Fee bonanza for attorneys, accountants and consultants:

Who is getting paid for the plunder of Detroit?

By Kevin Reed
28 December 2013

Nothing reveals more openly the criminal looting of Detroit by the wealthy elite than the hundred million dollars being paid out to well-connected law firms, accountants and consultancy businesses, which prepared the city’s bankruptcy. The fee bonanza has been underway as least since early 2012 and accelerated immediately after Michigan Governor Rick Snyder signed a revised emergency manager law on December 27, 2012.

Snyder’s anti-democratic act—the measure had been rejected by Michigan voters in the previous November election—cleared the way for the appointment of former Jones Day attorney Kevyn Orr as Emergency Manager of Detroit in March. Hired at an annual salary of $275,000, Orr proceeded rapidly to sign “core restructuring advisers” to lucrative city contracts and intending all along to push the city into Chapter 9 bankruptcy.

Well before they were awarded city contracts several of these firms were already employed by the state of Michigan. According to court documents, the Jones Day law firm provided more than 1,000 hours of consulting work for top Michigan state officials before being officially retained by the city as a “restructuring counsel” in March 2013. This included encouraging state officials in early 2012 to expedite a bankruptcy filing before voters could defeat the emergency manager law.

Orr and his advisers were so confident that the federal courts would approve the July 18 Chapter 9 petition that multi-million dollar and long-term contracts with advisory services were concluded well before the filing. Meanwhile, as the contract documents show, services such as analyses of Detroit’s financial condition, valuation of the city’s assets, the development of a restructuring plan and preparations for management of the bankruptcy process had long been underway

It is clear from the documents publicly available that Orr and his emergency management team moved in late spring and early summer of 2013 to extend the length of service and increase the financial commitments with the firms that were originally contracted by the City Council on January 16, 2013.

During the five-month legal process that ended with Judge Steven Rhodes’ decision in favor of a court-supervised bankruptcy on December 3, the hired guns emerged as outspoken advocates of Chapter 9 approval. Many of them appeared on behalf of the city as expert witnesses during the bankruptcy trial. The exorbitant fees—expected to reach more than $100 million—are seen as justified compensation for services rendered to protect and enhance the wealth of the city’s richest individuals and Wall Street investors.

While city employees and retirees are being told that their jobs, incomes, pensions and other benefits will be cut and Detroit’s assets, like the artwork of the DIA, sold off, fees as high as $1,000 per hour have been paid to those organizing the plundering operation. While the political and media establishment is on a mission to convince workers and residents that there is no money—according to a confidential document dated December 13, 2013—more than $41.6 million has already been disbursed to 30 restructuring firms on city contracts.

The following is a review of four companies collecting the restructuring fees under contract with the City of Detroit. These are just the most prominent of the many firms, which are cashing in from the carve-up of the city

Jones Day

Washington, DC law firm specializing in corporate bankruptcy

$18,000,000 contract / Approved July 17, 2013 for 14 months

Conway MacKenzie

Birmingham, Michigan consulting firm specializing in restructuring and crisis management

$19,300,000 contract / Approved June 1, 2013 for 16 months

Ernst & Young

New York City accounting firm specializing in cash flow analysis

$19,830,000 contract / June 1, 2013 for 16 months

Miller Buckfire

New York City investment banking firm specializing in asset monetization

$8,000,000 contract / July 16, 2013 for 14 months

What these facts prove is that the Democrats in the Detroit City Council, the Republicans in Lansing and their accomplices in the UAW and AFL-CIO have collaborated with the courts in a massive conspiracy against the working class in Detroit. For an entire year—long before the formal ruling by Judge Rhodes approving the Chapter 9 bankruptcy petition of Emergency Manager Kevyn Orr—a coterie of attorneys, accountants, investment bankers and bankruptcy reorganization experts have been busy at work. They are being paid tens of millions of dollars to carry through the looting of city assets and the gutting of workers’ and retirees’ pensions and health care benefits.