March 12, 2013 / 1:15 PM / 6 years ago

Chrysler bankruptcy lawyer is pick for Detroit manager: source

DETROIT (Reuters) - A bankruptcy expert who collected more than $1 million in fees helping to manage Chrysler’s restructuring is the top candidate to take over Detroit’s purse strings as emergency financial manager, a source with direct knowledge of the matter said on Tuesday.

Kevyn Orr poses for a portrait in this undated handout photo courtesy of Jones Day law firm. REUTERS/Jones Day/Handout

Kevyn Orr, a partner in Washington with Jones Day, one of the biggest U.S. law firms, is expected to be named to the post by Michigan Governor Rick Snyder later this week, the source said.

Orr’s name emerged on the same day that officials of the cash-strapped city made one last pitch to convince the state not to proceed with a takeover of Detroit’s finances.

Orr, 54, a University of Michigan Law School graduate, has wide experience in business restructuring and was one of Jones Day’s top billers during the Chrysler bankruptcy in 2009, according to court records.

“He’s very respected,” said John Pottow, a professor specializing in bankruptcy law at the University of Michigan Law School who knows of Orr by reputation. “This pick of this guy is very shrewd by the governor because he’s got sterling credentials.”

Orr has also served as deputy director in the executive office of a government watchdog, the U.S. Trustee program, which aims to ensure public trust in the bankruptcy process.

Orr could not immediately be reached for comment. Snyder declined to comment.

Snyder is widely expected to soon name an emergency financial manager, who could recommend the city file for bankruptcy. Such a filing, if allowed by the state, would be the biggest Chapter 9 municipal bankruptcy in U.S. history.

The Detroit Free Press late on Monday reported that Orr was the top candidate for the job. Detroit Mayor Dave Bing announced earlier on Monday that the city had chosen Jones Day as the restructuring legal counsel for the city.

A source with direct knowledge of the matter confirmed to Reuters that Orr was the top choice.

Orr’s emergence coincided with a hearing in the state capital of Lansing on Tuesday where representatives of the Detroit City Council tried to convince state officials not to appoint an emergency manager.

The heads of the City Council’s research and fiscal divisions acknowledged that Detroit is in a financial emergency. But they argued that a financial agreement in April 2012 between the city and the state should be given more time to work.

David Whitaker, director of the City Council’s research and analysis division, said bringing in an outside manager to run Detroit’s finances would sideline the elected leaders of the city and was “beyond anti-democratic.”

“Why take a move like that that’s so provocative when you have a document in place that everybody’s signed onto?” he said, referring to the April 2012 agreement.

An emergency financial manager would have authority over Detroit’s fiscal affairs, including contracts, asset sales, layoffs and consolidations.

Edward Keelean, Detroit’s acting corporation counsel, warned that the appointment of an emergency manager would trigger court challenges by labor unions and others.

Michigan Chief Deputy Treasurer Mary MacDowell, who presided over the hearing, said she would review the information presented by city officials and send her recommendation to Snyder.

Kevyn Orr poses for a portrait in this undated handout photo courtesy of Jones Day law firm. REUTERS/Jones Day/Handout

If a manager is appointed, the city can challenge the decision in state court. But such court challenges have failed in Michigan in the past.

Detroit, the birthplace of the U.S. auto industry and Motown popular music, has suffered from a sharp population decline that has left the city with falling tax revenue, rising crime and a costly and outdated government structure.

According to a report commissioned by Snyder, the city of 700,000 has “operational dysfunction” in its government, a crushing debt of $14 billion, and a projected deficit of more than $100 million when its fiscal year ends on June 30.

Reporting by Steve Neavling, additional reporting by Dawson Bell, Tom Hals and Karen Pierog and Ben Klayman; writing by Tiziana Barghini; editing by Dan Burns, Greg McCune and John Wallace

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