Conflicts of interest in ‘restructuring’ choices
By Marcus Wright
The Michigan Citizen
DETROIT — In a move that appears to only guarantee his own salary, Mayor Dave Bing jumped on the emergency financial manager (EFM) bandwagon within days of Gov. Rick Snyder’s March 1 proclamation that Detroit is in a financial crisis. His first decision, as he tries to move the city down the EFM path, was the announcement that Jones Day, the Cleveland-based mega law firm, will provide legal services for the city’s restructuring.
The choice is not final until Council approves.
It is a choice that gives citizens pause — especially since the Free Press leaked the governor’s choice for EFM, a partner in Jones Day, Kevyn Orr.
Many ask about that conflict and other possible conflicts for Jones Day.
The client list on the Jones Day Web site (www.jonesday.com/principlesandvalues/clientlist) names several large financial institutions with links to the city’s debt and stock of foreclosed properties dotting the city. Also named are real estate developers and Grand Rapids-based Amway, the largest campaign contributor to Snyder.
Deutsch Banke AG, The Goldman Sachs Group, L.P., JP Morgan Chase, Wells Fargo, Lehman Brothers Holdings, Bank of American, Pershing Square Capital Management and Royal Bank of Scotland Commercial are among large financial institutions that are Jones Day clients.
Multinational real estate firmsJones Lang LaSalle and Morgan Stanley Realty are also clients.
With this client list, many question the likelihood of this EFM working in Detroiters’ best interest. Conflict of interest arises when an EFM, who is also a lawyer, has competing interests or loyalties that either are, or potentially can be, at odds with each other.
Some ask, in the case of Jones Day and partner Orr, whose interests will they serve when it comes to representing the city, the state and/or their many clients.
General Motors, for example, is also a Jones Day client and a city-based corporation that now enjoys tax breaks with the city and the state. The company’s tax status may need to be reviewed in the interests of restructuring the city’s finances. An advocate for the city might say no more tax breaks for GM, the city can’t afford it. A lawyer for GM could argue that General Motors needs the breaks. Jones Day, wearing both hats, is caught in a conflict of interest.
Several companies with significant presence in the city are also on the Jones Day client list: CVS, Chrysler, Exxon Mobil and Sherwin-Williams are examples, along with the financial institutions that hold mortgages within the city or must come to the table to discuss restructuring the city’s debt — as Snyder has said they should do. Again Jones Day could be caught between competing interests.
The EFM has the authority to unilaterally dismiss public officials, work without public oversight, sell public assets and dissolve union contracts.
Jones Day Law Firm
- 1893 — founded in Cleveland, Ohio
- 1982 — first Black partner
- 2,400 attorneys world wide
- 36 offices worldwide
- $1.6 million in annual revenues
- 828 partners; four lawyers of color elevated to partner annually since 2003; total number of Black partners unknown; 153 women partners.