Former Michigan Treasurer Andy Dillon raises doubts in Detroit bankruptcy case

DETROIT (AP) - Former Michigan Treasurer Andy Dillon testified in the Detroit bankruptcy eligibility trial Tuesday.

Dillon spoke about a July 10 email he wrote questioning Detroit's request for bankruptcy authorization from Governor Rick Snyder. 

The filing for bankruptcy came eight days later. 

In the email Dillon wrote, "no mention of GRS-why?"  That was a reference to the Detroit city employee pension systems. 

That language was later added in the final bankruptcy authorization to address Dillon's concerns that Detroit was not paying its debt including millions owed to city employee pension funds.

This would help make the case that bankruptcy was a needed remedy for the city.

Dillon also wrote, "I don't think we are making the case why we are giving up so soon to reach an out of court settlement.  [It] looks premeditated." 

He continued, "We don't even say they [creditors, retirees] rejected the city's proposal.  I think we may want a take-it or leave-it demand before we pull the trigger."

Dillon was referencing the bankruptcy filing.  He also wrote, "I agree with the recommendation but I don't think we made the case.  After the letter is revised, let's work on the Gov's (sic) response."

Those who oppose Detroit's bankruptcy are trying to convince Judge Steven Rhodesm that Detroit city officials did not follow proper procedure negotiating in good faith with creditors before filing for bankruptcy. Dillon was an inside player who raised his own doubts.

Dillon also testified that recovery for unsecured creditors was so lawful, he was "very skeptical" there would be out of court settlements.

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