7 Action News Investigator Jim Kiertzner live blogs Detroit's bankruptcy trial from federal court

DETROIT (WXYZ) - Detroit's Chapter 9 Bankruptcy trial is underway in federal court in Detroit.

7 Action News Investigator Jim Kiertzner blogged the hearing from federal court. You can read his dispatches below.

4:13 p.m.

Bennett says the "range of reasonableness" a test in bankruptcy is zero for any benefits other than the Grand Bargain for 3 reasons: 1-can the city sell DIA assets and give free title to someone else when so many pieces of art have been donated with strings attached. 2- can unsecured creditors compel sale of art, no. 3- should the city sell the art even if it could? No.

4:00 p.m.

Bennet says the city will be criticized for not evaluating and marketing assets including the art. But it is not relevant because unsecured creditors don't have access. He also said the DIA settlement in the Grand Bargain allows the city's art assets to be moved into a trust, the city will get paid $466 million over 20 years and the city and the State Attorney General agree not to go after the art in the trust and the art assets including the masterpieces be kept in Detroit. Wall Street Creditors have said lenders would provide $b illion in loans to the city with leins on the art. Bennett says the city would have no ability to pay off those loans.

3:44 p.m.

Bennett told creditors Syncora and FGIC, you've got nothing. He also said that FGIC said in its own brief, the only way to get a municipality to pay debts is to raise taxes.

2:54 p.m.

What is "ipse dixit"? It is a Latin term that means, "he, himself said it." This is at the center of an argument by attorneys for Syncora Guarantee and Financial Guarantee Insurance Corporation (FGIC) trying to discredit Ken Buckfire - a paid financial consultant to Detroit who is set to testify in the trial. They say Buckfire's findings are based on only his judgment and may not be helpful to the court. Buckfire helped Detroit with the Plan of Adjustment that draws financial conclusions after bankruptcy. Buckfire has also said the city can't be forced to sell assets, can't be forced to lien assets and can't raise taxes. On that point, Judge Rhodes said, "that's like, duh." In other words, everyone knows that. They continue to discuss what role Buckfire may play in the trial.

2:17 p.m.

Detroit bankruptcy court is back in session, Judge Rhodes is ruling on pre-trial motions. Opening statements are expected this afternoon.

12:46 p.m.

Court is in recess until 2:10 p.m., when opening statements will begin.

11:26 a.m.

Judge Steven Rhodes continues to go through pre-trial issues and motions.

It is clear Wall Street Creditors Syncora and Financial Guarantee Insurance Corporation will attack the Grand Bargain in the trial. That is the deal struck in mediation that provided $816 million to save the collection of art at the Detroit Institute of Arts from being sold and softens pension cuts to 23,000 Detroit Retirees.

Syncora and FGIC both stand to lose more than $1 billion in Detroit bankruptcy. They won't get a dime of the Grand Bargain money and will argue the Plan of Adjustment is not only not fair but discriminatory to them.

Opening statements in this trial are expected today.

10:18 a.m.

Some drama before bankruptcy, Sam Riddle is not being allowed to stay in the media work room because he did not go through the process of applying for media credentials in advance of the bankruptcy trial. Sam said he would be getting an attorney.

In the courtroom, attorneys and Judge Rhodes continue to go through motions and issues in the trial.

10:04 a.m.

Bankruptcy court is back in session with Judge Rhodes taking up several pre-trial motions, telling a long line of attorneys who entered their appearances that they've performed a "monumental effort" getting court documents ready for this trial.

Many of these issues are important to the trial and include whether video clips can be played during the trial.

Sam Riddle has shown up in the media work room where reporters are watching the trial on a closed circuit TV system. Sam was questioned by the Federal Court Guard inside the room. Sam is a columnist with the Michigan Citizen Newspaper and allowed to stay.

Riddle jokes, "I'm familiar with this system" after being convicted in a public corruption trial a few years ago with then Detroit City Council President Pro-Tem Monica Conyers.

9:29 a.m.

Fusco says Michigan has a statue that allows for utility shutoffs without a hearing. Judge Rhodes asked if DWSD has a hearing policy. Fusco says yes - when a dispute is over a bill amount. The Judge also asked DWSD what is it's policy if people call in and say they have a medical emergency. Fusco says he does not know what DWSD tells customers in that kind of case.

