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Michigan governor seeks to dodge deposition in Detroit bankruptcy case

A 'Welcome to Detroit' border sign is seen as traffic enters Detroit, Michigan August 3, 2013. Picture taken August 3, 2013. REUTERS/Rebecca
A 'Welcome to Detroit' border sign is seen as traffic enters Detroit, Michigan August 3, 2013. Picture taken August 3, 2013. REUTERS/Rebecca

By Joseph Lichterman and Bernie Woodall

DETROIT (Reuters) - Michigan Governor Rick Snyder and other state officials are seeking to avoid being questioned by Detroit worker and retiree unions in the city's bankruptcy case, according to a motion filed on Friday.

Attorneys for the state, in a motion to quash depositions of Snyder, Michigan Treasurer Andy Dillon and others, said they would not be able to offer testimony relevant to the issue of whether Detroit is eligible to enter Chapter 9 protection.

The depositions, if they occur, would happen ahead of the late October start to hearings before U.S. Bankruptcy Judge Steven Rhodes on the eligibility issue.

The city filed the largest-ever municipal bankruptcy in U.S. history on July 18. Snyder, a Republican, had to approve a request from Orr to file for bankruptcy protection.

Ed McNeil of the American Federation of State, County and Municipal Employees Local 25 in Detroit, called Snyder's attempt to dodge being questioned "a cowardly attempt to hide behind a malicious legal maneuver."

The eligibility argument will focus on whether Detroit is insolvent, whether the city negotiated in good faith with its creditors, whether there were too many creditors to make negotiations feasible, and whether Detroit's bankruptcy petition of was filed in bad faith.

"The eligibility determination was made - and could only be made - by the city of Detroit and Emergency Manager Kevyn Orr," the state's motion said.

But McNeil said, "Every step of the way Governor Snyder has tried to stack the deck in his favor. He has blocked all opportunity for meaningful negotiations and mediation. Today's move is another attempt to bend the rules."

The state said the governor's reasoning for allowing the filing were laid out in a public letter Snyder wrote to Orr authorizing the city to seek bankruptcy protection.

It also argued that any request for discovery from state officials should be made after Orr and other city officials are deposed because "there has been no showing that the state officials were involved in any relevant eligibility determinations made prior to the filing of the petition."

Orr was deposed on Friday, but not on the question of the city's eligibility to file for bankruptcy protection.

Orr was deposed by attorneys representing objectors to a proposed deal that would terminate interest-rate swap agreements on casino tax revenue, which were used to hedge interest-rate exposure on some of the city's pension debt, at a discounted rate of as much as 25 percent, saving the city more than $70 million.

(Reporting by Joseph Lichterman; Editing by Lisa Shumaker)

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