Summary: After going through bankruptcy in 2014 with the help of Jones Day to determine the financials, things are going according to plan, so the mayor wants someone to blame.
When the City of Detroit was going through its bankruptcy proceedings in 2014, prestigious law firm Jones Day was brought in to help run the numbers. Now that the pension liabilities are showing a $500 million growth since the plan was approved, Mayor Mike Duggan is pointing fingers at the firm claiming the firm kept him in the dark about the figures used to determine the city’s pension liability plan.
Jones Day earned roughly $58 million in legal fees for their work plus endless praise from the federal judge over the case. However, the quality of their work is being questioned by the city and others so a managing partner at the firm came to the defense of the firm’s work.
When Duggan threatened a lawsuit against the firm and the emergency partner Kevyn Orr for hiding the numbers from him, a Jones Day partner in Washington D.C., Stephen Brogan, penned a letter attacking Duggan’s claims. Brogan’s clever comeback in a scathing letter was to call Duggan a “hack” with baseless and contrived allegations.
In the letter Brogan says if the case continues, “It is designed only to serve the venal interests of a political hack who has placed personal animus and self-interest ahead of the truth. No mayor in the history of this country has received the assistance that the plan of adjustment gave Detroit by removing $7 billion dollars in liabilities from its balance sheet.”
Brogan goes on to claim that Duggan is doing this for political gain – there is a month left for mayoral candidates in Detroit to file their paperwork. He wrote in the letter, “While it is predictable that an elected politician would want to take credit for surpluses and look to blame others if financial questions arise, and the Mayor’s latest comments obviously illustrate that, we will not allow this meritless action to be so used. Filing this action would place the Mayor in a long line of corrupt Detroit politicians who placed personal ambition above an objective determination of the City’s best interests.” The 13-page letter notes that Duggan testified during the case that he reviewed “every number.”
Detroit political insider Steve Hood said, “It was tactless, unnecessary, they don’t live here, they don’t vote here. It is not germane to the issue whatsoever what they think about the man – whether there are merits to the case or not – if they would have been zealous as they were in that letter than looking over the actuary tables, we wouldn’t be here we wouldn’t have a $490 million hole.”
Hood explains that groups like the American Federation of State, County and Municipal Employees went to the firm and judge, questioning the numbers. Hood wants to see Duggan sue the law firm but admits that Duggan approached the situation incorrectly. Going up against a big law firm like Jones Day is not something to take lightly. Hood explains, “Duggan is right on, in terms of fighting Jones Day. I don’t know if I would have messed with the president’s council. I would have just gone ahead and sued him.”
David Fink, the city’s attorney for this issue, said, “Mayor Mike Duggan and CFO John Hill have stated that they were not informed or briefed regarding the risks associated with the mortality tables and other factors that lead to inadequate funding of the city’s pensions under the plan of adjustment. While there is a fair amount of name-calling in the Jones Day letter, nothing in that letter contradicts the statements of the mayor and the CFO.”
What would Jones Day have to gain by not doing their work correctly? Tell us in the comments below.
To learn more about Jones Day, read these articles:
- Chicago Attorney Dan Reidy Picked to Lead Jones Day’s Business and Tort Litigation
- Jones Day Plans to Open Detroit Office
- Jones Day Takes over Top Spot from Skadden
Photo: flickr.com