EM conflict? No worries

April 11, 2013
By

As the Detroit City Council considers approving a contract with the Jones Day law firm — the law firm that Mayor Dave Bing and Emergency Manager Kevyn Orr want to hire to oversee the restructuring of Detroit’s debt — we find ourselves following Alice a little further down the rabbit hole.

Things seem to be getting more twisted every day.

On Wednesday, as Channel 7’s James Kiertzner reported, it was disclosed that, “Orr was part of Jones Day team making a pitch to Detroit and the state in January to do restructuring and negotiating with creditors to try to avoid a chapter 9 municipal bankruptcy.”

Ed Keelean, the city’s acting corporation counsel, delivered that info to council.

So, we have Orr and his Jones Day amigos making a pitch to state and city officials in January. Then, on March 11, the Bing administration announces that it has selected Jones Day to oversee restructuring of the city. Three days later, Orr is appointed by the state to be Detroit’s emergency manager. A that point he’s still a partner at Jones Day; he resigned from the firm one day after his appointment was confirmed.

On March 15, the day Orr starts work, Jones Day also begins working for the city.

If that all seems like an uncomfortably cozy arrangement that’s a little to coincidental to believe, well … don’t worry. The Bing administration, along with Keelean, say that the selection of Jones Day was made through a competitive bidding process and was done completely independent of Snyder and his decision to make Orr the emergency manager.

As we reported previously, one of Jones Day’s many corporate clients is Bank of America Merrill Lynch, which is involved in negotiations over a credit swap default that could cost the city as much as $400 million. (Bank of America Merrill Lynch is one of three creditors involved in those negotiations.)

Again, don’t worry. Keelean told the City Council that Jones Day has promised to seek conflict of interest waivers from any of the law firm’s clients involved in legal actions with the city.

The online publication The Am Law Daily checked with several experts, and the consensus was that there’s nothing inherently unethical with what’s happening here.

“A trio of ethics experts contacted by The Am Law Daily Wednesday agreed that Orr’s ties to Jones Day do not by themselves create a conflict of interest and that the city’s decision to employ a firm that Orr is familiar with and knows to be experienced in restructuring work is a smart one.”

As for the fact that Jones Day is already hard at work on behalf of Detroit, even though the council hasn’t approved the contract — which is worth as much as $3.2 million, with the firm billing more than $1,000 an hour for its top lawyers — that’s really not an issue either.

That’s because the council’s debate over the issue is just so much window dressing. It might be useful in helping bring out information that might not have been revealed otherwise — such as Keelean’s revelation that Orr was involved in trying to get Jones Day the contract early on — but ultimately, the council has no decision-making power. Although scheduled to vote on the contract on Tuesday, the decision of whether to enter into a contract like this is entirely up to Orr.