Stockton to ask judge to lift gag order on pre-bankruptcy talks
Hints of what happened during three months of tense negotiations between the city of Stockton and its creditors as the city struggled to avoid bankruptcy are beginning to trickle out -- and the city is eager to reveal more details.
Stockton's city manager, Bob Deis, told the Stockton Record that the city would ask a bankruptcy judge to make records from the three-month confidential mediation public to show how Wall Street attorneys behaved behind closed doors.
After failing to reach compromises with some of its largest debt-holders, Stockton on June 28 became the nation's largest city to have ever filed for bankruptcy protection. New York-based Assured Guaranty, which insures $161 million worth of debt the city has stopped paying down, issued a scathing statement criticizing the city for seeking bankruptcy protection, accusing it of shirking its debt.
The statement said Stockton lacked the political will to restructure its finances by, among other things, raising taxes and forcing further concessions from employees and retirees.
"They literally want anarchy in the streets," Deis told the Record. "They don't care. They just want to get paid."
An attorney involved in some of the negotiations said dozens of Wall Street lawyers flew in for meetings in Sacramento. These meetings about bond-debt were held separately from reportedly fireworks-filled meetings with employee union representatives. The city had reportedly pressed to have all creditors at the same table.
-- Diana Marcum
Photo: The view down Weber Street in downtown Stockton. Credit: Peter DaSilva / EPA