June 24, 2014 at 5:59 pm

Lawyer: Creditors want to shield judge from Detroit's 'human reality'

A man sits on a crate on Gratiot in Detroit. (David Guralnick)

Detroit — Holdout creditors are trying to keep U.S. Bankruptcy Judge Steven Rhodes from seeing the real Detroit — the good, the bad and the ugly — by protesting his planned bus tour of the city, the city’s bankruptcy lawyers argue.

Instead, creditors want the judge to view video and photos of the blight and crime-ridden city in a sterile courtroom environment, the city’s legal team said in a court filing this week. The city is trying to overcome objections filed by several creditors, including banks and bond insurers.

“What the objectors really mean is that they do not want the court to come face-to-face with the human reality that is the flip side of the cold, sterile numbers,” lawyer Deborah Kovsky-Apap wrote. “But just because the objectors would rather the court did not see certain evidence does not make that evidence irrelevant.”

Three creditors — Assured Guaranty Municipal Corp., Berkshire Hathaway Assurance Corp. and Financial Guaranty Insurance Corp. — have asked Rhodes to scuttle the three-hour tour, arguing it is risky, irrelevant and unprecedented in bankruptcy court. They argued everyone’s security could be compromised if the bus route and details are leaked in advance.

The city’s lawyers vowed that won’t happen. The route, time and date will be filed under seal.

“By showing both the depths of the needs of the city and its residents, and the possibilities for rebirth and revitalization, the site visit will enable the court to better assess how the plan will allow the city to move forward as a viable municipality,” Kovsky-Apap wrote.

Detroit's bankruptcy team proposed the three-hour tour to give Rhodes a first-hand glimpse of the city's conditions, which could be mitigated if the judge approves a plan to restructure $18 billion in debt.

The city has proposed having the U.S. Marshals Service or other security personnel accompany the judge and creditor lawyers during the tour.

Tour stops have not been finalized, but the trip includes visits to the Detroit Institute of Arts, rail lines and downtown redevelopment areas.

A tour, which would kick off an August trial over the city's restructuring plan, is improper, inefficient and impractical, creditor lawyers wrote.