Detroit emergency manager Kevyn Orr ordered an investigation into employee benefit programs, including the insurance and pension systems.
Mr. Orr told the city’s inspector and auditor general, agencies that both have subpoena power, to report within 60 days in an order dated Thursday.
The document should cover “next steps, and any corrective, prospective, legal, additional investigatory or other action designed to address any waste, abuse, fraud or corruption uncovered,” according to the order.
Mr. Orr’s advisers are meeting Thursday with union leaders for about 30,000 active employees and retirees to discuss a restructuring plan.
Bill Nowling, Mr. Orr’s spokesman, said Mr. Orr wants to look into questionable investments by the two city pension funds, such as real estate ventures.
Matt Gnatek, chairman of the $3.4 billion Detroit Police and Fire Retirement System’s board, said he welcomes an investigation. “We have nothing to hide,” Mr. Gnatek said in a phone interview. “We will cooperate with any investigation. We look forward to it.”
In March, Ronald Zajac, general counsel of the police and fire pension fund and the $2.77 billion Detroit General Retirement System, and Paul Stewart, a former trustee of the Police and Fire Retirement System, were charged with participating in a bribery and kickback conspiracy involving more than $200 million in investments, according to a news release from the U.S. attorney’s office.
The investigation and Thursday’s union meeting come as Detroit is trying to avoid seeking Chapter 9 bankruptcy protection.
On June 14, Mr. Orr said he would suspend payments on $2 billion of unsecured debt to begin restructuring, and pay those creditors less than 10 cents on the dollar to help resolve a budget deficit that’s approaching $386 million. Total long-term liabilities are about $17 billion.
Mr. Orr also plans to reduce payments toward unfunded pension liabilities, which would result in unspecified cuts for retirees.
The city has stayed afloat by skipping payments to pension funds, according to Mr. Orr’s report.