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Nerd’s memory fails over 33 times in bankruptcy testimony

By T. Kelly
The Michigan Citizen

DETROIT — Gov. Rick Snyder, the self-proclaimed “one tough nerd,” testified at least 33 times he didn’t recall key events in the process leading to Emergency Manager Kevyn Orr’s Chapter 9 Bankruptcy filing.

Invoking attorney-client privilege nearly as often, Snyder was on the witness stand Oct. 28 in response to a subpoena from the UAW, one of the opponents to the bankruptcy filing.

At the trial’s end, Federal Judge Steven Rhodes will decide whether the city meets two qualifications for bankruptcy. Evidence must show the city is both insolvent and has made a good faith effort to reach an agreement with creditors.

The State Attorney General and the EM’s attorneys from Jones Day — where Orr was a partner until appointed by Snyder to be emergency manager — provided testimony earlier in the eligibility trial about Detroit’s financial crisis. They described blight and failure of city services as proof of insolvency. They said Orr’s June 14 Proposal to Creditors was a good faith effort intended to begin negotiations with creditors including retirees. Orr testified creditors never made an effort.

Attorneys representing retirees, workers and unions took turns questioning Snyder to lay out their case against the filing, seeking testimony on when the bankruptcy planning began and who was involved. They wanted to know the governor’s intentions in upholding the state constitutional protection of pensions and whether the bankruptcy filing was a way around that safeguard. They inferred, in questioning, Snyder was attempting to change the state constitution without a vote of the people.


“I don’t recall,” was Snyder’s answer to questions about whether he discussed Article Nine, section 24 of the state constitution with EM Orr. Article 9, the pension protection provision, states: “The accrued financial benefits of each pension plan and retirement system of the state and its political subdivisions shall be a contractual obligation thereof which shall not be diminished or impaired thereby.”

Whether the state has to pay the pension is a legal question, Snyder said, and he would leave it for the courts to decide. He refused to testify whether he and Orr had discussed the constitutional clause protecting pensions. He said discussions about Article 9 and bankruptcy filing were subject to “attorney- client privilege” since attorneys were present during the discussions.

Pensions were not a consideration of the governor’s, according to his testimony. Snyder admitted he knew he had the power to protect workers’ pensions, but chose not to use it. He then refused to answer whether he had discussed with Orr excluding the pensions from the bankruptcy filing.

Snyder said he did not know what the average Detroit city retiree’s annual pension was until he read it in the newspapers. He testified he knew city retirees did not receive social security but was not aware that to be exempt from collecting and paying social security, as the city is, there must be a federally approved pension plan in place.

While admitting he was aware of cuts in revenue sharing to the city in recent years, Snyder said it was “speculative” whether a restoring of revenue sharing might reduce the city’s pension liabilities.

He did “not recall” Orr asking him if the state would share in the financial burden for the city’s pension liabilities.


The issue of the Emergency Manager law was a subject covered in the questioning. Under examination, he related the history of the first such law, Public Act 72, then the passage of PA 4, which he said tightened the earlier act; and finally the rejection of PA 4 by voters in November 2012. He said he favored the new law, PA 436, which passed less than two months later.

The new law provides cities with the option to file bankruptcy and negate collective bargaining agreements, he said.

A spending provision in PA436 shields it from voter rejection. However, Snyder testified the five million dollar provision was not “a significant amount” in the state’s $40 billion budget. He said the appropriation was added — not to keep PA 436 referendum proof — but to pay salaries of emergency managers and hire consultants. Those costs were “previously paid by cities,” he said, noting the state wanted to help.

“We really do care for these cities (under emergency management),” Snyder said to explain the inclusion of the appropriation. He said he was not aware that his appointee, Treasurer Andy Dillon, had discussed the spending provision with Jones Day. When asked whether Dillon had shared that information with him, Snyder said, “Not that I recall.”

Emails reveal the governor’s team feared the repeal of Public Act 4 as early as June of 2012, five months before the election, when Dillon and Jones Day were discussing the possible repeal.

“Did Dillon tell you he had received a memo from Jones Day regarding PA 4,” the lawyer asked, “I don’t recall,” Snyder said while admitting he met regularly with the treasurer. “He has to make decisions about what to bring me,” Snyder said.

Snyder told the court he didn’t recall whether he knew that Jones Day had expertise in municipal bankruptcy when his privately paid aide Richard Baird interviewed the law firm. “Lots of people were brought in to discuss the city relative to Chapter 9. Bankruptcy was a contingency plan.”

Testimony revealed within weeks of his inauguration in January 2011, Snyder’s office was involved with consultants and attorneys from the firms of Miller Buckfire and Jones Day, and the consultations extended until they were hired by the city.

“So, if Dillon was having discussions with Jones Day in April 2012, you were not a party or aware,” the attorney asked. “I don’t recall,” Snyder said.

Despite email evidence to the contrary, Snyder also testified he did not recall specific discussions about the hiring of Miller Buckfire, a consulting company now part of Orr’s team. Nor, Snyder said, did he recall the details surrounding the hiring of Jones Day or Jones Day’s work on the bankruptcy filing. He said he did not recall advising Mayor Dave Bing to hire Miller Buckfire.

Snyder said when the city’s two pension funds filed lawsuits July 17 to stop the emergency manager from slashing pension benefits it let him know that negotiations were futile. Filing Chapter 9 was a difficult but necessary decision, one of national importance, he said. On Snyder’s authorization Orr filed July 18, before a scheduled hearing on the pension lawsuits could be held.

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