Jones Day's Chrysler Charge To Taxpayers: $12,702,190.19

Chrysler's little parade in bankruptcy court to make sure a few hundred thousand unionized workers retain their jobs for another year or two is finished. And here is the bill to you, dear taxpayer (or rather the first of many): Jones Day's invoice is in the mail. Everyone take out their wallets and please split the $12,702,190.19 equally. After all, now that we are all benefiting form having a much leaner, much more competitive Chrysler around, we should all be happy to pay each and every lawyer who made it possible.

Jones Day has been kind enough to provide taxpayers with a breakdown of expenses incurred while working day and night to crack this determined from day one case.

And to get an itemized bill, er, perspective on the thousands of hours worked on the Chrysler case by virtually each of Jones Day's day lawyers, don't be shy and click on the fee detail below: 434 pages worth of itemizations are sure to provide countless hours of entertainment.

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Supreme Court Clears Chrysler Sale

Ginsburg denies application for stay. For commentary, check out SCOTUSblog.

Insisting that it was denying a postponement “in this case alone,” the two-page order said the challengers had not met their burden of showing that a delay was justified. The order allows a closing of the deal as of next Monday, because it lifts a temporary stay that Justice Ruth Bader Ginsburg had issued on Monday, apparently to give the Court time to ponder the issue.

That good ole' Quadrangle rolodex sure came in handy.

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Gonzalez Approves Chrysler Dealer Termination Plan

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Fiat Furiously Backpedalling

In the greatest diplomatic gaffe since Bush Sr. vomited all over Japanese PM Miyazawa, Fiat has sisued a brief with the Supreme Court, claiming what it said yesterday is actually not what it meant.

Whatever commitment Fiat may have to provide the industrial support and management expertise required to restore Chrysler to viability, any further delay imperils the chances of achieving an agreement that would permit Fiat to provide such support, leaving the alternative of a devastating [this was where the Italian translator whipped out a Thesaurus and was told to find the most dramatic, polysyllabic synonym of "big"] liquidation of Chrysler. Even the publicity surrounding the current delay puts Chrysler at further risk by sowing seeds of uncertainty among the many constituencies — employees, suppliers, dealers and taxpayers — who have supported this transaction and whose continued belief in the potential renewed viability of Chrysler is crucial to its survival. Further delay would only compound this risk while serving no countervailing public interest.

No countervailing public interest? How about the interest of those who, rightfully or otherwise, believe they have valid claims, and aside from the creditors, what about all those Asbestos claimants who will be stuck sucking their own thumb until the earlier of i) perpetuity or ii) until asbestosis creeps up.

Of course, this is merely damage control, and the damage already has been done. While yesterday ZH gave the appeal a 0.001% chance of getting cert, over the past 24 hours that probability has risen significantly in our opinion. Also, the 15th is a Monday, meaning the clock is starting to tick very loud for Steve Rattner. Maybe it is time he discovered what Ruth Ginsburg's direct line is and "presented" his view of the situation. Sphere: Related Content

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Indiana Pensioners Using Goverment's Argument Against It

As Zero Hedge expected in today's Frontrunning, it was only a matter of time before White & Case picked up on Fiat spokesperson Gualberto Ranieri's words, after he said "Fiat won't walk away from Chrysler." As has been repeatedly noted, the key argument presented by Chrysler and the USA, is that Fiat would bail if it had a chance. Of course, with Opel out of the consolidated picture, in my opinion, Fiat's walking away is still a distinct possibility, however now that the nitpicking over words has really picked up steam, a word out of place could be the difference between victory and loss.

And indeed, a few minutes ago, the Indiana Pensioners filed a Supplemental Statement in Support Of Stay Application (below), in which they state:

In responding to the news of this Court’s temporary stay, Sergio Marchionne, the CEO of Fiat, was quoted as follows:

“‘We would never walk away,’ Marchionne said in response to a question about whether Fiat would pull out of the deal if it isn’t completed by the June 15 deadline. ‘Never.’” Rather, Marchionne said that “We should just be patient and let the system work.”

Whether or not the arguments and testimony were ever true, the Indiana Pensioners respectfully submit that the risk of termination by Fiat if the transaction does not close by June 15 no longer provides a basis for driving the timing of these proceedings.

It is ironic, that Fiat itself could have dealt a big blow to its own case, if indeed it was truly interested in acquiring Chrysler. The SCOTUS will now have to start dealing with this angle, which for all practical purposes, weakens the debtor's case for an accelerated emergence dramatically.

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Chrysler Dealers Summary Arguments

The consolidated group of objecting Chrysler dealers has filed a summary in the Chrysler docket summarizing every single objecting party's pleadings. Very useful reading, which makes it easy to track what grounds any particular dealers believes the company/administration has wronged him/her on. Of course, way too late in the case to have a bearing on the SCOTUS decision, let alone BK court, but still good for all who are still curious about the dealergate scandal.

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Richard Mourdock's Take On The SCOTUS Decision

Fast fwd to 4:50 "There have certainly been threats made." by the administration.

Yet another confirmation of S-Rat's persuasive tactics.

Must watch interview with Indiana Pensioners' Richard Mourdock.

Interestingly, James Kwak of The Baseline Scenario seems to disagree with the Indiana Pensioners Fund argument for a variety of personal reasons. However, one question Kwak does not touch upon, which is at the heart of any "objective" argument, is how valid is this liquidation valuation in the absence of an adversarial analysis? Maybe James is aware that Greenhill put together their Fairness Opinion based exclusively on Capstone's liquidation report, which for all intents and purposes, was a biased, conflicted and unchallenged representation of reality.

If one is trying to be objective about this issue, it does necessitate an evaluation of all sides of the argument.

Zero Hedge has written and linked extensively to many much more detailed legal opinions (than that of the TBS) which consider that not only is TARP usage improper in this case, but also the Absolute Priority is, in fact, abrogated. But that is what a court is a venue for - to objectively voice various opinions with a fair chance of getting heard after the opportunity to prepare their case. One can argue that, aside everything else, these two critical aspects of the judicial system were soundly trampled upon in the Chrysler 363 sale.
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Obama Claims TARP Issue Is Out Of Supreme Court's Authority

SCOTUS blog reporting that according to a response filed by the Solicitor General Elena Kagan on behalf of the United States of America, no court, not even the Supreme Court, has an authority to rule on the applicability of the TARP funds, previously designated exclusively for financial company bail outs, for the Chrysler case.

