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Jefferson County Retains Klee Tuchin For Upcoming Chapter 9 Legal Advice
As anyone who follows the restructuring process (and religiously reads debtwire) will tell you, the first sign of smoke is when a creditor retain legal bankruptcy counsel, promptly followed by financial, which in turn, or at least 95% of the time, leads to a dropping off of bankruptcy docs at the local bankruptcy court, or Southern New York. And where there's smoke, there's Alabama fire. According to blog al.com, the Jefferson County Commission has just retained the services (at $975/hour) of Ken Klee, of LA-based Klee Tuchin, best known for advising Orange County on its Chapter 9 filing back in 1994. And with this the probability that Jefferson County will conclude that the time to file its own Chapter 9 in two days, is virtually a certainty (and sorry, no bankruptcy lawyer will advise his clients not to file for bankruptcy. Hourly retainer, remember?). And with the US debt situation still unlikely to be resolved within 48 hours, the last thing the market needs is to worry not only what known on effects this mega-municipal bankruptcy case will end up generating, but who else will file after. That said, we are confident the market will surge even more as it digests these news. Why? Two words: Bernanke Put.
From al.com
The commission voted unanimously to hire Klee and his law partner, Lee Bogdanoff, who will be paid $875 an hour, to assist the county with bankruptcy and other legal matters.
The firm will be paid $50,000 to start.
Klee served as a consultant on bankruptcy legislation to the U.S. Department of Justice. He is viewed by many as one of the nation's top experts on Chapter 9 and was involved in the Orange County, Calif, bankruptcy filing in 1994.
As for what to expect on Thursday:
The Jefferson County Commission will decide Thursday whether to file the largest municipal bankruptcy in U.S. history, announce a settlement with sewer system creditors or give creditors more time to work out a deal with the county to solve the $3.2 billion sewer debt crisis.
The commission announced today that it will meet during a special session at 1 p.m. [this] Thursday in the commission chamber in the downtown courthouse to decide on a Chapter 9 bankruptcy filing or determine a course of action to take with creditors, or to speak with lawyers in a closed-door meeting about both matters.
Thursday's special meeting for commissioners comes one day before a 30-day standstill period ends between the county and its Wall Street creditors, who have not responded to the county's compromise settlement plan that was submitted last week.
Next up will be the pitch book scramble for financial advisor which will mostly likely be won by Houlihan Lokey.
The bigger concern: how many other broke municipalities will be following the events in Jefferson only to decide that Chapter 9 is really the best option. While so far the muni default tsunami has not materialized is it possible it was merely waiting for the proper lit match? The Alabama fiasco sure looks like it could fit the bill.
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Can't The Bernank monetize additional debt they float, to keep the Ponzi alive, so that prior bond holders get their interest?
Oh, that's right, counties and states aren't too big to fail (and they shouldn't be), because they're not Goldman Sachs, JP Morgan, Berkshire, or other entities that are part of the kleptocracy, who carry bad loans that need to be unloaded, or are owed money by AIG.
Plus, the Bernank said it would violate the Rothschild Federal Reserve's mandate/charter to bail out counties.
Sucks to be you, Jefferson County (and Montgomery, and many others, soon to follow) bond holders and residents.
You should have started a too big to fail bank/investment house instead, bitchez.
But in Chapter 9, Jefferson County can give Chase / GS / etc. the big finger.
Sure, their bonds will be junk status for the rest of our lives, but hey, Jefferson County can and will make the GM/Chrysler bondholders look like KINGS.
Bernank & Jeetner will figure out a way to compensate JPM/Goldman for any losses they incur. Do not fret.
Also, JPM is going to make out like a bandit from these muni bankruptcies:
Jamie Dimon “I Wouldn't Panic About What I'm About To Say
Well, technically any governmental body within a state could repudiate the debt, if the state supports the move. It's happened before. The federal municipal BK law as written is subject to state control (sec. 903 -- otherwise the law would be unconstitutional.)
... and there you have it.
So why would any Mayor or County Commissioner or other such public servant even begin to lick the bankers boots when all they need do is go belly up and start over? Is the answer ignorance or corruption or what?
It is said that the world is in a state of bankruptcy, that the world owes the world more than the world can pay.
Ralph Waldo Emerson
corruption
$975 an hour?
That's around 210 days of unskilled flip work!
I'm sure the flip would do a better job chopping banker heads off with his machete.
the article says $875, so, it looks like the 975 is a typo. not that that's much different!! :)
No, they hired 2 suits.
One for $975/hr. His partner at $875/hr.
and don't forget the secretaries and assistants. When they all show up for a hearing, and they will, the rate will be something like $3k per hour while they just sit there, on the airplane, flying from San Diego and back. And their fees are guaranteed by the court to be paid. It's worth millions to the lawyers.
A countryman between two lawyers is like a fish between two cats.
Benjamin Franklin
In bankruptcy - you can see it all, almost - sign up for your Pacer account from the US Court System now if you don't have one already - I believe they still send passwords out via snailmail - don't wait - free, until you view a court document - all of which are filed through the Pacer system - .08 per page.
