Judge denies request for new DIA appraisal, more time needed on healthcare issue

(AP-modified) - Bankruptcy Judge Stephen Rhodes has denied a request for a new appraisal of artwork at the Detroit Institute of Arts.

Judge Rhodes has scheduled a hearing for 10:00 a.m. on January 28 regarding a health care injunction request.

The judge rejected the request from creditors who wanted a role in deciding what to do with the city's valuable art collection.

Federal Judge Steven Rhodes says he lacks authority to appoint a committee.

Creditors filed a request two months ago to have a say in the appraisal of art and any potential way to make money from it. Since then, foundations have pledged more than $300 million to prevent any sale and shore up Detroit pensions.

Separately, Gov. Rick Snyder has talked to state lawmakers about the state chipping in.

Christie's auction house has appraised about 2,800 pieces of art, saying they're worth $454 million to $867 million.

Rhodes says there will be opportunities later to argue over what to do with art, if anything.


Sources involved in closed-door Mediation in Detroit's bankruptcy case tell 7 Action News a bankruptcy deal that will be announced by Governor Rick Snyder this afternoon is in "serious trouble." 

The Governor's plan is to save art at The Detroit Institute of Arts and provide money to soften the cuts coming to Detroit retiree pensions. 

Sources say the deal would be to take over control of the two Detroit Pension Systems and the $5 billion in assets the two pension boards control.

Detroit Emergency Manager Kevyn Orr has said pensions are underfunded by $3.5 billion. 

The deal from the Governor would provide $700 million dollars to creditors including retirees, $350 million would come from the state and $350 million has been pledged by foundations. 

"Why would we give up $5 billion for only $700 million" one source said speaking on the condition of anonymity. The mediation sessions are headed up by Chief U.S. District Judge Gerald Rosen.

Detroit has two pension systems, the General Retirement System which actuarial reports show is funded below 80% and could be taken over by Emergency Manager Kevyn Orr. 

The Police and Fire Pension system is above 80% and any takeover could be fought in court.  Both pension boards last year set aside a $3 million dollar war chest to fight an anticipated takeover.

The two pension systems have had corruption issues in the past including federal indictments of board members in "pay for play" schemes from people trying to get loans from pension funds. 

The funds have also made bad investments including a 2006, $24 million dollar loan for redevelopment of the Book Cadillac Hotel in downtown Detroit in which developers have paid no money back.  The hotel reopened in 2008.


7 Action News has learned mediation over Detroit retiree pensions has moved into Federal Court in Downtown Detroit.

The negotiating team including members of the Detroit pension systems, were seen walking into court Wednesday morning.

These closed negotiations are tied to several other moving pieces.  They include a hearing Wednesday morning before bankruptcy Judge Steven Rhodes to consider another appraisal at the Detroit Institute of Arts.

An earlier appraisal by Christie's only looked at five percent of the art work, and reported it was worth hundreds of millions of dollars. Critics say the art could be worth billions.

Michigan Governor Rick Snyder is expected to announce a deal in Lansing Wednesday afternoon for the state to match a $350 million donation from local foundations aimed to save the artwork and provide money to Detroit creditors.

You can watch the Governor's announcement live at 3:30: http://www.livestream.com/snyderlive

Judge Rhodes will also consider a request by retirees to delay cuts in their retirement that are set to take effect March 1.

Closed negotiations to turn the Detroit Water and Sewerage Department into a regional authority have apparently stalled.  Reports indicate an authority could be formed with Detroit, Wayne County and the state and not include Oakland and Macomb Counties.


Detroit's creditors are asking bankruptcy Judge Stephen Rhodes to form a committee to develop another appraisal of the DIA's art.

Judge Rhodes asked "Why value all the art when we don't have a decision?" He was referring to the fact that we don't yet know if the art is an asset that can be sold.

Attorneys for creditors argued the committee would not be paid for by the city but by creditors themselves.

Bruce Bennett from Jones Day for Detroit argued the most prominent pieces of art bring the most value. He's using two books found on Amazon as his guide to the DIA collection.

Bennett also argued that although Christie's only appraised five percent of the art, it represents 80% of the DIA's value. 

He also says donated art has different rules. While there is city ownership it is complicated because such art is protected by donor privacy and their records belong to the DIA. 

Bennett added the DIA's file room is not well organized. 

To sell the art would be "very valuable" says Bennett.  The decision on whether to sell is a "difficult and sensitive" issue. 

The judge says he will rule on the issue of a secondary appraisal committee at 3 p.m. Wednesday afternoon.

Federal mediators issued this statement today:

Federal Mediators Statement

7 Action News is following all of these developments and will keep you updated.

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