June 11, 2014 at 11:23 am

Schuette seeks to quash subpoena related to DIA art sale

Attorney General Bill Schuette )

Detroit — Attorney General Bill Schuette wants to block a holdout Detroit creditor from questioning him about a legal opinion that the Detroit Institute of Arts collection cannot be sold because it is held in a charitable trust.

Schuette asked U.S. Bankruptcy Judge Steven Rhodes to quash a subpoena from bond insurer Syncora Guarantee Inc. The firm wants to question Schuette under oath about the opinion as part of its fight to sell pieces of the DIA collection for creditors’ benefit.

The subpoena would subject Schuette to an undue burden and possibly reveal privileged material, Schuette wrote in a motion Wednesday.

“No extraordinary circumstances exist here to allow Syncora to depose the attorney general,” Schuette wrote. “The Attorney General has no firsthand knowledge of the facts relevant to the determination of the legal status of the DIA’s art collection.

“Indeed, the Attorney General is unaware of any case authorizing a party to depose a state attorney general as here on the matter of legal conclusions set forth in an official attorney-general opinion.”

Rhodes will consider the request to quash the subpoena June 26.

On Tuesday, Syncora called the city's debt-cutting plan, which includes a "grand bargain" to bolster pensions and protect the city-owned DIA collection from creditors, a politically popular, but unfair, attempt to emerge from Chapter 9 bankruptcy.

Facing hundreds of millions in potential losses, bond insurance giants Syncora and Financial Guaranty Insurance Co. have been pushing for a sale of city-owned art at the Detroit Institute of Arts, which Orr has resisted.

The bond insurers contend more money could be extracted from the DIA than the $466 million private foundations and the DIA have offered over 20 years, coupled with a $195 million lump sum payment for Detroit pensioners.

Schuette issued his opinion in June 2013. It said Detroit Emergency Manager Kevyn Orr could not sell off all or parts of the DIA's collection to help pay off the city's $15.6 billion in debts and long-term liabilities.

"It is my opinion, therefore, that the art collection of the Detroit Institute of Arts is held by the City of Detroit in charitable trust for the people of Michigan, and no piece in the collection may thus be sold, conveyed, or transferred to satisfy City debts or obligations," Schuette wrote.

Syncora might call 37 witnesses during an August trial that will determine whether Rhodes approves the city’s debt-cutting plan.

The witness list includes Schuette, Gov. Rick Snyder, Detroit City Council President Brenda Jones, Councilman George Cushingberry and former Mayor Dave Bing.

Also Wednesday, Rhodes struck a scathing filing by Syncora one day after the bond insurer complained about the city’s debt-cutting plan. The judge’s order came after Syncora ripped the “grand bargain” that would rescue the DIA collection and criticized federal mediators for holding press conferences.

The judge said Syncora’s filing did not follow bankruptcy procedure.

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