.
Hmm, more of these on the way? Pennsylvania had some trouble, what happened to Harrisburg, PA? Is Valdimort bailing out his base MSAs until after 2012?
O/T, Gasparino: confirmed, Obama telling banks "no default" -- while WH scaring public with armegeddon talk.
Gee, with public servants like that we don't need tapeworms and botulism.
Obama privately tells Wall Steet "do not worry, and keep the campaign donations coming forth," while Obama tells senior citizens that as of August 2nd they will have to eat melamine for dinner, and that if they try to seek medical attention using Medicare, they'll be arrested, and that they must return their Medicare cards to his office, via pre-paid Federal Express shipping.
Actually, if they were arrested and jailed the state would be on the hook for their medical care.
Along with their housing, utilities, entertainment and food.
What, plastic rice not good enuff for'em?
Actually, I prefer the armageddon talk - it's much better than the usual "don't worry your pretty little heads about what's going on back in Washington; Dr. Bernanke . . . wait, did I just say 'Dr. Bernanke'? whoops, I mean the President has it all well in hand!"
Off topic but anyone noticing the Yen is now pegged at 78.05'ish? Swissy @ 80.25'ish?
Uhhh, looks like the manipulation pressures are building and are causing side effects...something to pop soon
No way. They are just finding their free market equilibrium. Shame on you for suggesting such a thing.
Hmm, supplying a few more assault rifles to Mexican Drug cartels should fix this!
They should make Bill Blount foot the legal bill. He got them into this mess.
the trickle down from the Fed, to the states, to the counties, to the towns , seems to have run dry....sucks for the public leeches !
Of course they're going to declare bankruptcy. The only reason they - and who knows how many other municipalities - are putting it off is in the desperate hope of proving Meredith Whitney wrong.
I saw some semi-hot blonde chick, saying this would happen on a grand scale..
Was that the same girl with Omaha's oracle in her mouth?
Nope, Merideth Whitney's too classy for that!
Bernanke better get rid of his put or he will never be able to print more money.
As I see it, anyone holding bonds should assume you are holding nothing and act accordingly. It is only worth what someone will pay for it. Everyone is bankrupt. Only what you have under your control is really yours.
I see my dollars this way. So far, I can still get stuff for them, but that is only because the definition of the situation has not caught up to reality yet. So for now, the music is playing and some folks are still dancing, looking for a chair to sit in, clutching fiat, stocks, and bonds.
Get into a chair while you can. Get real things because a huge number of the claims on things that exist out there have nothing to back them up.
The casino is on fire. Look for an exit while you can. Extra bonus, when you exit, you leave the crooks holding the bag, burning.
Hmm, Gold & Silver chairs...Check!
Merideth Whitney not quite 2 years ago warned this was comming
But CNBC told me Meridith Whitney was wrong.
Meredith Whitney told me CNBC is wrong.
Well they've been defrauded, see municipal services, but whatever. While Glass-Steagall would enable the federal gov't to have funds to help[since it opens up the option of a credit system] (see federal gov't empowering states and not the other way around), and the fraud could be dealt with directly at the same time, even without it, counties have the option of bankruptcy. We need a credit system to replace the borrow fiat out of thin air from banksters (under their advisement of course), going forward, but when it comes to this, chapter 9 is an option. On that note, with a big middle finger to the banksters I say.....
Roll Tide
Re-tain-er...Re-tain-er... Nobody in this town works without a retainer. You think you can find someone who does, you have my blessin'
Jefferson County files for bankruptcy in two days, Washington DC in a week.
Gundlach, back in Feb, argued that a crash in muni prices (as distinct from a collapse in intrinsic values) is coming. When it happens, he will back up the truck and load up.
So will I. I'm looking for MUB, for example, to fall below 90, and even below 80.....someday.
JP Morgan is going to end up owning all of Montgomery Counties assets, and will be charging eggregiously for the use of these structures and facilities, so it's all for a good cause:
Jamie Dimon “I Wouldn't Panic About What I'm About To SayRemeber the GM/Chrysler bondholders?
Jefferson County can tell all their bondholders to FUCK OFF as part of bankruptcy.
The market cap of LULU is probably 10x bigger than the entire debt of Jefferson County.
Whatever debt that is going to be written off by JPM, GS, or whoever, has been already gained in capital appreciation of a myriad number of cult consumer and retail stocks.
Just look at Group 1 Automotive (GPI) today, going up to new 3-year highs on 3x normal volume.
It is going to take a nuclear bomb or something to stop the "resilient consumer" from buying $50,000 Camaros, F-150 pickups, Dodge Charger Hemis, etc.
Yeah, and that Netflix is on a tear! Oh, wait, nevermind.
pods
http://news.yahoo.com/ala-county-readies-possible-record-bankruptcy-1556...
Alabama is next...
$96.4 billion to go for Meredith to be proven right. Of course anyone new this was coming if they actually read any financial blogs and papers.