The Obama Administration argued Monday that no court, including the Supreme Court, has the authority to hear a challenge by Indiana benefit plans to the role the U.S. Treasury played in the Chrysler rescue, including the use of “bailout” (TARP) funds. The Indiana debt holders, U.S. Solicitor General Elena Kagan wrote, simply have no right to raise that issue, thus putting it out of the reach of the courts.

Although arguing that the courts may not rule on the validity of Treasury’s decision to shore up a new Chrysler company with funds from the Troubled Assets Relief Program, the Solicitor General did argue that those funds may go to a troubled auto company, and not just to banks or other regular financial institutions.

Convenient - so if not the highest judicial institution in the US can decide on what the proper venue for TARP utilization is, does that mean that Geithner and Obama are now completely above the law in terms of how they burn taxpayer cash. Of course, the SCOTUS decision is a moot point - nobody dares to stand in front of the Obama juggernaut at this point. However, this chain of events will inevitably set off a precedent of unintended consequences for not just domestic, but also foreign lenders, when it comes to investing into any US companies, especially ones deemed to be added next on the Too Big To Fail bandwagon.

In this sense, the US will be forced to provide unlimited DIP funding as industry after industry discovers it is insolvent and the whole debate over whether the current economic crunch is liquidity driven, is concluded in favor of the rational minds, and lenders discover they have no recourse, not even with the Supreme Court Of The U.S. Sphere: Related Content

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Chrysler Sunday Evening Update

Update 1: Chrysler just filed its response to the Indiana appeal. The biggest variable here is the value that Chrysler assumes the first lien lenders would attain in a liquidation which at $800 million, Jones Day claims would be a far worse outcome than the $2 billion the secured lenders are guaranteed under the current plan. Of course, the entire liquidation analysis in the Chrysler case is predicated upon the work of one totally discredited and previously humiliated (by both his actions and by auto task force restructuring expert [if the 3 month Greatwide Logistics bankruptcy can be considered any expertise] Matt Feldman) Robert Manzo.

The liquidation analysis hyperlinked above is so fraught with lowball assumptions and a desperate desire to goal seek the lowest possible valuation, that if White & Case had their act together (mostly timing dependent), they could easily bring a valuation expert to testify under oath how a liquidation could bring a median valuation of well over $4 billion in bankruptcy (we dare inquisitive readers to go through Manzo's generous expense and cost assumptions and draconian asset recovery estimates without collapsing into a laughing heap on the floor).

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Lots of action behind the scenes on this Sunday night. Instead of paraphrasing it, I will refer readers to the wonderful blog of the Supreme Court Of The US which is keeping blow by blow tabs on the action.

All the complete filings, two new delay applications filed in addition to Indiana Pensioners, and much, much more. Also, for the insomniacs, a lengthy and very interesting analysis on the Chrysler sale courtesy of Steve Jakubowski, of The Bankruptcy Litigation Blog, which argues against many of the points that Stephen Lubben brings up.

The second delay appeal filed with SCOTUS deserves additional highlighting as it deals with the elimination of future claims against "good Chrysler" and might have sufficient grounds for the Supreme Court to reconsider the sale. From the SCOTUS blog:

If the Chrysler sale goes through soon, and a Chrysler-made vehicle is in a crash — perhaps during holiday traffic over July Fourth — is it unconstitutional to deny someone injured in that accident a right to sue? That, in essence, is the question that five consumer groups, a Chrysler consumers’ committee, and three men who already have accident lawsuits pending against Chrysler are asking the Supreme Court to answer.

They are seeking a chance for themselves and others to pursue existing and future accident claims against NewChrysler — the auto company that is to rise out of the government-managed rescue plan. Their application for a delay of the plan can be read here.

Under the terms of the rescue, NewChrysler would be freed of current and future lawsuits seeking money damages for injury (or death) caused by cars or trucks that were sold by “old” Chrysler before the sale deal took effect. Millions of those cars, oif course, are still on the road.

If that provision remained intact, there is almost no doubt that it would be repeated in any deal to spare bankrupt General Motors Corp. from existing and future accident claims, thus affecting millions more cars and trucks now in use.

Keeping the victims from suing, their lawyers argue, is not only beyond the power of a bankruptcy court, but raises “an important constitutional issue” about cutting off legal rights of people who, as of now, have no idea that they may someday be hurt in an auto crash.

The most immediate impact of the provision would be on those who already have sued Chrysler for accident harms, the application suggests. William Lovitz, Farbod Nourian and Brian Catalono joined in the consumer groups’ challenge because they are suing right now.

Lovitz’s mother was killed, and her son claims that was due to design flaws in Chrysler-made cars. Catalano is making the same claim for his own mother’s death. And Nourian is suing for his own injuries, medical bills and lost wages following a serious accident involving a Jeep Cherokee.

“Given that no funds remain in Chrysler to pay any claims,” and that the sale deal would bar claims that NewChrysler has liability for “old” Chrysler’s products, they say to the Court, “the claims of each of these individuals will disappear, with no consideration of the merits of their individual cases or of the merits of the issues they seek to present to this Court.”

The constitutional claim being asserted by the consumers and victims is tied to the simple fact that people do not know, now, that they could be in an accident in the future. “The future causes of actions of people who have not yet suffered a loss or injury due to the defect in their vehicles would not be covered,” the application notes.

That, it adds, is where the constitutional problem — a violation of due process — arises. “Because people who will, but have not yet, suffered injury from defects in Chrysler vehicles do not know that they will be injured in the future, they cannot receive either meaningful notice that their rights are being adjudicated or a meaningful opportunity to be heard,” it says.

The application contends that the constitutional problem goes beyond claims for injuries that may be suffered because of flawed products made by the auto companies. There is no realistic way, it argues, to expect that a consumer will monitor legal notices in the newspapers disclosing that a maker of consumer goods has filed for bankruptcy, so the consumer not yet harmed by that product should go to court to make a claim in case they are hurt by it in the future — to make sure they get in before any filing deadline.

While those who are injured in the future by a Chrysler car or truck may try to sue to undo the ban on potential lawsuits, but the ruling by the bankruptcy court would be a precedent hard to overcome, so a lawyer to file such a lawsuit may be hard to time, according to the consumer groups’ plea.

