Ponzi-Scheme Expert To Oversee Detroit Bankruptcy
It's good to see that as more of the US spirals into chaos, someone still has a sarcastic sense of humor.
For those who missed it, in the Kevyn Odd statement listing the primary reason for the bankruptcy of Detroit, this was the punchline: "Absent restructuring, the City is projecting cash flows of negative $198.5 million in the current 2014 fiscal year and negative $260.4 million in fiscal year 2015. This cash depletion would leave the City in a net cash position (after required property tax distributions) of negative $11.6 million as early as December 2013. The City also has experienced negative cash flow for years, and that trend is expected to continue and accelerate if not addressed.... For years, the City has spent more than it takes in and has borrowed and deferred paying certain obligations to make ends meet. The City is insolvent." In other words, a pure pyramid scheme whose final can kicking day has finally come. Which perhaps explains why the just appointed Judge to preside over the largest municipal bankruptcy in US history is none other than Judge Steven Rhodes, 64, who just happens to be the co-author of "The Ponzi Book: A Legal Resource for Unraveling Ponzi Schemes."
The book’s website quotes Irving Picard, the bankruptcy trustee for Bernard Madoff’s defunct investment firm, as calling it “one-stop shopping for the facts needed to understand the complex fall-out from a collapsed Ponzi scheme."
In other words, if there is anyone qualified to oversee the biggest Ponzi scheme collapse to date in US public sector history, it would be Judge Rhodes. We can only hope, however, that he leaves some time in his busy schedule over the next several years, for that other, biggest of all Ponzi schemes, the United States of America.
“It is our unanimous and very strong belief that Honorable Steven W. Rhodes is the bankruptcy judge best qualified to preside over the city of Detroit Chapter 9 case,” Phillip Shefferly, chief of the U.S. Bankruptcy Court in Detroit, wrote in a letter filed with the court.
Rhodes, a graduate of the University of Michigan Law School, probably welcomes the challenge of overseeing the case, said Sheryl Toby, a bankruptcy attorney at the Dykema law firm in Bloomfield Hills, Michigan. He is set to retire at the end of the year and take on senior status as a judge, she said.
“He stepped up for it clearly, and he didn’t have to,” she said.
Rhodes handled the bankruptcy reorganization of Southfield, Michigan-based auto-parts maker Collins & Aikman Corp. In 2007, he approved a liquidation plan for the maker of auto interiors.
He also served as chief judge of the bankruptcy court in Detroit when it changed its rules at the end of 2008 in an effort to make it a more attractive venue for carmakers to reorganize. Still, General Motors and Chrysler filed for bankruptcy in New York the following year.
Rhodes is a skilled manager of the courtroom who keeps cases moving and won’t be swayed by public opinion that will come with such a high-profile case, said Judy Calton, an bankruptcy partner at Honigman Miller Schwartz & Cohn LLP in Detroit.
“He’s sterling at managing everything and moving the case,” she said. “He’ll keep people’s feet to the fire, and he’ll rule.”
He'll rule all right... until the 2013 equivalent of 2009's Steven Rattner has a screaming fit at the Judge, and delivers the proverbial tap on the shoulder from Obama, advising him Superpriority is only to be followed in non-special situations, and that despite what he may know about conventional waterfall schedules, the rights of retirees and labor always trump those of creditors in the New Normal Pro Forma Chapter 9.1, adjusted for the "Obama provision" of satisyfing voting constituents first and foremost.
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