The Judge then asked Fusco if he has any figures on how many customers have been provided financial

assistance by the city, Fusco said he does not.

The Judge asked Jennings if the city should prosecute people who turn the water back on illegally. Jennings says some landlords are turning water back on and some "Robin Hoods" are turning water back on for people.

This is unresolved. Judge Steven Rhodes says he will decide later today in a written ruling on the request for a TRO and will schedule a hearing on a Preliminary Injunction for a later date on the same issue in that order.

9:14 a.m.

Jennings told the Judge that Denise Donaldson has a 92-year-old mother with a feeding tube in her home. Donaldson got a notice that her water would be shutoff on August 27, during the moratorium. She called DWSD on August 20 and was on hold for 2 1/2 hours and did not talk with a city rep.

On a second call she was told if she sent in 10% the water would not be shut off. But Donaldson said she would not have the money until August 29. DWSD did not tell her where to go for help.

She called Michigan Welfare Rights who convinced the city to keep the water on but the fear is, "the water could be shut off at any moment."

Detroit Mayor Duggan has said $2 million dollars has been donated to help pay bills, but Jennings says they are not giving out any of the money yet and they are delayed by an application and vetting process.

Timothy Fusco, attorney for the city is opposing this TRO and is telling the Judge this court can't grant relief sought because it is beyond the reach of the bankruptcy court. 

9:04 a.m.

Jennings continues, "Homrich is a wrecking company no less."

And the plan is to cut off 70,000 homes over 2 years and "the city can not tell you what process is in place" to keep people safe, Jennings said.

She also says they are willing to work with city attorneys to form a comprehensive plan for affordability and for landlords who don't pay the bills and tenants who have their water shut off. Jennings says people who request a hearing with the Detroit Water and Sewerage Department now wait a year to get the hearing. Jennings says Detroit has collected "millions of dollars" off the backs of customers with "no due process of law."

Judge Rhodes asked Jennings, "How do you deal with the argument that when some people don't pay their bills, everyone else's bills go up" and it makes it harder for everyone to pay.

Jennings says utilities have funds available for people who can't pay in the winter to keep from freezing. Jennings says people should be able to pay a percentage of their bill and keep the water flowing.

The Judge also asked if people in trouble should seek out help on their own when they can't pay.

Jennings says the city needs an affordable plan for people who can't pay.
The Judge asked again, can you identify anyone who, during the moratorium, applied for help and didn't get it.

Jennings said, "absolutely, your honor."

The Judge said, "take your time because I want you to get this right."

8:54 a.m.

Jennings told Judge Rhodes that Detroit has commercial customers owing $21 million dollars. The city has shut off 154 of those customers and 100% are back on.

"Detroit needs to get its stuff together," Jennings said.

She says Detroit's website has nothing on it about a hearing process for customers to dispute bills.

"We are at risk and all of us are in this together," Jennings said. 

8:46 a.m.

Attorney Jennings is outlining specific cases of people with health issues. She is also outlining that Detroit contractor Homrich has a contract to approach customers and turn off 70,000 customers over a 24 month period. The contactor will be paid $5.6 million. She alleges Homrich is turning off water without contacting the customers, just marking the front with blue spray paint where shutoff valves are located and shutting off the water.

Jennings says the Detroit Water and Sewerage Department is disorganized and some shutoffs have not been billed for 6 years.  She wants another full hearing to bring in medical experts to show some customers face irreparable harm if the shutoffs are allowed to continue. Jennings also wants customers to be able to request a hearing with the city to dispute any past bills.

8:35 a.m.

Detroit's historic bankruptcy trial to confirm the Plan of Adjustment is underway. Judge Steven Rhodes just took the bench. He is first hearing a request for a Temporary Restraining Order keeping the Detroit Water and Sewerage Department from shutting off water for non-payment of bills. Alice Jennings for the Plaintiffs is arguing there could be "substantial harm" to children, elderly, disabled and low income folks and shutoffs could start a "Pandemic" of medical conditions - if water shutoffs are allowed to continue. Jennings says 19,000 Detroit water customers have been shut off since March. 

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