Stockton, Calif.’s plan to exit bankruptcy by paying retired city workers more than some bondholders is being fought by the same law firm that helped Detroit craft a similar proposal to resolve its debt woes, Bloomberg News reported today. In closing arguments in Sacramento today, James Johnston of the Jones Day law firm is to argue that his client, Franklin Resources Inc., is being treated unfairly because Stockton is offering only 1 percent of what it owes the company’s funds, while public worker pensions will be paid in full. Stockton, a city of 298,000 people about 80 miles east of San Francisco, filed for bankruptcy in 2012 after spending too much on downtown improvement projects and property-tax revenue plunged in the housing crisis. Creditors filed $1.18 billion in claims. After months of negotiations, it reached deals with most creditors, including bond insurer Assured Guaranty Corp. and current and retired workers. The city is asking Bankruptcy Judge Christopher Klein to approve a plan that continues paying the California Public Employees’ Retirement System the full amount it’s owed. San Mateo, Calif.-based Franklin says CalPERS should be treated like any other creditor and face cuts.