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Chrysler Supreme Court Stay Application

The Indiana Pensioners' Supreme Court Stay Appeal presented below. Oddly, on page 6 the Indiana Pension Funds have for the first time noted that their first lien holdings are $100 million, whereas in all prior disclosures they noted it was $42 million. Does this number include the Oppenheimer face holdings? Otherwise it seems like a rookie clerical error that will not help their case. Alternatively, Indiana Pensioners have been purchasing Chrysler first lien debt in the open market.

Also, in the parallel case of Government Motors, a decent profiling of Judge Robert Gerber.

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Indiana Pension Funds Submit Stay Request To US Supreme Court

WSJ reporting that the White & Case windmill chase is to be finally decided, likely in less than 48 hours, and by none other than Bill Clinton nominee and recent cancer survivor Justice Ruth Bader Ginsburg.

The emergency stay request, filed shortly before midnight Saturday, came after the 2nd U.S. Circuit Court of Appeals in New York approved the acquisition of most of Chrysler's assets by a group led by Fiat, the Italian auto manufacturer. A U.S. bankruptcy judge early last week approved the sale.

The stay request asks for the extension of a temporary hold on the sale put in place by the appeals court until Monday at 4 p.m. EDT or when the high court decides whether to intervene.

"Absent a stay, the court will be deprived of the opportunity to decide critical, nationally significant legal issues relating to management of the economy by the United States government," the pension funds said in the stay application.

Under Supreme Court practices, individual justices field emergency motions and Justice Ruth Bader Ginsburg will handle the filing. She could rule herself or refer the motion to the entire court. Justice Ginsburg can also reject the appeal outright or request other parties involved in the case file briefs on a tight schedule.

While the merits of the Indiana Pensioners' case can be argued, what is clear is that the speed with which this case has proceeded through the courts is a violation of simple due process. White and Case, a mere ten days ago, announced that as part of their discovery they received 87,000 documents totaling 385,000 pages from 39 separate productions. How one law firm even working 24 hours a day has even a remote chance of going though all of this and prepare any semblance of an argument is laughable. And these productions were received as recently as 3 days before the Fiat sale hearing: the government's strategy of literally drowning the law firm with data has worked, and the courts are complicit in this derailing of procedure. But in a case where one lawyer calls another lawyer a "terrorist", there is little that can surprise anymore.

Zero Hedge has offered its services for a distributed effort of perusing the discovery data dump by engaging our readers who have a legal expertise. If Messrs Lauria and Kurtz are ok providing ZH with any data that may eventually end up in the public record as a Joint Appendix or otherwise, we would assist to the best of our capacities in finding more such comparable emails where former Willkie Farr bankruptcy partner, current Auto Task Force member, Connecticut resident and prolific Democratic donor Matt Feldman tells Capstone MD Robert Manzo "I'm not talking to you. You went where you shouldn't" for trying to salvage a deal in the 11th hour, simply because the President does not negotiate with "terrorists." Sphere: Related Content

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In Preparation For The Chrysler Appelate Hearing

The three briefs filed with the Second Circuit are provided below. Reminder: the appeals hearing will be tomorrow at 2:00pm at the Appelate court at 500 Pearl Street. If the hearing does not result in an outright rejection of the appeal, this could have historic precedent as it unlocks a chain of events which would i) delay the Chrysler bankruptcy indefinitely, ii) give Fiat a free "out", and as has been rumored, without getting Opel, the motivation for the Italians to consummate the deal is materially lower, iii) have a material adverse impact on the outcome of the accelerated GM case. Even if the 2nd Circuit sides with the Debtor/USA, it is still feasible that White & Case will seek overtures to the Supreme Court. In other words, all unemployed and bored readers would be well advised to check out the action at the Second Circuit (no entrance fee).

Also, a cursory look at the filings indicates that the Indiana Pensioners will likely have an uphill climb as their two main points are demonstrably subjective i) whether the 363 sale was sub rosa plan, and ii) whether the US is allowed to use TARP funding for auto bailouts. Granted, some degrees of freedom in both, but what likely could have produced more bankable results would have been a valuation fight, where Lauria could have brought in an expert to opine as to the value of a liquidated Chrysler, and state (objectively) that this value is significantly higher than that presented by Capstone's highly discredited banker Robert Manzo. Arguing against the good faith preparation of his report, together with a justified higher valuation liquidation analysis would have potentially given the Judge much less subjective leeway.

But who knows, stranger things have happened.

The main briefs presented:

Indiana:

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Debtor:

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United States:

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Live Transcripts Of Chrysler Terminated Dealers Hearing

The files below are the court recordings from today's terminated dealers objection hearing. We have not had a chance to go through them yet. We would advise readers to focus on the testimony of Ethel Cook from Arkansas, whose sworn declaration previously, brought up some very interesting observations.

Part 1

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Part 2

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Terminated Chrysler Dealers Are Heard; The Clinton Scent Redux

Today, Chrysler's terminated dealers finally get a chance to be heard by Judge Speedy, although the mootness of the hearing can be smelt from miles away. Associated Press has some good color on the proceedings:

Just under 20 dealers were sworn in at the beginning of what was expected to be a lengthy day of testimony from both dealers and Chrysler LLC executives. Arguments on the motion are scheduled for Tuesday.

It's not clear when U.S. Judge Arthur Gonzalez will rule on Chrysler's motion, or how this will effect Chrysler's plans to terminate the dealer franchises effective Tuesday.

James Tarbox broke down while testifying about learning that the franchises for his pair of dealerships in Rhode Island and Massachusetts were included on Chrysler's list of the 789 it plans to terminate.

"I thought there must be a mistake," he said choking back tears.

Though acknowledging that he posted a loss for 2008, Tarbox said his dealerships have won awards for both sales and service in recent years.

While dealer closure is a natural and expected phenomenon, as both Chrysler and GM attempt to streamline into something resembling profitability, the question of terminated dealer selection is one that has bothered Zero Hedge, and specifically Marla, who put together some very interesting statistical analyses and models trying to extract any relevant patterns. As readers will recall, while the data preliminarily did not demonstrate a republican or democratic bias, there was some peculiar tendency in the data to favor Clinton donors. Yes, just statistics, and we all know those can be flawed. Plus the data set Marla worked with was not exhaustive. Hopefully, when GM discloses its full list of closures, the statistical exercise can be repeated with a much bigger sample population which should confirm or deny any relevant observations. Several GM dealers have already approached us unsolicited with information on their termination: we hope that if GM is tight lipped about its dealer list, that more voluntary information will come from the GM dealer community. But again, the best possible outcome is to get a more relevant statistical case.

