Bankrupt Detroit subpoenas news publication over award to Kwame Kilpatrick

July 02--The City of Detroit has subpoenaed the Bond Buyer to provide records documenting why it gave an award to former Detroit Mayor Kwame Kilpatrick for a $1.4-billion borrowing deal that ultimately helped vault the city into bankruptcy.

The subpoena thrusts the New York trade publication into the middle of the largest municipal bankruptcy in U.S. history. The Bond Buyer gave Kilpatrick and the city its Midwest Regional Deal of the Year award in a glitzy ceremony in New York in December 2005.

The city ordered the Bond Buyer to provide "documents concerning the selection" of the deal as an award winner -- as well as nomination documents submitted to the publication and any documents regarding the legality of the deal or the process of getting it approved.

Michael Scarchilli, editor in chief of the Bond Buyer, declined to comment.

The honor was mostly ignored at the time, but it surfaced in September 2013 in the Free Press' "How Detroit went broke" report as an example of how the debt deal was celebrated at the time.

One city adviser on the deal, Robert W. Baird & Co., issued a news release bragging about the award.

The award honored Kilpatrick and then Detroit finance chief Sean Werdlow for orchestrating a complex $1.4-billion borrowing deal -- called pension obligation certificates of participation -- to eliminate the city's unfunded pension liabilities.

But Detroit bankruptcy lawyers now argue that deal was a "sham" and should be wiped out.

Bond insurers Syncora and Financial Guaranty Insurance Co. -- which both backed the debt -- are aggressively defending the deal in court.

Contact Nathan Bomey: 313-223-4743 or [email protected]. Follow him on Twitter @NathanBomey.

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