Millions in consultancy fees paid out by Detroit emergency manager

By James Brewer
1 October 2013

As part of the bankruptcy of Detroit, Michigan, consultants’ fees paid out by Detroit’s Emergency Manager Kevyn Orr have skyrocketed to over $62 million, according to a recent report. Since the contracts were signed only months ago, fees have increased by as much as $45 million over original estimates.

The figures were reveled by the Detroit Free Press based on documents obtained through the state of Michigan Freedom of Information Act. Legal experts predict the total fees, including to Orr’s former law firm Jones Day, will increase even more if the federal bankruptcy court rules on October 23 that the city will be allowed to proceed with bankruptcy.

These revelations come as Orr insists that there is no money to maintain city services and the living standards of public-sector workers and retirees. Referring to the consulting fees, Orr’s spokesman Bill Nowling told the media Friday, “The fact of the matter is, we can’t afford not to.” He added that the consultants have expertise in a “whole host of areas that we need for the restructuring and in the bankruptcy court.”

With the aid of the bankruptcy courts, Orr—working on behalf of the giant banks and bondholders—is attacking every right of the working class. Plans are underway to sell off art from the Detroit Institute of Arts, slash pensions and eliminate the city’s health care program.

This process of plunder has engendered an entirely predictable degree of corruption and insider dealing, of looting large and small. Tens of millions are sloshing around the offices of the emergency manager, with no accountability or oversight.

The beneficiaries of the millions of dollars in “restructuring costs” are some of the most elite corporate entities in the country. So far, the highest paid of the financial advisory firms is Conway MacKenzie, which has been tasked with “evaluating, developing, negotiating and executing restructuring actions.” The company was contracted in January of this year for $4.2 million, but the contract is now estimated at more than $19 million.

Jones Day, the Washington DC firm that employed Orr until he was appointed emergency manager, has the next highest payout. Contracted in July at $3.3 million, the company may now get $18 million according the Free Press.

Jones Day was one of the firms contracted by the auto companies, with the support of the Obama administration, to use the bankruptcy courts to shut factories and hundreds of dealerships, and to slash wages. Orr himself played a prominent role in the process. The company has a long record of providing aid and advice to corporations and the wealthy. (See “The Detroit bankruptcy and the Jones Day law firm”)

Jones Day’s top lawyers are billing Detroit as much as $1,000 an hour. Other smaller firms charge $850 an hour to $200 an hour for paralegals.

Most of the contracts for the consultants were signed early this year for much smaller amounts than they are now valued. For example, Ernst & Young was signed in June for $1 million. Its contract is now more than $8 million. Also, Miller Buckfire, which was contracted for $1.8 million in July to act as a financial asset advisor, now has also racked fees of $8 million. A full list of the firms was tabulated by the Free Press here.

None of the contracts agreed by Orr require either notification or approval by the City Council or any other body, according to the Michigan emergency manager law. Orr’s spokesman claimed that all the contracts are public record, yet the documents obtained by the Free Press had to be applied for with a Freedom of Information request to the state.

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