So...

Last night I decided to flip through some of the sworn declarations presented by the dealers at the bankruptcy court hearing today. The compiled presentation list is presented below for the benefit of readers. The dominant theme among all dealers is that virtually all acknowledge they were compliant with both Project Alpha and Project Genesis: the key cut off criteria that Chrysler stated it had used in determining who gets terminated and who stays. In fact, the bulk of the dealers had significantly above average statistics from a sale, MSRP, customer satisfaction and service point of view within the entire Chrysler dealer universe. So in the event that retained dealers were not Genesis compliant while cut ones were, this would demonstrate that there was, in fact, more here than meets the eye. We leave the exercise for a later day, but will get to it shortly.

One particular declaration caught my eye, that of Ethel L. Cook, a dealer based in downtown Little Rock, a town near and dear to the former resident. I believe readers can draw their own conclusions based on Mr. Cook's sworn testimony (highlights mine).

On May 13, 2009, I received a letter from Chrysler notifying the Dealership that Chrysler had elected to “reject” our Dealer Agreement. I am obviously very familiar with the Little Rock, Arkansas dealer network and was surprised because both Cook and Crain, the only Chrysler dealers in Little Rock, were both rejected. Therefore, Chrysler’s action would, on its face, result in a complete lack of representation in a major American city. Since that would be a ludicrous result, one can only infer that Chrysler has a more sinister motive.

Because it is inconceivable that Chrysler will not have a dealership in Little Rock going forward, the only conclusion that one could draw is that, after review, the evidence in other markets in the region, that Chrysler now intends to “give” the Little Rock market to a Landers-related dealer.

Having reviewed the pattern of assumption and rejection of dealers throughout their region, I have detected a pattern: In every market where there is a dealership connected with former Penske Automotive executive Steve Landers, or his new automotive partnership with “Mac” McLarty (former Chief of Staff for President Clinton) and Robert L. Johnson (majority owner of the Charlotte Bobcats), the competitors are rejected.

In the Little Rock, Landers Chrysler Dodge Jeep is located far out of town in Benton, Arkansas. Nevertheless, the two Little Rock dealers, Cook and Crain were rejected.

In the Fayetteville, Arkansas area, Landers-McLarty Dodge Chrysler Jeep is located far out of town in Bentonville, Arkansas. Competitors Springdale Dodge Chrysler, Steve Smith County Jeep and Jones Brothers were all rejected.

In the Shreveport, Louisiana market, Lee’s Summit Dodge Chrysler Jeep (a Landers McLarty dealership) is located in Bossier City, Louisiana. Both competitive dealers, Claude de Beaux in Vivian, Louisiana and Greater Birmingham Dodge Chrysler in Shreveport were rejected.

In the Springfield, Missouri market, Tri-Lakes Motors (a Landers-McLarty dealership) is located in Branson, Missouri. Competitors Heritage Chrysler Jeep in Ozark, Missouri and Ramsay Motor Company in Harrison, Arkansas were rejected. A pattern seems to be emerging. Everywhere there is a Landers-McLarty dealership, Chrysler has rejected the competition.

In the Huntsville, Alabama market, Landers McLarty Dodge Chrysler Jeep, is located in Huntsville. Competitor Cloverleaf Chrysler Dodge Jeep was rejected.

Favoritism and cronyism towards preferred dealer group is not a valid exercise of business judgment.

We could not agree with the last line more, Ethel. After reading this sworn declaration, Zero Hedge is eagerly awaiting the full results from Marla's exercise, especially once it gets the much needed GM dealer termination data.

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GM Dealers Get Ultimatums To Follow New Rules/Not To Hinder Bankruptcy Or Be Shut Down

The Cleveland Plain Dealer Reporter out with a "shocker" disclosing just how much of a political bargaining chip the Big-3 use their dealers as. According to the story, GM sent ultimatums to all of its 6,000 U.S. dealers on Tuesday with the following stipulation "follow our new rules or face almost immediate franchise cancellations in court."

For the 2,000 dealerships targeted to lose their franchises, GM said it would soften the blow if those retailers don't oppose the automaker's restructuring plan.

The dealers that GM is keeping learned that sales quotas will go up, that they might have to remodel showrooms and that selling competing brands at GM stores could be discouraged.

GM has not publicly stated which dealerships will lose their franchises, and that list may never become public. Chrysler's cancellation list came out in court filings, but GM is encouraging dealers to settle out of court.

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Ganley, whose dealership is among the survivors, pointed out that if dealers don't agree to GM's terms, the automaker could cancel their franchise contracts in bankruptcy court. GM said in its filing Monday that it now plans to eliminate hundreds of more dealers, for a total of about 1,500.

In all, the automaker expects to cancel the franchises of about 2,000 stores, including about 500 Saturn, Hummer, Saab and Pontiac dealerships.

Why all the secrecy GM? What kind of pattern are you afraid will emerge if someone puts it all together?

Any GM dealers who have received the FedEx ultra secretive GM termination FedEx and wish to speak out, please contact myself (tyler at zerohedge dot com) or marla (marla at zerohedge dot com). Sphere: Related Content

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Appeals Court To Hear Chrysler Objection, Delay Bankruptcy Emergence

In what could become the first stone David has cast at Goliath, the U.S. Court of Appeals for the Second Circuit has decided to hear the appeal of the Indiana Pensioners. The WSJ reports that the Second Circuit will hear oral arguments on Friday the 5th, which will make bankruptcy emergence this week (as Chrysler and Obama had hoped) an impossibility. Furthermore, additional delays could jeopardize the case, which as Zero Hedge reported earlier, has to close by the 15th or Fiat is allowed to walk (whether it will chose to do so, considering the ridiculous taxpayer gift it is receiving, is another story).

From a legal perspective, the judges who will hear the appeal have lifetime appointments and don't have to be concerned about being re-appointed to a new 14 year term in about three months (don't worry Speed ball [a pun on Rogaine and very fast Mexican mice], you will get your 30 pieces of silver). Since one of the 2nd circuit judges is currently interviewing for a promotion, it will be interesting to see just who gets appointed.

