City of Detroit Sues to End Pension Finance Schemes
DETROIT, Jan. 31, 2014 /PRNewswire/ -- Kevyn Orr, Emergency Manager for the City of Detroit, ("Detroit" or "the City") today authorized the City to take legal action to end the controversial pension financial deals that hastened Detroit's insolvency.
The lawsuit is against the Detroit Police and Fire Retirement System Service Corporation, the Detroit General Retirement System Service Corporation, the Detroit Retirement System Funding Trust 2005 and Detroit Retirement System Funding Trust 2006 to nullify the disastrous $1.44 billion Pension Obligation Certificates transaction (the "COPs") because it was void from the beginning.
"This deal was bad for the City from its onset despite reassurances it would adequately resolve the City's pension issues," Orr said. "We have tried without success, to negotiate a resolution to this dispute and to allow the City and its taxpayers to move forward and unwind these illegal transactions."
The COPs transaction was intended to raise money to meet the City's obligations to meet the unpaid accrued actuarial liabilities ("UAAL") of the City's two principal retirement systems. The City believes it was, however, illegal from the outset because it was a thinly-disguised municipal bond issue using shell entities to exceed the City's statutory debt limit under the Michigan Home Rule City Act and circumvent the requirements of the state's Revised Municipal Finance Act. The City is seeking declaratory judgment that the City has no enforceable obligation to continue making payments on the COPs.
The City of Detroit is represented by Jones Day in the COPs litigation.
SOURCE City of Detroit