US Bankruptcy Court

By Dale Kasler
dkasler@sacbee.com
02/05/2015 6:44 PM

With harsh words for CalPERS and an angry bondholder, a U.S. bankruptcy judge has put into writing his pivotal rulings on the sanctity of public pensions in the Stockton bankruptcy case.

U.S. Bankruptcy Judge Christopher Klein of Sacramento late Wednesday issued a 54-page written version of two groundbreaking decisions he made in the Stockton case last October.

In the first, Klein said Stockton had the legal authority to break its contract with the California Public Employees’ Retirement System and scale back its pension plan. In the second, the judge decided to approve Stockton’s reorganization plan even though it kept the pensions fully intact.

“This court is persuaded that no better plan is likely under the circumstances,” Klein wrote, giving his nod to Stockton’s decision.

While the written opinion is essentially a rehash of the October rulings, it includes some scolding of CalPERS and its leading antagonist in the case, the Franklin Templeton investment firm of San Mateo.

Franklin, angered that it was getting just 12 cents on the dollar for a $36 million loan to the city, launched a lengthy court fight against the city’s decision to pay CalPERS in full. CalPERS argued that government pensions are untouchable.

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