Ex-Harrisburg Receiver Hires Lawyer for Possible Court Probe

The former receiver of Harrisburg, Pennsylvania, hired a lawyer to represent him in case the state judge overseeing the city’s insolvency asks him to explain why he resigned last month.

David Unkovic quit on March 30, two days after he asked state and federal authorities to investigate the bond deals that some Harrisburg officials say helped drive the city into financial distress. In a one-page, handwritten letter of resignation, Unkovic said he was “in an untenable position in the political and ethical crosswinds and am no longer in a position to effectuate a solution.”

Unkovic has refused to publicly explain his decision. “If David Unkovic is called to testify before a Commonwealth Court, he is prepared to do so,” Howard Bruce Klein, his attorney, said in an interview. “Beyond that, we have no comment.”

Unkovic was appointed last year by Governor Tom Corbett, a Republican, to develop Harrisburg’s plan. His appointment and the plan were both approved state appeals court Judge Bonnie Leadbetter. Leadbetter hasn’t scheduled a hearing related to Unkovic’s resignation.

Leadbetter ordered the state to file a status report on what Unkovic’s temporary replacement has done and to say when a new receiver will be named.

Unkovic filed an initial version of a plan that called for the sale or lease of city assets, including a trash-to-energy plant that doesn’t generate enough revenue to cover more than $300 million in debt. That bond debt is guaranteed by the city.

Officials Divided

His plan divided Harrisburg officials, with the controller, treasurer and some members of the city council opposing Unkovic. Mayor Linda Thompson supported him.

The city council put Harrisburg into bankruptcy in October. The case was thrown out of federal court by a judge who ruled the filing wasn’t authorized by state law. Under the U.S. Bankruptcy Code, states have the authority to prevent cities or counties from filing.

Unkovic has a responsibility as a lawyer to explain why he implied there were political or ethical pressures behind his resignation, attorney Mark Schwartz, who filed the bankruptcy case, said in an interview.

“What he said means that the waters are poisoned,” Schwartz said. “They are going to remain poisoned for the next guy, until there is an explanation for what happened and a remedy is put in place.”

Schwartz opposed Unkovic’s appointment on behalf of city council members. He has asked the U.S. Court of Appeals in Philadelphia to allow the city council to appeal the dismissal of the bankruptcy.

Pennsylvania state officials and Harrisburg’s mayor oppose the council’s effort to reinstate the bankruptcy. State officials and the mayor have accused Schwartz of filing a frivolous appeal and asked the court to sanction him.

The receiver case is TD Bank NA, v. Harrisburg Authority, 2010-CV-11737, Court of Common Pleas, Dauphin County, Pennsylvania (Harrisburg).

To contact the reporter on this story: Steven Church in Wilmington at schurch3@bloomberg.net

To contact the editor responsible for this story: John Pickering at jpickering@bloomberg.net

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