And here is where the door to the Supreme Court of the United States opens. If a decision in favor of Chrysler at the 2nd circuit level differs from prior decisions on the priority of claims that other Appeals Courts have issued on bankruptcy issues, this case may have to advance to the Supreme Court to clarify any conflicts between courts at the same level. And once it gets here, there is no telling what speed the case may move with.

All in all, some very impressive gamesmanship by Lauria et al. As long as people keep fighting, fundamental rules of law and finance may yet be preserved and the buying up of electoral favors, i.e. UAW votes, in which the vast majority pays for the greed, laziness and stupidity of the few, whether it is Flint, Michigan or 85 Broad, may not be a done deal in this, what was once a truly great, country.

The case is 09-2311-mb in the Second Circuit. Sphere: Related Content

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Indiana Pension Funds Get Approval To Appeal Sale Motion

In the latest appellate order, the Indiana Pension Funds early this morning were granted a motion to appeal directly to the U.S. Court of Appeals, bypassing District Court, as had been the desire of Chrysler and Fiat. While undoubtedly a last ditch effort before the June 15 deadline, after which Fiat can walk away if there is no closed deal, the action will hopefully derail Gonzalez' steamrolling of over 300 objections, which early yesterday were overruled as he proceeded to approve the 363 sale motion.

In his order, Gonzalez was brief and to the point: "The Court certifies that an immediate Appeal of the Sale Opinion, the TARP Opinion and Sale Order is appropriate because this case involves a matter of public importance, and an immediate appeal may materially advance the progress of this case."

Undoubtedly, Gonzalez found himself in a very tight place, after District Judge McMahon earlier stated that "no court in the land would deny [the Indiana Pensioners’] right to be heard on appeal." The major question now is the determination by appelate court if there is grounds for one, and the process over the next two weeks, which will determine if the entire bankruptcy procedural farce has any chance of being overturned. If that is the case, all of Obama's rhetoric yesterday at the GM bankurptcy announcement about the Warp 10 speed with which Chrysler emerged from bankruptcy (trampling over many, many objections) will be refuted squarely in another court of law.

The order granting the appeal and the initial apeal filing are both provided below.

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Chrysler Sale Approved, Indiana Funds Appeal

Gonzalez is passing the steamrolling baton to Gerber who will now have daily coffee with Geithner and Rahm re: GM. Below is Gonzalez' order approving the Chrysler asset sale.

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Concurrent with the finalized sale, Lauria and Indiana still continue fighting, either unaware of just how grossly beyond repair the U.S. justice system now is, or desperate to bill for a few remaining hours. Their objection is based on the fact that TARP "need interpretation" whether or not it should be allowed for auto bailouts. Here's a clue: it is allowed for whatever the three stooges say it is for.

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You're the worst thing that's ever happened to me.

Hoping that our readers might enjoy a sneak preview of what we were working on, we decided to post our preliminary results on the Chrysler dealer data we crunched all weekend.

It will be a cold day in hell before we do that again, you can be sure.

The reaction was complicated by my typing "Why would there be an significant and highly positive correlation between dealer survival and Clinton donors?"

I didn't mean "statistically significant," but that was all it took. A number of blogs fixated on this sentence and ignored the next two, "Granted, that P-Value (0.125) isn't enough to reject the null hypothesis at 95% confidence intervals (our null hypothesis being that the effect is due to random chance), but a 12.5% chance of a Type I error in rejecting a null hypothesis (false rejection of a true hypothesis) is at least eyebrow raising. Most statisticians would not call this a "find" as 95% confidence intervals are the gold standard for this sort of work." You can imagine the result.

As a measure of how partisan this issue is, both sides of the aisle had it out over sentence structure all day. We were severely chastised (in my case rightly so) and that was further complicated by my posting without explanation, the results of six regressions absent any narrative about our experimental design, our order of testing and the like. This subjected us to "data fishing" criticisms. (Probably warranted to some small degree- though some readers went so far to accuse us of outright fraud). What began as an attempt to give our readers some transparency devolved into a mess of sound bytes. The fault is entirely mine for expecting civil peer review or anything like it in such a forum. A mistake I shall not repeat with early findings again.

When we pointed out that we found no support for a republican "enemies list" the response was that we had shifted our theory to match the new data. (This is odd since we never thought there was an enemies list). This should have been SOME news at least- at least that the present data didn't seem to support a theory that's been all over the MSM.... Somehow this little bit got lost even by the people you would have expected to pick it up. Talk about focus!

The slew of email I received ranged from "thanks" to "you are the spawn of the devil." The latter is obviously closest to the truth, so we are sending that reader the Marla Singer Stolen Jeans prize. His name was Robert Paulson.

We planned to release the data publicly today, but we are having second thoughts about that particular plan. Nothing makes a researcher feel less like sharing than being told what a moron they are after 48 hours of straight dataset preparation.

We have come up with a few ideas instead.

1. We are considering creating a members-only section for research and data like this. This would be the place we would release preliminary findings and datasets we have put a great deal of (uncompensated) (wo)manhours into. We may or may not then release final results to the public. Or we may after a substantial delay.

2. We may send datasets like this one to qualified and interested parties who request it by email. (This is where we are leaning for this particular set at the moment).

This means that everyone who isn't a certified space monkey is going to have to wait for the integration of the GM dealer closing data.

As our dataset is a derivative of the CRP, we will be distributing it (to the extent that we do) under the creative commons Attribution-Noncommercial-Share Alike license (though we may ask you respect the embargo time before we release it publicly).

I'll decide at the end of this note.

About the Data - Dataset creation:

Individual donor records from the Center for Responsive Politics for the 2008 election cycle (~800 megs, n=3542585) were converted to a .csv file. (Please consider donating to the Center here). Chrysler dealer records were compiled from dealer closing and dealer survival records (n=3129 after the elimination of mangled or unusable entries). These were obtained from bankruptcy documents and converted to excel. Both datasets were imported into an SQL database (after abortive attempts to run matching with less effective but more amusing methods-- at this size Excel and Access were useless so we had to rely on custom SQL queries for the initial extraction).

