Harrisburg Receiver Quit Amid Concern He Would Be Fired

David Unkovic, the former receiver for the city of Harrisburg, Pennsylvania, quit because he thought he would be fired by state officials, he said at a court hearing on his proposed replacement.

Pennsylvania appeals court Judge Bonnie Leadbetter ordered Unkovic to appear at a hearing to approve the appointment of a new receiver, William B. Lynch, a retired U.S. Air Force major general.

“We need to put the resignation of the former receiver behind us before we can go forward,” Leadbetter said. After Unkovic and Lynch testified, Leadbetter approved Lynch as the receiver for Harrisburg, the capital city of Pennsylvania.

Unkovic quit March 30, two days after publicly calling for state and federal probes of more than $300 million worth of bond deals that is at the heart of Harrisburg’s insolvency. He had developed a tentative plan to raise money for city by selling or leasing city assets, including the waste-to-energy plant related to the bonds.

After holding a press conference in which he called for the investigations, Unkovic met with lawyers from Pennsylvania’s office of general counsel, which represents Governor Tom Corbett, Unkovic said in court. He said he left that meeting convinced he would be replaced, so he resigned, submitting a one-page, hand-written letter to Leadbetter.

‘Irrational’

Calling a press conference and other actions showed that Unkovic was “irrational,” Steven Kratz, a spokesman for Pennsylvania’s economic development department said in a press conference after the hearing broke for lunch. During one meeting Unkovic was “slamming papers around,” Kratz said.

“It became clear he couldn’t handle” the job, Kratz said.

Unkovic declined to comment after the hearing, which took place in state court in Harrisburg, a few blocks from the state’s capital complex.

During the hearing today, Leadbetter praised Unkovic’s work as receiver, especially his proposal for solving the city’s fiscal crisis. Leadbetter said she wanted to understand why he resigned because Unkovic seemed like a man who could handle “complex” situations.

“I am very sorry you were unable to proceed,” Leadbetter told Unkovic.

Bond Deals

Before he began working for Pennsylvania last year as head of the economic development department, where Kratz worked for him, Unkovic spent three years at the law firm of Cozen O’Connor LLP. His career includes jobs at law firm Saul Ewing LLP and investment company PFM Asset Management LLC. He had spent most of his career working on public bond deals like those related to Harrisburg’s debt.

In December, about three weeks after Corbett nominated him, Unkovic said in court that Harrisburg’s bond debt had a “disturbing” structure. After that hearing, Unkovic said he avoided any public comments about a potential investigation of the bond deal until his March 28 press conference.

Unkovic said he was “put in a box” by creditors who convinced another state court judge to appoint a rival receiver to take control of the waste-to-energy plant. That receiver will be a tool of creditors, including Dauphin County and Assured Guaranty Municipal Corp., Unkovic said in court. The county and Harrisburg have both guaranteed repayment of the incinerator debt, and Assured Guaranty insured the bonds.

Recovery Plan

For the next receiver to succeed he will need the support of Corbett and other top state officials, Unkovic said.

Dauphin County Deputy Chief Clerk Scott Burford didn’t return a call or e-mail requesting comment on Unkovic’s statements. Ashweeta Durani, a spokeswoman for Assured Guaranty, declined to comment.

Unkovic was appointed under a state law that allows a receiver to prepare and implement a fiscal recovery plan.

Elected officials in Harrisburg disagree about Unkovic’s initial plan to end the insolvent city’s crisis. That plan would be implemented by Lynch, should his appointment be approved by Leadbetter.

Before he resigned, Unkovic proposed selling or leasing city assets, including a trash-to-energy plant that doesn’t generate enough revenue to cover more than $300 million in debt.

The debt is one of the main reasons Harrisburg is insolvent. In March, the city of 49,500 announced it would miss $5.27 million in bond payments. It earlier defaulted on payments it guaranteed on the waste-to-energy incinerator.

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, Delaware, at schurch3@bloomberg.net

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

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