Regrouping for Detroit, GM’s bankruptcy evasion and Chinese corporate records
1. Kevyn Orr and a Detroit rebound?
Last Friday, I happened onto a C-Span broadcast of a speech to a national group of bankruptcy lawyers given by Kevyn Orr — the emergency manager who Michigan Governor Rick Snyder appointed to take over Detroitâ€™s finances and guide the fallen city through bankruptcy. Since I couldnâ€™t stand watching the Yankees get slaughtered by the Los Angeles Angels of Anaheim, I stopped on the Orr speech for a minute. I stayed 45.
I had never seen Orr speak or paid much attention to Detroitâ€™s troubles and his efforts to dig the city out from under. But if his talk — riveting, funny, emotional, self-effacing, forceful, fact-filled, wholly convincing and seemingly off the cuff — is any indication, both Orr and Detroit 2014 are big national stories.
They are worthy of coverage beyond the good work thatâ€™s been done by, among other local outlets, the Detroit Free Press, which ran this comprehensive storyÂ last month, on the one-year anniversary of Orr leaving a lucrative partnership at the Jones, Day law firm to take on the rescue job.
Itâ€™s a job that involves balancing the needs of retired police officers and fire fighters, who had every moral right (and probably an impregnable right under the state constitution) to expect to be paid the pensions (averaging about $30,000 a year) they were promised against the need to relight the cityâ€™s street lamps and provide funds for ambulances and fire trucks to improve horrifying response times.
Orr negotiated a pension deal two weeks ago. He has had to figure out how to make sure the cityâ€™s stellar collection in its Detroit Institute of Arts doesnâ€™t have to be auctioned to pay off bond-holders, while also creating incentives for investors to come back to Detroit. Itâ€™s all being done against the backdrop of a decades-long legacy of local government so incompetent and corrupt that thereâ€™s a stench associated with making good on any debts or union contracts it negotiated — even if the people, particularly the pensioners, relying on those promises are not to blame.
Orrâ€™s speech on C-Span describes his work a lot better than that. Take a look and youâ€™ll see that he — and whatâ€™s he facing and doing in Detroit — are great stories. Pay particular attention to his description of the six year-old girl with the pink backpack waiting at the bus stop.
2. GMâ€™s bankruptcy dodge: Where were the lawyers and the judge in 2009?
As this New York Times story reports, General Motors is aggressively trying to get lawsuits over its faulty ignition suits dismissed because most of the damage from the dangerous product occurred before July 10, 2009 — when a bankruptcy judge allowed General Motors in effect to become a new company and leave behind any liabilities resulting from acts of the old company.
Thatâ€™s a standard and clear legal argument. But hereâ€™s my question: Did the bankruptcy judge grill GM lawyers — and GM corporate officers — during those 2009 hearings to find out if they knew of any possible over-hanging liabilities to consumers resulting from product defects that might become ripe litigation issues going forward?
Parties seeking bankruptcy protection are supposed to list all their liabilities, so that the judge knows what he or she is dealing with (and who is potentially being shortchanged) by allowing a bankruptcy restructuring.
How is the law supposed to apply in the case of potential and foreseeable product liabilities? How did the judge try to apply it in this case? How, if at all, did GM and its lawyers respond to any such queries? Did any product liability lawyers who might have been investigating the ignition switch problem at the time come forward?
Maybe Iâ€™ve missed it, but I havenâ€™t seen any reporting yet on these obvious questions.
3. Chinaâ€™s open corporate records:
This story about the investigation of the business success of relatives of another former high-ranking Chinese official in the New York Times 10 days ago (co-reported by Michael Forsythe, the former Bloomberg reporter who resigned allegedly because Bloomberg spiked his story about the business connections of the Chinese elite) was yet another coup for the Times.
But it was this sentence that interested me the most, because Iâ€™ve seen variations on it in most of these great scoops about Chinese officialsâ€™ business dealings:
Three of Mr. Zhouâ€™s relatives — a sister-in-law, a son and Ms. Zhan, the sonâ€™s mother-in-law — hold or have controlled stakes in at least 37 companies scattered across a dozen provinces, from Audi dealerships to property firms, according to corporate documents filed with the government.
Those italics are mine. It seems from reading these and other stories that somehow clear records of the ownership of Chinese corporate assets are more accessible in China than they are in the United States or other countries.
How did that happen? If top Chinese officials are so concerned about this kind of reporting that they wonâ€™t hesitate to harass the news organizations doing it by holding up their visas (or, in the case of Bloomberg, limiting the purchase of Bloomberg data terminals), why havenâ€™t they shut down access to these records?
PHOTO (TOP): A visitor at the Detroit Institute of Arts museum looks a mural by famed Mexican artist Diego Rivera in Detroit, Michigan, June 2, 2013. REUTERS/ Rebecca Cook
PHOTO (INSERT 1): Detroit’s emergency manager Kevyn Orr speaks during an interview with Thomson Reuters in New York, April 9, 2014.Â REUTERS/Eduardo Munoz
PHOTO (INSERT 2): General Motors Chief Executive Officer Mary Barra during a launch event for new Chevrolet cars before the New York Auto Show in New York, April 15, 2014. REUTERS/Carlo Allegri