Mich. gov. denies knowing donors for manager fund

AP News
Posted: Oct 10, 2013 6:38 PM
Mich. gov. denies knowing donors for manager fund

LANSING, Mich. (AP) — Michigan Gov. Rick Snyder said under oath that he does not know who contributed to a nonprofit fund that is covering housing and some other expenses for Detroit's state-appointed emergency manager.

"There's an independent board that does that work," the Republican governor said Wednesday in response to questioning by a labor union attorney during a deposition about why he signed off on the largest public bankruptcy filing in U.S. history in July. The Associated Press obtained a draft transcript of the deposition Thursday.

Some of emergency manager Kevyn Orr's expenses are covered by Snyder's New Energy to Reinvest and Diversify, or NERD, fund because "it was created to offset the burdens of government," Snyder said. He pointed to past expenses on travel and upgrading a press auditorium in his Lansing offices.

Snyder has come under criticism for using the fund to pay a top aide and to cover Orr's expenses. Orr's $275,000-a-year salary is paid for by the state Treasury Department.

The fund can legally accept unlimited anonymous donations, though Snyder is reviewing whether to disclose the identity of future donors.

He answered questions about the fund and Orr's expenses after one of his attorneys objected by saying it was not relevant to the issue of whether Detroit is eligible for bankruptcy. He agreed to answer in the "spirit of cooperation and to move these proceedings along," Assistant Attorney General Margaret Nelson said, according to the transcript.

AFSCME lawyer Sharon Levine wanted to know if Snyder knew if any consultants hired by Detroit or any city creditors had donated to the fund, or if any NERD contributors had given money for or against a ballot measure that repealed Michigan's emergency manager law last November.

The testimony can be used as evidence in an upcoming trial that will determine whether Detroit is eligible to shed or restructure at least $18 billion in debt in U.S. Bankruptcy Court.

Snyder has repeatedly said bankruptcy was a last resort for Detroit, which has lost 25 percent of its population since 2000 but continues to bear pension and health care obligations struck in better times. Local elected leaders were benched in March when Orr, a bankruptcy specialist, was appointed emergency manager with sweeping powers.

In the three-hour deposition, Snyder said any proposed changes to vested pension benefits for Detroit retirees will be made by a federal judge if the city is allowed into bankruptcy. Orr has said Detroit's debt includes underfunded obligations of about $3.5 billion for pensions and $5.7 billion for retiree health coverage.

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He is proposing an overhaul of Detroit's two pension systems by shutting out new workers and freezing benefits for current members.

Snyder said during the deposition that modifications to pensions is "part of the bankruptcy process" and not his "decisions to make."

Orr stepped away from his role as a partner in the Cleveland-based Jones Day international law firm after the state hired him as emergency manager. Detroit had hired Jones Day to head up a major financial restructuring before the bankruptcy filing, leading to conflict-of-interest questions.

In the deposition, Snyder said "it was important that he resigned and severed all ties."

On Thursday, lawyers for union workers and retirees opposing the bankruptcy filing also deposed Michigan Treasurer Andy Dillon and Rich Baird, the top adviser to Snyder whose $100,000-a-year salary is covered by the nonprofit fund.

Dillon said in a statement that "the decision to seek bankruptcy protection was not an easy one but was determined to be the only remaining way to address Detroit's long-running financial crisis."


Associated Press reporter Corey Williams in Detroit contributed to this report.


Email David Eggert at deggert@ap.org and follow him at http://twitter.com/DavidEggert00