Detroit Bankruptcy Judge to Consider Sanctions for Syncora Attorneys
Bankruptcy Judge Steven Rhodes will consider whether to impose sanctions on attorneys for bond insurer Syncora after they alleged that Detroit’s bankruptcy mediators conspired to protect pensioners and the Detroit Institute of Arts at the expense of financial creditors, the Detroit Free Press reported today. After Syncora accused the mediators of “naked favoritism,” the city asked Judge Rhodes to reject Syncora’s accusations and consider ordering the insurer’s attorneys to formally apologize or endure sanctions. Alternatively, Judge Rhodes could rule that Syncora’s objections are worthy of consideration during a trial that will determine the fate of Detroit’s sweeping restructuring plan. The Syncora issue is the latest spat between the city and the bond insurer that has inflamed what was already a bitter feud — so much so that Judge Rhodes instructed the two sides to stop using war analogies to describe their quarrels. Syncora’s decision to question the integrity of the mediators was strategic. “It seems that the tone is ramping up in an uncomfortable way,” said Prof. Melissa B. Jacoby of the University of North Carolina-Chapel Hill. Syncora is bidding to weaken the core pillar of Detroit’s bankruptcy restructuring plan: the grand bargain that would allow the city to accept $816 million in outside funding over 20 years in exchange for reducing pension cuts and transferring the city-owned DIA to an independent trust.
