Indiana officials renew Chrysler bankruptcy fight
9/4/2009INDIANAPOLIS — Indiana officials want the U.S. Supreme Court to reconsider their objections to the Chrysler bankruptcy proceedings that resulted in the sale of the bulk of the automaker's assets to Italy's Fiat.
The Supreme Court in June rejected an appeal by a trio of Indiana pension and construction funds that wanted to block the deal. The court at that time did not consider the merits of the opponents' arguments, only whether to hear their full appeal.
Indiana state Treasurer Richard Mourdock claims the sale unfairly favored Chrysler's unsecured stakeholders, such as the United Auto Workers, ahead of secured debtholders like the pension funds.
The petition filed Thursday argues that the Supreme Court should decide whether bankruptcy proceedings similar to Chrysler's should be allowed in the future.
"We are not asking for the bankruptcy sale of Chrysler to be reversed, which is legally impossible, but the losses to our funds are very real," Mourdock said. "From the beginning, I have consistently stated that the federal government must follow the law and that is why the appeal was filed."
Chrysler spokesman Michael Palese declined comment Friday.
Mourdock's office estimates that three Indiana funds — the Indiana State Police Pension Trust, the Indiana Teachers Retirement Fund and the Major Moves Construction Fund — lost about $6 million in value during the bankruptcy sale. The funds held less than 1 percent of Chrysler's $6.9 billion in secured debt, and lost less than 1 percent of their value.
If the Supreme Court decides to hear the case, it could mean Indiana could recover some lost money, said Jim Holden, chief deputy and general counsel for the Indiana treasurer's office. If the Supreme Court sides with Indiana, it could send the matter back to a bankruptcy court to determine how much money could be recovered, and how that would work.
The state argues that a provision in U.S. bankruptcy code known as section 363 was used in the Chrysler case as a way to avoid typical Chapter 11 bankruptcy reorganization, which provides more protection for creditors. Indiana is asking the Supreme Court to determine whether section 363 may be used that way in the future.
"It's being used more and more as a kind of back door for this kind of thing — to wipe out creditors' claims and reorganize," Holden said. "Our position is that's too much of a stretch."
Critics say Mourdock's fight against the Chrysler bankruptcy proceedings is a waste of money that has already cost $2 million in legal fees. The new filing will not cost the state any additional legal fees unless the Supreme Court decides to hear the case.
Indiana Democratic Party Chair Dan Parker slammed Mourdock, a Republican, for filing the petition.
"Richard Mourdock continues to use the retirement funds he's pledged to protect as private slush funds to fight this very personal battle with President Barack Obama," Parker said in a statement Friday.
Mourdock has said all along that he considered the fight one of principle.