “Project Debtwa,” 260n38 property taxes, 2, 3, 67 property values, 18–19, 46, 87, 109 Pscholka, Al, 199 Public Access to Court Electronic Records (PACER), xiv, xv Purdue University, 71 Quasarano, Thomas, xv Quicken Loans, 245 Rago, Ed, 53–54 Raiders of the Lost Ark (film), 220 Rapson, Rip, 140–42, 146, 246 ratings agencies, 26, 190–91 Real Clear Arts (blog), 125 recycling programs, 178 referendum, emergency manager law, 17 regional transportation, 183 Rembrandt van Rijn, 115, 117, 127 Renaissance Center, 10 Republican Party, 15, 133, 193–99 Resolution Trust Corporation, 31–32 restructuring consultants, 64 Retired Detroit Police and Fire Fighter Association, 83, 156, 196 revenue sharing, state, 13 Rhodes, Steven appointment of, as bankruptcy judge, 73–74 background and early career, 71–72 and bankruptcy eligibility, 77–79, 83, 84, 87–90, 91 on bankruptcy in general, 4, 234–35 and bankruptcy settlements, 99 and casino taxes, 92 and city services, 87, 231–32 and Detroit Institute of Arts, 127, 150, 170, 173–75, 238 on fresh start for Detroit, 239 and grand bargain, 167, 225 on helping City of Detroit, 247 and interest-rate swaps settlement, 100–105, 110–12, 165, 166, 173–75, 204, 210–13, 220–24 on limits to free speech, 83 on mediation process, 212–13, 228 on need to reach a settlement, 164 and Official Committee of Retirees, 77 and Kevyn Orr, 85, 87–89, 240 and pension cuts, 83, 88–89, 156, 160, 195 pension plan recommendations of, 237 and plan confirmation hearing, 215–17 and Gerald Rosen, 74–75 and streetlight controversy, 95, 97 and water negotiations, 186–88, 191 Rhodes Test, 216, 238 Richard, Gabriel, Richardville, Randy, 195–96, 198 right-to-work bill, 37 Rivera, Diego, 172 Rizik, Chris, 9, 11, 12 Rizzo Environmental Services, 178 Roberts, Victoria, 131, 202 Robert W Baird & Co., 26–27 Rodin, Auguste, 117 Rose Art Museum, 171 Rosen, Gerald and appointment of Steven Rhodes as bankruptcy judge, 72–75 and Sean Cox, 188 and Detroit Institute of Arts, 130–31, 133, 167, 241–43 and Detroit-to-Windsor tunnel, 226, 227 and “empty cabin” negotiating tactic, 205–6 and grand bargain, 194, 198, 200–202, 204, 206–12, 229–31, 234, 235 haircut of, 162 and interest-rate swaps settlement, 102–5, 110–12, 135–36, 227 and Mariam Noland, 136–38 and non-profit foundations, 147–51, 154 and Kevyn Orr’s proposals, 129–30 and Elizabeth Perris, 164 and philanthropies, 136–38, 140–44 and possibility of federal bailouts, 132 Steven Rhodes on, 238 and Rick Snyder, 132–33, 163, 164 Rosen, Jake, 74 Rust Belt, 45 Saarinen, Eliel, 144 “sacrosanct” remark, 83–85, 196 safe-harbor laws, 100, 268n94 St Louis, Missouri, 45, 46 San Bernardino, California, 66 sanitation services, 178 Schaap, A Paul, 148 school system, 244 Schuette, Bill, 121–22 SEC (U.S Securities and Exchange Commission), 92 secured debt, 29, 49–50 Self-Portrait with Straw Hat (Van Gogh), 127 service corporations, 23–24, 107 Shabazz, Malik, 34, 39 Sharpton, Al, 42 shell corporations, 23–24, 107, 110, 166–67 Shumaker, Greg, 84, 100–101 Sixth Circuit, 72 Skadden, Arps, Slate, Meagher & Flom, 33 Snyder, Dale, Snyder, Helen, Snyder, Rick background and early career, 7–12 at bankruptcy eligibility trial, 82–83, 85–86 and Belle Isle, 177 budget of, 29 and decision to file for bankruptcy, 67–70, 89 and Detroit Institute of Arts, 118–19, 122, 151–52 and grand bargain, 193–95, 198, 199, 202, 230, 235–36 and hiring of emergency manager, 15–17, 33, 35, 40 and Bill Nowling, 41 and Kevyn Orr, ix, xi, xiii, 37–38, 47, 67–68, 176, 181, 235, 236, 240 and public education initiatives, 244 right-to-work bill of, 37 and Gerald Rosen, 132–33, 163, 164 and state’s role in restructuring settlement, 136, 149–50 as technocratic “nerd,” 5, 7–8 and water deal, 188 Snyder, Sue, 10–12 Sole, David, 107–8, 155 Soto, Ed, 214 Spencer, Steve, 42, 49, 134–36, 157, 167–68, 214, 229–31 Spirit of Detroit (statue), 161 Sprayregen, James H M and Detroit Institute of Arts, 172, 241–43 and Eugene Driker, 227 and FGIC, 229 and grand bargain, 207–9 on Stephen Hackney, 61 legal strategy of, 94, 214–15, 227–28 Stallworth, Thomas, III, 197 Standard & Poor’s, 26, 27 Stewart, Paul, 52 Stifel Financial, 14 Stockton, California, 88 streetlights, 46, 95–99, 180 Stryker, Mark, 149 Sugrue, Thomas, 39–40 Sun