Detroit on Friday filed a lawsuit in U.S. bankruptcy court seeking to invalidate $1.44 billion of debt sold to fund public worker pensions — a move that also could void the ill-fated interest-rate swaps contracts that were a factor leading Detroit into bankruptcy, Reuters reported. The lawsuit contends the city and its retirement systems violated Michigan law when they set up "sham" service corporations and funding trusts to facilitate the debt sales in 2005 and 2006. All other contracts or obligations connected to the debt are also void, the lawsuit claims. Detroit in its lawsuit said that the pension debt was "nothing more" than a borrowing by the city, and it violated borrowing limits imposed on Detroit by the state of Michigan. In the suit, Detroit asked Bankruptcy Judge Steven Rhodes to issue a judgment declaring the city is not obligated to continue making payments on the so-called pension certificates of participation (COPs). The COPs were issued during the term of former Mayor Kwame Kilpatrick, now in prison on federal corruption charges.
