Monday, May 26, 2014

Court-appointed expert assessing the feasibility of Detroit's bankruptcy plan requests more information

Per the Detroit Free Press:

By Alisa Priddle 

8:12 PM, May 23, 2014  

The court-appointed expert hired to assess the City of Detroit’s bankruptcy plan says the city and an accounting firm hired to help it are refusing to share information she needs to determine if the city’s plan of adjustment is viable and that could delay proceedings.

Martha Kopacz of Boston-based Phoenix Management Services was chosen by U.S. Bankruptcy Judge Steven Rhodes last month to assess the viability of the city’s plan of adjustment prior to a confirmation hearing set to start July 24. The plan is the blueprint for Detroit’s restructuring and exit from bankruptcy.

Today, Kopacz’s lawyer, Stephen Lerner of the firm Squire Sanders, filed a letter with the court on her behalf accusing Ernst & Young and the city of not providing the information she needs to do her job.

“The expert is concerned that without the fully functioning E&Y model and the additional documentation ... she will be unable to fulfill her duty to provide an expert opinion on the feasibility, let alone by June 24, 2014,” the letter said.

The letter prompted a quick response from Jones Day, which represents the city. Lawyer Geoffrey Stewart chastised Lerner for complaining to Rhodes 45 minutes after Ernst & Young’s principal, Gaurav Malhotra, spoke to Kopacz to clear up some misunderstandings.

Kopacz joins a number of financialcreditors as well as Oakland and Macomb counties who have argued for months that the city is withholding critical information related to its bankruptcy plan. Lawyers for some creditors were in court Thursday arguing for a month’s delay to the start of the trial on the grounds the city is not releasing information quickly enough.

Detroit filed for Chapter 9 bankruptcy protection on July 18. Under emergency manager Kevyn Orr and the mediation efforts of Chief U.S. District Judge Gerald Rosen, the city has reached agreements with many of the parties involved in an effort to get out from bankruptcy protection by late September.

The letter from Kopacz’s lawyer accuses Ernst & Young of not providing their full financial models that support the city’s plan of adjustment. Kopacz met with the accounting firm on April 23, the day after her appointment, and requested the data in a format that would allow her to analyze the feasibility of the city’s plan and compare the assumptions and calculations on which it is based.

“E&Y refused this request based on a firm policy against sharing such versions of financial models,” the letter to Rhodes states....

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