The dealer dataset was matched against full last name and first 2 characters of first name of the "majority owner" field v. the name of donor field in the CRP dataset. (Single initial first names were also matched). Records that matched were merged into a new file. The matching result produced a new data subset (n=~10000). This subset was filtered by first 2 charters in zip code. The resulting initial match dataset yielded n= ~6200 records including all political donations made by potential name matches, and preserving multiple donations from one majority owner name. In the case where a single majority owner owned several dealerships, records for each dealership/donation pair were created. In this way we could link dealership fates with their owner's political acts.

As the CRP data includes self-identified profession and employer data, we edited the automated match list by hand by first looking for a match between CRP employer or profession and the name of the dealership in the dealership dataset. We also cross checked full name entries-- in cases where small details like middle initial disagreed but the two datasets agreed on employer as a dealership we preserved the record. If no clear match was found with employer / profession we then looked to other connections- for instance common CRP donor codes with other records where the donor listed a known dealer as employer / profession. Some professions caused us automatically to look for other evidence (self-employed, business owner, etc) which often led us to find donors we might have otherwise passed by.

We had finished the first pass of this edit when we ran our first regressions and published the preliminary results.

We've since made a second pass and caught some more bad matches.

The newest resulting hand-edited dataset (n=5117) includes a single entry for each dealership with no matched political donations and at least one entry for each dealership where majority owners donated in a fashion tracked by CRP individual donor data.

Each individual dealership was assigned a numeric ID code. After filtering for double entries and subject to our removal of mangled or unreadable records the dataset contained 2923 individual dealer codes. This is somewhat less than the reported ~3200 total dealers reported as current by Chrysler.

Using a pivot table keyed on individual dealer ID code we tabulated several variables from the CRP/Dealer data including:

Source/Field: Description

Dealer/Majority Owner (full name)
CRP/FullName
CRP/Profession
CRP/Employer
Dealer/CompanyName
Dealer/CompanyAddress
Dealer/Zip Code
Dealer/DealerTerminationStatus: (1=terminated)
Created/ID: Dealer Unique ID
CRP/DonorCode: Individual Donor Code
CRP/Recipient: CRP Unique Recipient ID
CRP/DateDonation
CRP/AmountDonation
CRP/Party - Codes:

First Character:
D=Democratic
R=Republican
3=3rd Party
U=Unknown
P= PAC

Second Character:

Party:
W=Winner
L=Loser
I=Incumbent
C=Challenger
O=Open Seat
N=Non-incumbent

PAC:
B=Business
L=Labor
I=Ideological
O=Other
U=Unknown

We further teased these party codes into boolean categoricals (1/0) for each party / PAC code.

We then added calculated fields for:

Clinton (0 or 1 where Recipient ID = N00000019)
Obama (0 or 1 where Recipient ID = N00009638)
McCain (0 or 1 where Recipient ID = N00006424)

D (Any democratic donation)
R (Any republican donation)

None: No donation match found
Some: Any donation match found

Using pivot tables in Excel sorted by dealer code, we then aggregated all donation data by Dealer ID. In this way we captured the entire donation profile of a given Majority Owner and assigned to to each of his/her dealers. We used this dataset in our regression analysis.

Update: 3:30 am:

Some limitations to the data:

1. We are only counting majority owners in our donor matches. It's entirely possible that other influential donors who are minority owners, or former owners or otherwise connected in ways we cannot see are not being counted. Perhaps a son or relative has taken over the business but "Dad" or "Grandpa" still holds a majority stake. We caught several "retired" donors who were obviously still owners of dealers. We might be undercounting for this reason.

2. While we have PAC data, it is not sorted by party (for obvious reasons). To the extent PAC money is flowing someplace that might make a difference we cannot see it. (It would be fun to look at PAC (Labor) donations v. saved dealers, no?)

3. We don't have any data on dealer profitability. This is a pretty important factor we'd like to account for. Since this is generally claimed or understood to be a major factor, we might get stronger results out of the data (or weaker results for that matter) if we had the ability to add it as a variable.

4. There are certainly fund raising activities (speaking engagements, benefit dinners, etc) that we are not capturing with individual donor data. Certainly this makes our data weaker.

5. We haven't added older (2006, 2004) data yet. We have no idea if it will make a difference, but it might.

6. We don't have a good way of capturing organizational giving at this point. ABC Chrysler, Golden Hills may have donated gobs to Republicans and we'd never know about it because we are stuck with individual donor data.

Some general interesting facts:

Dealers: 2923

Dealers terminated: 702
Dealers saved: 2221
Dealers with Majority Owners who donated to republicans: 429
Dealers with Majority Owners who donated to republicans also terminated: 100
Dealers with Majority Owners who donated to democrats: 174
Dealers with Majority Owners who donated to democrats also terminated: 43
Dealers with Majority Owners who donated to both: 80
Dealers with Majority Owners who donated to both also terminated: 19
Dealers with Majority Owners who donated to no one (not even PACs): 2111
Dealers with Majority Owners who donated to no one (not even PACs) also terminated: 517

etc. etc. etc.

Initially we were interested in testing the hypothesis that donating to Obama in the 2008 election cycle might result in higher than average survival rates among dealers.

The data wouldn't come close to rejecting the null hypothesis there. (p-value ~0.7)

Here's that regression with the final version data:

Binary Logistic Regression: safe versus Obama 

Step  Log-Likelihood
   0        -1611.36
   1        -1611.34
   2        -1611.34
   3        -1611.34


Link Function: Logit


Response Information

Variable  Value  Count
safe      1       2221  (Event)
          0        702
          Total   2923


Logistic Regression Table

                                               Odds     95% CI
Predictor      Coef    SE Coef      Z      P  Ratio  Lower  Upper
Constant    1.15086  0.0434894  26.46  0.000
Obama
 1         0.101900   0.464948   0.22  0.827   1.11   0.45   2.75


Log-Likelihood = -1611.335
Test that all slopes are zero: G = 0.049, DF = 1, P-Value = 0.825

* NOTE * No goodness of fit test performed.
* NOTE * The model uses all degrees of freedom.


Measures of Association:
(Between the Response Variable and Predicted Probabilities)

Pairs        Number  Percent  Summary Measures
Concordant    14616      0.9  Somers' D              0.00
Discordant    13200      0.8  Goodman-Kruskal Gamma  0.05
Ties        1531326     98.2  Kendall's Tau-a        0.00
Total       1559142    100.0

* NOTE * 1 time(s) the standardized Pearson residuals, delta chi-square, delta
         deviance, delta beta (standardized) and delta beta could not be
         computed because leverage (Hi) is equal to 1.

