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Detroit trial: How 'bout that $3.5 billion check?

Kevyn Orr
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Kevyn Orr

Detroit's emergency manager testified Tuesday that he would have listened to any proposal to preserve retiree pensions before the city's bankruptcy filing last summer—but that he probably would not have agreed to a deal.

Kevyn Orr testified under cross examination on the fifth day of a trial to determine if Detroit's bankruptcy case can go forward. The city must show that it was broke and tried to negotiate with creditors in good faith before filing for Chapter 9 protection in July.

(Read more: Save cities or let them go bankrupt?)

The opposition is led by Detroit's unions and pension funds, which have much to lose if the city is declared eligible to rework $18 billion in long-term debt. Orr has said the pension pools are underfunded by $3.5 billion, but he hasn't publicly proposed what to do about it.

The Michigan Constitution prohibits public pensions from being impaired. Orr believes federal law trumps that provision, although he acknowledged there's no legal precedent.

(Read more: Detroit banker: Pension cuts go without saying)

Under questions from a United Auto Workers lawyer, Orr testified that he and his team were prepared to negotiate with creditors after telling them in a private meeting on June 14 that they might get just pennies on every dollar owed.

"Yes, that's why we called it a proposal," he said.

But when asked if he would have agreed to keep hands off pensions, Orr replied: "Probably not."

Later, Orr, a bankruptcy lawyer, said he couldn't recall specifically asking Gov. Rick Snyder for a state bailout for Detroit pensions. He said it was clear there would be no buckets of cash for any purpose.

(Read more: Bankrupt Detroit needs to cut red tape: Kid Rock)

Judge Steven Rhodes repeatedly became frustrated with Orr's responses to questions. Instead of replying yes or no, he often wanted to elaborate or couldn't recall.

"You don't remember asking the governor to write a check for $3.5 billion?" Rhodes said.

Orr said, "I don't recall asking it in that context."

—By The Associated Press.

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