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Emergency manager gains grudging acceptance

Restructuring wizard sets sights on Detroit

The Washington Post

The man who has become the face of Detroit’s historic bankruptcy planned to spend his weekend at home in Chevy Chase, Maryland, corralling the ferns that are overgrowing their planters and threatening his garden. Or maybe taking his two young children to the pool.

Long anonymous to most of Washington, Kevyn Orr is among a tiny handful of prominent African-American corporate turnaround lawyers in the country. Until recently, he was perhaps best known for helping guide Chrysler through its wrenching but ultimately successful 2009 bankruptcy.

Now Orr has rocketed to national prominence for his lead role in trying to free Detroit from at least $18 billion in debt. He is also charged with restoring basic services that have eroded to dangerous levels during the Motor City’s six-decade descent from industrial capital to urban basket case.

His decision last week to file the largest municipal bankruptcy in the nation’s history has triggered anger among the city’s creditors as well as its 9,700 employees and 20,000 retirees, who stand to lose money and benefits. It also sent ripples of concern through financial markets worried that other distressed cities and towns could follow Detroit’s lead.

Orr said bankruptcy offers the best hope for the kind of renewal he envisioned for Detroit in March when he left his cushy job as a partner at Jones Day, a global law firm, to serve an 18-month term as the $275,000-a-year emergency manager for Detroit.

“Frankly, initially I did not want the job,” Orr said. “But my managing partner, my friends and my wife convinced me that at various times in your life there are calls to action and you have to answer that call. What was really going through my mind was that this is a storied city in America that is deserving of a fresh start.”

As important, Orr felt that he was one of just a few people with the right skills and the right biography for the job. “I am a restructuring professional,” he said. “I happen to be an African-American restructuring professional, for a city that is 83 percent African-American. And I’m just one of a handful in that cohort who has done these kinds of high-profile representations.”

Orr, 55, felt connected to the region — he attended both undergraduate and law school at the University of Michigan, which is about 45 minutes from Detroit. And as the son of Fort Lauderdale-area educators who were active in South Florida’s civil rights struggle in the 1960s, he felt a duty to serve its people.

“The real issue is, how do we get the city to the point where residents can expect the police to respond in shorter than 50 minutes?” Orr said. “How do we get the city to the point where the mortality rate for cardiac arrest isn’t 100 percent in the first 45 minutes?”

The job gave Orr extraordinary power to run Detroit. He can tear up contracts, hire and fire workers, and liquidate city assets. It also put Orr in the cross hairs of some of Detroit’s civil rights and political leaders, who saw the state-mandated emergency-manager role as an undemocratic, and maybe unconstitutional, taking of power. For them, it was the latest incarnation of the long-standing racial polarization separating mostly black Detroit from the rest of Michigan.

Some retiree representatives complain that Orr has used calculations that overstate the city’s pension liability. That, they say, could result in substantial benefit cuts to free money for city improvements. “It seems like they are going to take money from retirees to repair and tear down houses,” said Donald Taylor, president of the Retired Detroit Police and Fire Fighters Association. “I don’t know how appropriate that is.”

Orr has been acutely aware of such perceptions and has attempted to alter them by using the same skills that have propelled him throughout his highly successful legal career: Be an open and honest broker, but one persuaded only by facts.

Among Orr’s earliest actions as emergency manager was to restore the pay and benefits that had been slashed for Detroit city officials. Then he met with city leaders to hear their concerns and their ideas, making it clear that he did not see himself as a potentate. The approach has earned him grudging support.

“I did not want an emergency manager in Detroit from the beginning,” said Detroit City Council member Andre Spivey. “But if we had to receive someone, I think Kevyn has been an excellent choice. He is a very smart guy who knows what he is doing, and I think he has a genuine interest in helping the city of Detroit.”

Matthew Cullen, president and chief executive of Rock Ventures, a company that has invested heavily in downtown Detroit, has met with Orr on several occasions.

“He is very pragmatic, very factual, but also empathetic,” Cullen said. “I think the people in the city get that and they feel that.”

In 2001, Orr was working at Jones Day, a law firm that now has 2,400 lawyers in 40 countries.

He was preparing to open and head a Miami office for the firm when he was hired to be Detroit’s emergency manager.

Shortly after his appointment, it was revealed that Orr had failed to pay more than $15,000 in child-care-related taxes, which resulted in liens being placed on his $1 million Chevy Chase home.

After the revelation surfaced, Orr quickly paid the tab, calling it an embarrassing oversight. Previously, he had paid more than $16,000 in liens.

The problem barely slowed his roll. Since coming to Detroit, he has spent weekdays living in the Westin Book Cadillac Hotel, a once-neglected landmark that was reopened in 2008.

First he organized scores of meetings, getting to know the city and its people.

He then set about documenting the city’s stunning list of problems, including hourlong police response times, 11,000 arsons a year and an alarming decline in population and revenue, topped by the massive debt.

Now comes the hard part: trying to win concessions from creditors and pensioners.

His first offer, which would pay bondholders pennies on the dollar and lead to unspecified benefit cuts for pensioners, was answered with a flurry of lawsuits. That led him to the bankruptcy filing, which leaves a federal judge to oversee restructuring negotiations.

Orr’s ambitious goal is to have an agreement in place by the time his term ends in 15 months.

  • Harrison Terran

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