We ran Clinton next. Here are the new results (note a drop in p-value).

Binary Logistic Regression: safe versus Clinton 

Step  Log-Likelihood
   0        -1611.36
   1        -1610.29
   2        -1610.26
   3        -1610.26
   4        -1610.26


Link Function: Logit


Response Information

Variable  Value  Count
safe      1       2221  (Event)
          0        702
          Total   2923


Logistic Regression Table

                                               Odds     95% CI
Predictor      Coef    SE Coef      Z      P  Ratio  Lower  Upper
Constant    1.14409  0.0435562  26.27  0.000
Clinton
 1         0.573566   0.412789   1.39  0.165   1.77   0.79   3.99


Log-Likelihood = -1610.265
Test that all slopes are zero: G = 2.190, DF = 1, P-Value = 0.139

* NOTE * No goodness of fit test performed.
* NOTE * The model uses all degrees of freedom.


Measures of Association:
(Between the Response Variable and Predicted Probabilities)

Pairs        Number  Percent  Summary Measures
Concordant    27105      1.7  Somers' D              0.01
Discordant    15274      1.0  Goodman-Kruskal Gamma  0.28
Ties        1516763     97.3  Kendall's Tau-a        0.00
Total       1559142    100.0

* NOTE * 1 time(s) the standardized Pearson residuals, delta chi-square, delta
         deviance, delta beta (standardized) and delta beta could not be
         computed because leverage (Hi) is equal to 1.

We still think there is enough to be curious here, but clearly our model is insufficient to understand what's going on in any statistically significant way. The reader will have to answer for themselves if such a p-value is eyebrow raising or not. (Perhaps someone will conduct a Bayesian analysis for this p-value and the Maureen White connection for us).

And for the "Anti-Republican" conspiracy buffs:

Binary Logistic Regression: term versus R 

Step  Log-Likelihood
   0        -1611.36
   1        -1611.29
   2        -1611.29
   3        -1611.29


Link Function: Logit


Response Information

Variable  Value  Count
term      1        702  (Event)
          0       2221
          Total   2923


Logistic Regression Table

                                                  Odds     95% CI
Predictor        Coef    SE Coef       Z      P  Ratio  Lower  Upper
Constant     -1.14513  0.0467939  -24.47  0.000
R
 1         -0.0457553   0.123407   -0.37  0.711   0.96   0.75   1.22


Log-Likelihood = -1611.291
Test that all slopes are zero: G = 0.138, DF = 1, P-Value = 0.710

* NOTE * No goodness of fit test performed.
* NOTE * The model uses all degrees of freedom.


Measures of Association:
(Between the Response Variable and Predicted Probabilities)

Pairs        Number  Percent  Summary Measures
Concordant   198058     12.7  Somers' D              0.01
Discordant   189200     12.1  Goodman-Kruskal Gamma  0.02
Ties        1171884     75.2  Kendall's Tau-a        0.00
Total       1559142    100.0

I don't plan to be so silly as to offer more commentary this time, and I'm only putting up the new regressions to quell the flames.

Alright, I've decided.

If you'd like the raw, merged dataset, drop me an email (marla @ zerohedge d o t com) with your stats qualifications and the like and we'll work something out. You'll probably get at least a week with the stuff on your own before we open the floodgates.

If you'd just like us to run some testing against what we have, just let us know and we'll see what we can do for you.

Likewise, if you think we've blown something, why not write us a nice note telling us how it should be done to meet with your satisfaction? We're happy to give it a shot- if you're polite about the whole thing.

Thanks also to ep and jb! Sphere: Related Content

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I Am Marla's Observations On Artificial Selection In Chrysler Dealerships

Ok. You fuck me, then snub me. You love me, you hate me. You show me a sensitive side, then you turn into a total asshole. Is this a pretty accurate description of our relationship, Barack? This most recent nonsense is only the latest schizoid break. As you are no doubt aware, conspiracy theories are flying to and fro suggesting that the list of dealers that would be confiscated/dissolved/appropriated/killed by Chrysler the Auto Task Force was politically generated. Most versions of this tale mention a sort of Nixon enemies list approach to dealerships and cite snippets of data on the mostly republican political contributions of closed dealerships. We didn't really want to believe that about you. Quips like "Dealer List Targets GOP" sound like dead cats meowing to us.

Such stories interest us, but all stories involving the Chrysler travesty and the pending GM daterape interest Zero Hedge. Zero Hedge is a bathtub of squirming desire and skepticism. Yes, we think there is a lot that goes on that someone isn't telling us (or you). Still, parsing the dealers through an enemies list to determine closures seemed entirely unlikely to Zero Hedge. If true it should (but probably wouldn't) be the end of any administration. That sort of rank thuggery should be the end of any administration, no matter what its denomination.

Regardless, even if some sort of preference was manifesting itself, Zero Hedge doubted that an "enemies list" would be the mechanism. It does seem that Chrysler was not particularly involved in the process. That's suspicious, but not damning without more. It is least political poison though. It is asking for trouble anytime economic decisions like this are made with tainted or potentially tainted political methods. This from Reuters citing Leonard Bellavia, of Bellavia Gentile & Associates, who represent some of the dealers being terminated:

"It became clear to us that Chrysler does not see the wisdom of terminating 25 percent of its dealers," Bellavia said. "It really wasn't Chrysler's decision. They are under enormous pressure from the President's automotive task force."

Control of the list would present the opportunity for a bit of mischief by the automotive task force. Still, Zero Hedge thought it much more likely a "crony" list would be employed, granting automotive pardons for the democratically connected or perhaps to habitual donors. Still, positive Democratic bias in this respect is probably more realistic than negative Republican bias. Megan McArdle expressed similar sentiments last week and Cody Hatch comments over on Megan's site:

Anecdotally, there are Democratic-owned dealerships which are not being closed, but which are seeing all or most of their competitors closed. Equally anecdotally there are profitable-Republican owned dealerships which are being closed. That's troubling, but as must be forever pointed out, the plural of anecdote is not data. Until - and unless - someone does some statistical analysis of both the dealers which are being closed and the ones which are being left alone, this is just a collection of troubling anecdotes. (Okay, a surprisingly large collection of troubling anecdotes, but still...)

We agree. So, as this is a matter of some gravity, we decided to do exactly this.

