Michigan Gov. Rick Snyder (Carlos Osorio / Associated Press)
Lansing — Gov. Rick Snyder testified Wednesday under oath that he doesn’t know who is bankrolling his secretive NERD Fund that is paying for some of Emergency Manager Kevyn Orr’s living and travel expenses and a close aide’s $100,000-a-year salary.
A union attorney asked Snyder during his Detroit bankruptcy deposition whether the city’s bankruptcy law firm Jones Day, city restructuring firms or two powerful creditor banks have donated to his NERD Fund, according to a draft transcript obtained by The Detroit News.
“With respect to your questions as to who the donors were and that category of questioning, my answer would be I don’t know,” Snyder testified. “There’s an independent board that does that work.”
According to the transcript, Snyder made the disclosure after an assistant attorney general initially protested the line of questioning. The attorney argued the questioning was outside of the scope of the deposition and the American Federation of State, County and Municipal Employees objections to Detroit’s eligibility for bankruptcy.
AFSCME attorney Sharon Levine said the identify of the NERD Fund’s donors could be relevant to whether Orr has a “conflict of interest” that needs disclosed, according to the transcript.
After a brief two-minute consultation with the governor, Assistant Attorney General Margaret Nelson told Levine that Snyder agreed to answer the NERD Fund question “in the spirit of cooperation and to move these proceedings along,” according to the transcript.
Levine also asked the governor if he knew whether the NERD Fund contributed to ballot campaigns for or against last year’s repeal of Snyder’s first emergency manager law.
“I don’t know,” Snyder testified.
Snyder has publicly said his office is considering releasing the names of the NERD Fund donors, while his spokeswoman has acknowledged the Republican governor may even shut down the fund altogether.
NERD is an acronym for New Energy to Reinvent and Diversify, but plays off of Snyder’s self-designated “one tough nerd” title. The fund, a 501(c)4 organization, states on its Internal Revenue Service forms that its purpose is “to promote charitable causes, including lessening the financial burdens of government in the state of Michigan.”
Last month, Snyder’s office disclosed that the NERD Fund is spending $4,200 a month paying for Orr’s lodging at the Westin Book Cadillac hotel in downtown Detroit and flights back home to Maryland on weekends. The reimbursements are made in addition to Orr’s $275,000-a-year state salary.
Snyder defended those expenses in his deposition Wednesday.
“With respect to the question of expenses, Kevyn Orr’s agreement is such that some of his expenses can be reimbursed by the NERD fund because it was created to offset the burdens of government and does similar things such as press auditorium upgrades, help with expenses for travel,” Snyder testified.
But Democrats and government watchdog groups have criticized the secrecy of the non-profit civic fund’s donors, even as Snyder’s office has disclosed the NERD Fund paying the $100,000 annual salary of Rich Baird, who works in the governor’s office but is not a state employee. The IRS does not require the NERD Fund to disclose its donors or detailed expenses.
On Thursday, the campaign of Snyder’s likely 2014 Democratic opponent, Mark Schauer, launched a website calling on the governor to disclose the NERD Fund donors’ names and contributions. SecretiveSnyder.com includes a counter showing its been 66 days since Snyder’s office first said it was considering releasing the donors’ names.
“I think it’s extremely disingenuous for him to claim he doesn’t know who donated to that fund,” Schauer spokesman Zack Pohl said Thursday.
Snyder spokeswoman Sara Wurfel said Thursday “the governor’s answer is clear and speaks for itself.”
“The fund has its own board of directors and the governor is not involved with managing it or raising money for it,” Wurfel said in an email to The News.
Baird, whose official title is “transformation manager,” is a close adviser to the governor and recruited Orr to resign his partnership from Jones Day’s Washington office to become Detroit emergency manager in March. Snyder confirmed Baird’s role in his deposition, according to the transcript.
Snyder was deposed for three hours Wednesday morning inside his Lansing office by attorneys representing city labor unions and retirees fighting to derail Detroit’s bankruptcy case.
The governor’s decision to testify under oath about his authorization of Detroit’s bankruptcy is unprecedented, with AFSCME attorney Sharon Levine even acknowledging it was “highly unusual.”
Union and retiree attorneys hope to use the governor’s testimony as part of a mountain of evidence they’re gathering to convince U.S. Bankruptcy Judge Steven Rhodes that the city did not negotiate in good faith with creditors prior to the July 18 Chapter 9 bankruptcy filing.
During the deposition, Snyder also revealed he only personally interviewed Orr and one other candidate for the EM job and acknowledged that the race of the candidates to run the majority African American city “would be a factor that could be of some consideration.”
Snyder also testified that Jones Day did not offer Kevin Orr as a packaged deal to win a multi-million dollar contract as the city’s restructuring counsel before he was appointed emergency manager in March.
At several times during the deposition, Snyder says cutting pensions and privatizing Detroit’s water department or selling other city assets remains a “hypothetical” proposition.
“I view that that’s part of the bankruptcy process that those are not my decisions to make,” Snyder said. “There’s a plan of adjustment that will be presented by the city, assuming Chapter 9 goes forward, and that would be adjudicated by Judge Rhodes.”
The union attorneys deposed Baird and state Treasurer Andy Dillon on Thursday.
In a statement, Dillon reiterated that bankruptcy was the city’s best option for stemming the tide of six decades of economic and financial decline.
“The administration has been clear from the outset; the decision to seek bankruptcy protection was not an easy one but was determined to be the only remaining way to address Detroit’s long-running financial crisis and ensure a viable, successful future for the city, its residents and businesses,” Dillon said in a statement.