DETROIT (Reuters) - The city of Detroit may have to publicly disclose at least some of the financial information in its digital vault, which includes what the city’s fiscal future could look like.
U.S. Bankruptcy Judge Steven Rhodes on Wednesday accepted an offer by Jones Day, the law firm handling the city’s July 18 municipal bankruptcy filing, to go through about 7,000 pages of financial information in a digital “data room” in the next few days and identify which documents could be made public.
Rhodes said he will entertain the city’s argument to keep some of the data out of the public eye on August 28.
The city, under state-appointed Emergency Manager Kevyn Orr, set up and provided the content for the password-protected data room and allowed access to creditors involved in the historic Detroit bankruptcy filing only if they signed a nondisclosure agreement.
Creditors and Orr’s office have not revealed what the data consists of. While it was not intended to be seen by the public, representatives from the city’s unions and pension funds as well as corporate creditors have been given the password to it after agreeing to the nondisclosure agreement.
On Wednesday afternoon, Jones Day attorney Gregory Shumaker made the offer to identify documents that should be kept from the public, in a change from insisting that all of them should remain private.
Orr is a former member of Jones Day. He resigned from the firm to take the emergency manager position five months ago.
At a hearing earlier on Wednesday at the federal courthouse in Detroit, Rhodes seemed to take umbrage when Shumaker said some of the financial information in the so-called room was not relevant to the city’s Chapter 9 filing.
“This is bankruptcy. What is not relevant?” said Rhodes.
Shumaker seemed taken aback. There are scenarios of what may happen to the city’s finances in the future that are best kept private, he said.
“What would be the harm to the city’s interest?” countered Rhodes.
In the afternoon session, Shumaker said some personal information of individual pensioners should be kept confidential. He also said that as part of an agreement with the actuarial firm Milliman, which drew up some scenarios for the city’s two pension funds, the company insisted that anyone viewing the information sign a nondisclosure agreement.
Rhodes told Shumaker to make sure Milliman representatives were in the court next week to explain why their actuarial research should remain out of the public’s view.
On July 10, eight days before Detroit filed for the largest municipal bankruptcy in U.S. history, a United Auto Workers attorney, Michael Nicholson, refused to sign the nondisclosure agreement that covered the data as well as discussions held that day in a meeting with Jones Day representatives regarding the city’s pensioners.
Nicholson told Rhodes in court Wednesday morning that he was pleased to see a hearing had been set on the potential public release of the information.
Wednesday’s hearing had been requested by Syncora Guarantee, the bond insurer that is contesting a creditor agreement Detroit is asking the court to approve. That agreement involves interest-rate swaps related to Detroit pension debt for which Syncora guarantees payment.
Detroit sued Syncora in July after it allegedly told U.S. Bank, which controls the flow of casino funds that were part of a previous agreement with the swap counterparties, not to release up to $11 million a month to Detroit. The hearing did not result in any resolution to the dispute.
Questions regarding information in the data room by Syncora’s attorney, Stephen Hackney, led to Rhodes’ questioning why the information should be kept confidential.
Reporting by Bernie Woodall; Editing by Prudence Crowther