To start with, we pulled raw donor data from The Center for Responsive Politics / OpenSecrets.org for the 2008 election cycle and extracted ~865 megabytes of 2008 individual contribution ("IC") cycle table entries. Pause here a second.

We cannot say enough about the The Center for Responsive Politics and its decision to open source not just the 2008 cycle data, but basically all the data they collect. Without this sort of disclosure and a public minded attitude, we might never get to the bottom of these kinds of issues. Zero Hedge would like to add that their telephone librarians are sharp, effective and adroit. They sent me right where I needed to be (my cave) and got me exactly what I needed to have (my animal guide).

CRP/OpenSecrets.org, Zero Hedge's message to you: Slide.

As a consequence, and to the best of our knowledge, this particular output is the widest available dataset on contributions. We matched this data against two Chrysler dealer lists:

First, Docket #797 "Document #3" "Schedule of Designated Domestic Dealer Agreements and Cure Costs Related Thereto" (a list of dealers expected to survive).

Second, the famous "Exhibit A" document of dealers to be closed.

Each "Majority Owner" name was matched against donor names in the IC file. Where text matches were close enough we created new entries with address and zip code information to try and quality check our matches and avoid excluding matches with one or two letter typos from our dataset. Where possible we matched the dealship name and the "employer" field from the IC dataset.

Instead of doing this correctly in the first place with a parser written in C, we were lazy enough to run the matching/cleanup in ksh. Hours later we regretted our decision and switched to direct SQL queries. The IC list has in excess of 3.5 million entries. Crosschecking against 3000+ dealer records was an experience.

Once we felt we had a mostly-clean dataset (though this process continues), we matched dealer data against several variables including:

Dealer status: (Safe or Nuked).

The party affiliation of the recipient of the contribution (Republican, Democrat or Silly Party).

The Center for Responsive Politics' individual candidate identification number (CID) which we filtered for one of: Hillary Clinton, John McCain, Barack Obama or Other.

The donation dollar amount.

Zip code.

We ran binary logistic regressions across the variables. The results are interesting but the most dramatic was saved dealers v. donations by candidate and/or party.





This puzzled us. Why would there be an significant noticeable (we have rightly been called out for using significant here) and highly positive correlation between dealer survival and Clinton donors? Granted, that P-Value (0.125) isn't enough to reject the null hypothesis at 95% confidence intervals (our null hypothesis being that the effect is due to random chance), but a 12.5% chance of a Type I error in rejecting a null hypothesis (false rejection of a true hypothesis) is at least eyebrow raising. Most statistians would not call this a "find" as 95% confidence intervals are the gold standard for this sort of work. Nevertheless, it seems clear that something is going on here. Specifically, the somewhat low probability that the Clinton data showing higher survivability of Clinton donors could result just from pure chance. But why not better significance with any of the other variables? Why this stand out?

Then we got to thinking. Steven Rattner, the Car Czar, is married to Maureen White, one-time national finance chairman of the Democratic National Committee. What does Maureen do now? From her website:

Maureen White is currently Chairman of the Board of Overseers of The International Rescue Committee (IRC), a member of the North American Advisory Board for the London School of Economics, and a National Finance Chair of the Hillary Clinton for President Campaign. (emphasis ours)

That website looks dated, but you get the idea.

Again, we want to point out that our findings are preliminary and subject to change. But whatever the result, the Administration has made themselves very vulnerable by taking charge of the dealership closing decisions.

Plot Of Terminated Dealers (Republican Donors)
we haven't begun our in-depth geographic analysis yet, but the
concentration of these in Detroit (almost all of them) is interesting to say the least.

Plot Of Terminated Dealers (Democratic Donors)
clearly just by the numbers there is a rather short supply of these.

If a "pardon list" of a specific class of donors were being used, it would be consistant with the data we observed (noting, however, the significance issue). We would expcet to see no seriously significant correlation to any of the catagories except the Clinton donors. What we can say about the data more difinitively is that it seems pretty clear that the overall democratic donors list was not used. It is also not self-evident that an "enemies list" of republican donors was used to pick beheddings. If a target quota for closures (either $ or number of dealerships) was in use, one does wonder, however, how the difference would be made up if a "pardon list" was utilized.

We also regressed against amounts donated, and found very little in the way of interesting relationships. Again, this would be consistant with the use of a list of donors, and not a dollar weighted ranking system (which would require significant effort on the part of the tabulator of such a list).

Did Maureen White pass a list of Clinton donors to her husband for preferential treatment in the Chrysler dealer beheddings game? We don't know. "Maybe" is about the best answer we can give with this data. But "Maybe" should never have been an option anyone even had to wonder about.

Again, please remember:

THESE ARE PRELIMINARY FINDINGS

There is still clean-up to do in the original data. Zero Hedge believes there are some doubled entries still, but we also believe that the data is unlikely to change substantially even with these corrections. There are a number of other issues I won't belabor for us to cope with before we will call our results "final." Normally Zero Hedge would not post preliminary results, but given the early results, we felt it important to post them immediately with this disclaimer.

Zero Hedge is currently mapping zip codes to average income statistics to try and reverse engineer any local affluence factors that might have gone into the decision, and to correct for any bias in the data on this basis. We will also be taking a very detailed look at geographies and looking for new ways to display our dataset. Suggestions, of course, are most welcome.

Zero Hedge is contemplating posting the entire dataset and analysis for peer review once the data scrub is done and we rerun the numbers. Stay tuned.

Oh, and by the way, you're not getting this GM bond back. We consider it asshole tax.

UPDATE (05/31/2009 2:54 pm et):

1. Like it or not, using 95% as a confidence interval is totally arbitrary. You may not be concerned by a 12.5% chance of a Type I error. We think it significant enough to make us quite a bit more curious.

2. A word about multiple experiments:

We found what I will call the "Clinton Effect" after running the data in separate regressions just with Clinton, Obama, McCain. The rest of the variables we added in later testing. One could make the argument that Zero Hedge was "data mining" or "fishing" with multiple experiments eventually bound to find something. Readers will have to judge the import of this observation for themselves.

Zero Hedge would like to acknowledge the generous assistance of: "J" of the Quad Processor Monster, "B" from Desert parts unknown, "A" of jet-setting dinosaur fame, and "F" security guru extraordinaire. Sphere: Related Content

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