Wednesday, March 13, 2013

Chrysler bankruptcy lawyer top pick for Detroit manager

(Reuters) - A bankruptcy expert who collected more than $1 million in fees in Chrysler's restructuring is the top candidate to take over Detroit as emergency financial manager. Kevyn Orr, a partner in Washington with the law firm Jones Day, is expected to be named to the post by Michigan Governor Rick Snyder this week, a source with direct knowledge of the matter said on Tuesday. Orr, 54, has wide experience in business restructuring and a reputation as a calm leader who thoughtfully considers a range of views. He was Jones Day's third most active partner on the Chrysler restructuring, piling up $1 million in fees in the first year on the case. "Facts are stubborn things, and Kevyn is willing to be bound by those and willing to make courageous decisions," said Ben Wilson, Managing Principal at the Washington law firm Beveridge & Diamond. One decision that Orr is likely to face is whether to recommend the city file for bankruptcy, which, if allowed by the state, would be the biggest municipal bankruptcy in U.S. history. Detroit, the birthplace of the U.S. auto industry and Motown music, has suffered an exodus since the U.S. housing crisis, leaving it with falling tax revenue and rising crime. It has "operational dysfunction" in its government, debt of $14 billion, and a deficit projected to hit more than $100 million when its fiscal year ends on June 30, according to a report commissioned by the governor. On Monday, Detroit Mayor Dave Bing said the city had chosen Jones Day as its restructuring counsel. The Detroit Free Press later reported that Orr was the top candidate for emergency manager, which Reuters confirmed by a source with direct knowledge of the matter. Orr did not return calls and emails on Tuesday. Snyder declined to comment. CHRYSLER TRACK RECORD Orr established himself as a restructuring leader during Chrysler's intense five-week dash to complete its sale to Fiat in 2009, a turnaround that some considered improbable at the time. He logged $1 million in fees on the Chrysler restructuring in the first year, according to court documents. He billed as much as $750 an hour, above the average hourly rate of $690 for a Jones Day partner. Two other partners, John Papadakis and Adam Plainer, billed at more than $1,000 an hour. During the initial weeks, Orr appeared regularly in court and examined witnesses as Chrysler battled for approval of its sale to Fiat, a deal backed by U.S. government funding. He briefed reporters during court breaks and patiently walked them through the complex proceedings. Before joining Jones Day, Orr was director of the executive office for the U.S. Trustee, the arm of the Justice Department that oversees bankruptcy. Richardo Kilpatrick, a Detroit attorney who worked with Orr in the Trustee's office, said he expected Orr to try to work by consensus rather than by force. "He's got the right skill set to deal with the issues confronted here, if anybody does," Kilpatrick said. Standing behind Orr will be Jones Day, with 2,400 lawyers, making it the world's fourth-largest law firm, according to rankings by the American Lawyer magazine. The firm recently added Bruce Bennett, a Los Angeles-based bankruptcy attorney who is among the most experienced in the country with municipal, or Chapter 9, bankruptcy. Bennett oversaw the bankruptcy of Orange County, California, which at the time was the largest municipal bankruptcy ever. CITY OPPOSITION Orr, originally from Florida, earned his graduate and law degrees at the University of Michigan, according to Jones Day's website. An African-American, he is the chairman of Jones Day's diversity task force. The pick was "very shrewd by the governor," said John Pottow, a professor specializing in bankruptcy law at the University of Michigan Law School. But not everyone reacted positively to reports of his imminent appointment to the job. "Jones Day has a reputation of protecting big banks while leaving out the small people," said Reverend Charles Williams, head of the Michigan chapter of New York-based Reverend Al Sharpton's National Action Network of community activists. "They'll save bondholders and banks, but not the small, local-based businesses that employ Detroit (residents)." Orr's emergence on Tuesday coincided with a hearing in the state capital, Lansing, where representatives of the Detroit City Council tried to convince state officials not to appoint an emergency manager. David Whitaker, director of the City Council's research and analysis division, said bringing in an outside manager would sideline elected leaders and was "beyond anti-democratic." "Why take a move like that that's so provocative when you have a document in place that everybody's signed onto?" he said, referring to an April 2012 agreement between the city and the state. Edward Keelean, Detroit's acting corporation counsel, warned that the appointment of an emergency manager would trigger court challenges by labor unions and others. An emergency financial manager would have authority over Detroit's fiscal affairs, including contracts, asset sales, layoffs and consolidations. If a manager is appointed, the city can challenge the decision in state court. But such court challenges have failed in Michigan in the past. Michigan Chief Deputy Treasurer Mary MacDowell, who presided over the hearing, said she would review the information presented by city officials and send her recommendation to Snyder. (Reporting by Steve Neavling, additional reporting by Dawson Bell, Tom Hals, Karen Pierog and Ben Klayman; Editing by Eddie Evans, Bernard Orr)

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