June 17, 2014 at 2:18 pm

Schuette approves 'grand bargain' for Detroit bankruptcy

Michigan Attorney General Bill Schuette (Dale G. Young / The Detroit News)

Michigan Attorney General Bill Schuette on Tuesday approved a $661 million plan to bolster pensions and protect the Detroit Institute of Arts collection from creditors.

His approval is a condition of the so-called “grand bargain,” which is a key element of the city’s plan to restructure $18 billion in debt and emerge from bankruptcy court.

The “grand bargain” combines $195 million in state tax dollars with $466 million in private funds to prevent pensioners from facing double-digit percentage reductions in their monthly lifetime benefits.

Schuette wants to block a holdout Detroit creditor from questioning him about a legal opinion that the DIA 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 recent court filing.

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

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