Indiana Funds May Not Be Done with Chrysler

Indiana Treasurer Richard Mourdock is contemplating yet another legal challenge to the terms under which Chrysler sped through reorganization

By David Welch

The Indiana pension funds that went all the way to the Supreme Court to try to stop the sale of Chrysler to Italy's Fiat Auto (FIA.MI) might be back again. Indiana Treasurer Richard Mourdock is mulling a legal motion to get the nation's highest court to rule whether the sale—which was finalized in bankruptcy court on June 10—was valid.

The funds hope that the court will either overturn the sale or force the new Chrysler—which is owned by Fiat, the United Auto Workers, and the federal government—to pay secured creditors such as the Indiana pension plans some more money. Legal experts say it's a long shot, since a federal appeals court and Supreme Court Justice Ruth Bader Ginsberg already denied their efforts during the bankruptcy process.

Still, while it's hard to imagine the sale of Chrysler being overturned, Indiana's persistence shows what can happen now that the government is so deeply involved in Big Business. People like Mourdock cry foul and fight not only to recover more money, but to prove a point.

Driven by Principle

Mourdock, who has already spent $2 million of Indiana's money in a failed fight to recover more cash, admits that he is also motivated by principle. Mourdock argues the government rushed the sale of Chrysler and used its influence to manipulate bankruptcy proceedings. He is also personally opposed to government ownership of business. "John Wayne never needed a bailout," Mourdock says. "Is it about money? Is it about principle? Is it about the law? Yes. It's about more than Chrysler and Indiana. When we see the law has no meaning, it sets a bad precedent."

He maintains that the fight was about getting more cash for the pension funds, which bought the Chrysler debt at a discount rate of 43¢ on the dollar last year. Since the funds paid $18.3 million, they only needed $6 million more to break even.

The Treasurer says he was torn between his own constituents. Pensioners benefiting from those three funds wanted him to pursue a better settlement on the Chrysler debt.

Pro Bono Help

If Mourdock decides to file the motion, the pension plans' hired counsel, aggressive Florida attorney Tom Lauria, will work pro bono. But the state's Solicitor General would also work on the case. That could be problematic since some of Mourdock's own constituents oppose his fight. Had Indiana stopped the sale and the carmaker was liquidated, some of the state's 7,000 Chrysler jobs would have been at risk. Those voters let him hear it. "They thought I was trying to attack their jobs," Mourdock says.

That's the tightrope Mourdock walks. While some constituents want him to drop the fight, he and Lauria may keep going. They argue that the government wielded heavy influence to get the majority of other secured creditors to take 29¢ on the dollar when unsecured creditors—namely a health-care trust for retired UAW members—got paid much more. Secured creditors normally take precedence in bankruptcy. But in this case, Chrysler and the Treasury Dept. argued that a quick bankruptcy was needed to finalize the sale to Fiat and keep the stigma of bankruptcy from further hurting car sales. So they used a process called a "363 sale" to sell the Chrysler assets they wanted to keep to Fiat, the UAW's retiree health-care trust, and the government.

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