Also Rises, The (Hemingway), 18 Super Bowl (2010), 12 Supremacy Clause, 84 Syncora Holdings accord with, 228–30 and casino collateral, 29, 61–62, 92 and Detroit Institute of Arts, 135, 169–70, 172, 241 Elaine Driker and, 208–12 and grand bargain, 202, 204–19, 221–30 Stephen Hackney and, 60, 61, 63, 94–95, 211 as insurer of COPs, 24 as insurer of interest-rate swaps, 25 and non-profit foundations, 174–75 and Official Committee of Retirees, 134–36, 156 opposition to swaps settlement by, 108, 165–67 Kevyn Orr and, 63–64 potential impact of losses on, 94 Steven Rhodes and, 221–23, 228 and service corporations, 107 and street-lighting controversy, 96–97, 99 TARP (Troubled Asset Relief Program), Taubman, A Alfred, 122, 123 Taylor, Don, 156, 157, 196 Tea Party movement, 133 Tedder, Greg, xiv temporary restraining order (TRO), xi Tenth Amendment, 65–66 Torielli, Gina, 132 trash collection, 178 TRO (temporary restraining order), xi Troubled Asset Relief Program (TARP), UAW, see United Auto Workers UBS as “bookie,” 91–92 and casino collateral, 29, 92, 110 and Christmas Eve Massacre, 211 Ken Cockrel Jr and, 27–28 Kwame Kilpatrick’s COPs deal with, 23 and LIBOR scandal, 106, 109 monthly payments from city to, 61 Kevyn Orr and, 165 public image of, 93 Gerald Rosen and, 103 and safe-harbor laws, 100 and Syncora/FGIC, 95, 99, 225 and 2009 interest-rate swaps agreement, 28–29 unemployment, 9–10, 19, 21, 27, 243–44 unemployment compensation, 46–47 Uniform Crime Reporting Statistics database, 45 unions, 52, 77, 198, 217 United Auto Workers (UAW), ix, xi, xii, 49, 77, 130, 134, 198 United Nations, 189 University of Michigan, 30–31, 71, 179 unlimited-tax general obligation (UTGO) bondholders, 162–64 unsecured debt, 29 U.S Bank, 28, 62 U.S Bankruptcy Court, xiii, 154 U.S Conference of Mayors, 151 U.S Congress, 65, 75 U.S Constitution, 65, 69, 84 U.S District Court for the Eastern District of Michigan, 73, 74, 129 U.S Internal Revenue Service, 43 U.S Justice Department, 32 U.S Securities and Exchange Commission (SEC), 92 U.S Trustee Program, 32 UTGO (unlimited-tax general obligation) bondholders, 162–64 Valentiner, William, 115 Van Dusen, Amanda, 191 Van Gogh, Vincent, 115, 117, 127 venture capital, 150 Veolia, 187 Vile, Jerry, 203–4 Visitation, The (Rembrandt), 127 Voluntary Employee Beneficiary Associations, 159 Vortkamp, Jean, 80, 86 Waitt, Ted, 10–11 Walker, Darren, 6, 124, 138–39, 143–49, 246–47 Wall Street Journal, 63 Walsh, John, 197 Washington, D.C., 182, 184 waste collection, 178 water system, 181–92 Wayne County, 40, 182, 186 Wayne State University, 83, 245 WDIV-TV, 282n229 Wedding Dance, The (Bruegel the Elder), 126 Weil, Gotshal & Manges, 33, 214 Werdlow, Sean, 21 Wertheimer, Bill, ix–xii, xiv–xv Whitewater investigation, 32 Wiener, Victor, 172 William Davidson Foundation, 148 Williams, Charles, II, 38 Williams, Meeko, 189–90 Wolfe, Jerry, 8–9, 11 Woodham, Doug, 125–26 World War II, WXYZ-TV, 282n229 Young, Coleman, 1, 2, 10, 19, 54 Yuan Capital, 168 Zajac, Ronald, 52, 257n14 Copyright © 2016 by Nathan Bomey All rights reserved First Edition For information about permission to reproduce selections from this book, write to Permissions, W W Norton & Company, Inc., 500 Fifth Avenue, New York, NY 10110 For information about special discounts for bulk purchases, please contact W W Norton Special Sales at specialsales@wwnorton.com or 800-233-4830 Book design by Nick Caruso Production manager: Anna Oler ISBN 978-0-393-24891-3 ISBN 978-0-393-24892-0 (e-book) W W Norton & Company, Inc 500 Fifth Avenue, New York, N.Y 10110 www.wwnorton.com W W Norton & Company Ltd Castle House, 75/76 Wells Street, London W1T 3QT ... his introductory press conference, Orr sent a message to unions and Wall Street creditors: It was time to stop denying Detroit s fiscal fiasco and if bankruptcy was the only way to deliver a... himself “one tough nerd” and a black bankruptcy attorney who identified as a “yellow-dog Democrat.” Their decision to plunge Detroit into the hopeful, but profoundly uncertain, territory of bankruptcy. .. “What we told UBS was, ‘Listen, if you take us to court and require us to pay $400 million, we’re just going to have to ask the government to allow us to go bankrupt.’ The city could declare bankruptcy