Posted on Naked Capitalism by Tyler Durden:
White & Case, made famous by its irreverent lawyer Tom Lauria, who led a valiant fight for the non-TARP lender committee until its disbandment after holdout after holdout decided fighting against the US government was not reasonable, has been retained again, this time by Indiana Pension Funds, holders of Chrysler first-lien claims, who are continuing where the non-TARP lenders dropped off.
In several motions with the Chrysler docket earlier, the Indiana State Teachers Retirement Fund, Indiana State Police Pension Trust, and Indiana Major Movers Construction Fund, fiduciaries for "approximately 100,000 civil servants, including police officers, school teachers and their families" have objected to the 363 sale, and demand Judge Gonzalez should block the sale, claiming "the plan is illegal and tramples their rights."
Among other things, the Indiana Pensioners seek to appoint both a trustee and an examiner in the case (an examiner was eventually retained in the Lehman bankruptcy), claiming that the company "has ceded control over their business and their restructuring efforts to the United States Treasury Department" which is using the Chapter 11 process to reward creditors that the "government deems politically important."
Not only that, but lawyers added that "the Treasury Department has taken constructive possession of Chrysler and is requiring it to adopt a sale plan in bankruptcy that violates the most fundamental principles of credit rights."
Whereas before it was easier to scapegoat certain evil, vicious hedge fund managers who could much easier be stripped of their fiduciary obligations and painted for the greedy, disgusting animals they are, Obama and Rattner will have a much more difficult time playing the blame game on this occasion, where the actual impaired party is so much closer to the people for whom it is a fiduciary, in this case, as the filing notes, roughly 100,000 ordinary men, women and children in the state of Indiana.
Lastly, this could significantly derail any plans for a fast and streamlined 363 sale: hopes were high that with the dissolution of the non-TARP committee it would be smooth sailing for Fiat and for the administration to get everything they wanted. With this last minute objection coming completely out of left field, Chrysler and its advisors will be stumped which lever in the media blame game to use now.