Submitted by Jen Jones on Tue, 06/30/2009 - 12:13am
Well, Chrysler's bankruptcy fire sale is done. It was finalized on June 10th. Now, three main players hold the bulk of Chrysler's "good- assets: the Italian car-maker Fiat, the United Auto Workers' retiree healthcare trust, and the federal government. And, the majority of Chrysler's secured creditors got 29 cents on the dollar for their debts. You'll recall that this deal was not without controversy.
The bankruptcy judge who oversaw the case approved the deal, finding it was necessary for Chrysler to avoid liquidation. But the heads of two Indiana pension funds -“ the Indiana State Police Pension Fund and the Indiana Teachers' Retirement Fund -“ and Indiana's Major Moves Construction Fund appealed the judge's order to the Second Circuit U.S. Court of Appeals in New York. The Indiana groups sought to block the sale, because it would wipe out the bulk of the $42.5 million in secured debt that Chrysler owed them collectively. The Second Circuit upheld the order of the bankruptcy judge.
The Indiana groups took their challenge to the Supreme Court, urging the court in an emergency petition to hear the case and postpone the sale. Justice Ruth Bader Ginsburg stayed the sale while the court decided whether to hear the case. The Obama Administration, through the Solicitor General's Office, urged the court to let the sale proceed. Solicitor General Elena Kagan wrote in a brief to the court, "As an economic matter . . . blocking the transaction would undoubtedly have grave consequences.- The court's decision didn't take long. The day after the Indiana trio filed their petition, the high court denied it, clearing the path for the sale to go forward.
And the deal is done. The assets have changed hands and the creditors were paid according to plan. The Indiana funds got $12.3 million on their $42.5 million bill. But this may not be the end of the saga. Indiana Treasurer Richard Mourdock wants the sale invalidated. Mourdock is seriously considering filing another Supreme Court petition, asking the court to determine whether the sale was legal. The funds will argue that the government could finance the bankruptcy sale process only with congressional approval. They will also argue the sale should be overturned because the government and the UAW -“ two of the three purchasers -“ had conflicts of interest, because they were creditors before the sale.
Mourdock's bid is, no doubt, a long shot. The Supremes grant only a tiny fraction of the petitions for review they receive, making any petition a Hail-Mary effort. Even if the court does grant review, the deck is stacked against the Indiana funds, since the Second Circuit already rejected their claims.
Mourdock has already spent $2 million of the state's money to fight this battle. Tom Lauria, the funds' hired counsel, promises to work pro bono on the case should it go forward. Still, Indiana's Solicitor General's Office will also work on the case, which means even more state funds will be invested into this campaign. And, some of Mourdock's constituents have opposed his agenda from the get-go, because they would have been among the many who would have lost their jobs had the sale not gone through.
Mourdock admits he is motivated, at least in part, by principle: he thinks the government just shouldn't meddle in the affairs of private sector with "bail outs- and deals that give Uncle Sam an ownership stake in private businesses.
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