I'd like to compare the increase in AAPL's market cap as the stock rose from $320 to $400 to the total outstanding debt of Jefferson County.
Or maybe the same increase in GOOG or BIDU's market cap since the June lows.
Anyone got a calculator?? LOL....
and this expert said Meredith was full of it
http://www.bloomberg.com/news/2011-07-25/meredith-whitney-wins-if-we-los...
and you just know Merideth is out there thinking "you
ain't seen nothin yet".
At $875 / hr it won't take long to completely bankrupt them. Probably a bunch of paralegals they're paying 35k / yr.
If you read the specifics on this debacle you realize the problem lies with several parties, primarily one, who have no vested interest in the outcome.....AKA public officals/employees, who get paid regardless of success or failure.
Interest rate swaps engineered by JP Morgan doomed this county. JPM and co-underwriters collected $120 million in fees on a municipal deal to refinance the county's sewer system. The sewer system was completed for $3.2 Billion, yet should have cost a maximum of $1.2 billion. Now the citizens of Birmingham AL and other county residents are seeing an increase in their water rates of 25% or more. The median household income of this county in $6,000 less than the national average.
Bribes were accepted from JPM by a few county commisioners and the Commission president and former mayor is currently in federal prison. JPM was forced to pay $75 million in fines, but not one banker was charged in this incident.
At the very least you'd think JamieD would have the courtesy to fire one junior banker.
JP Morgan paid $700 million for their bribes to Jefferson County:
http://www.dallasarealaw.com/lawblog/jp-morgan-settles-lawsuit-in-regards-to-illegal-disbursements/
$75 Million in fines and forfeiture of $650 million in termination fees related to the swaps.
Forgive my ignorance, but why can't Jefferson County bring some sort of civil suit against JPM? Did paying that fine completely absolve them from any responsibility?
JPM was censured. A mere slap on the wrist. Here is the SEC sanction order.
http://www.sec.gov/litigation/admin/2009/33-9078.pdf
Nope...being a TBTF Bank absolved them of all responsibility. Where have you been the past 3 years to ask such a question?
Thanks for the post AB. I am very familiar with the "Greek style" fucking that JPMorgan gave Jefferson County. Oh, and by the way JPM did it to Greece "Greek style" as well.
Gotta love those guys/gals! /sarc
The bribes were cheap too! One female commissioner sold out for a few hundred dollars worth of shoes. Matt Taibbi has written two articles covering the screwing of Jefferson County:
http://www.rollingstone.com/politics/news/looting-main-street-20100331
http://www.rollingstone.com/politics/blogs/taibblog/the-continual-screwi...
Jefferson County did sue JPM back in 2009, but JPM contested for some reason. The SEC bent over for JPM and gave them a small fine. However, I remember recently that the Alabama Supreme Court ruled that the county could sue JPM for fraud. Not sure how the county plans to proceed but I hope they win billions. Not holding my breath though.
Let's see now...Jefferson County, Alabama v. JPMorgan...? David v. Goliath? It may have worked out in the Bible story, but in the USSA.
Shorting Jeff. Co. And I live in Alabama, and I would like them to take JPM to the woodshed...but I know better.
Keep the vasoline at the ready Comrades!
HEY! Where is the fracking spell checker??? Tyler...you at home? ;-)
Yeah, JPMorgan is guilty as hell....but the cost overruns for EPA bullshit and terrible project oversight were alllll state/city employees who didn't give a shit about crucial details.
And regarding the bribes.....who was it again that accepted them?....state/city employees! Get it? It takes someone receiving the bribe to make it work - thats all I'm saying. So pay me well to do a poor job, then I'll take bribes to really, truly not care, and basically say "fuck you" to the neighbors, friends, family paying in to make the whole thing go. Thats why the root of the problem is the city/state employees primarily, then JPMorgan et al.
This is really bad, really bad. This is the last thing the markets need or want. Because if this big county decides to go chapter 9, then other smaller ones or similar sized counties will do so also in order to free up money they need.
Harrisburg, PA's Chapter 9 is being handled by Cravath, one of the most if not the most prestiguous law firm in the country.
They are doing Harrisburg Pro Bono because either A) they are really nice people and don't want to charge Harrisburg $625 an hour; or B) hey see a lot more Muni defaults coming and want to build up their expertise in the field before the Muni Wave hits
Several counties are looking into defaulting. This is a big one. Hell congress several months back was looking at ways to amend the constitution to allow states to default. These are indeed scary times. The EPA is always a fricking pain in the ass. Dealt with them before and most of the time cost overruns are because of them. I called an exterminator company to try and get rid of some pigeons and they seeded my area with large corn.
A week later the EPA showed up. The EPA was going to fine me 35k. The gist of it was it is ok to get rid of the pigeons but when they crap they may leave some poison and the song birds might eat it. Needless to say the pest control company and I had two wet dry vacs to vacuum the bait up and they cleared us.
Totally stupid analysis and alot of fear on my part. The state law clearly stated you could bait for pigeons.
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