Ex-Justice Diane Hathaway Sentenced To Prison For Real Estate Fraud

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By Ed White

Declaring herself “broken” and “disgraced,” former Michigan Supreme Court Justice Diane Hathaway tearfully took responsibility for fraud Tuesday before a judge sentenced her to a year and a day in prison for concealing assets while she was pleading with a bank for a sale on her underwater home.

Defense attorney Steve Fishman said the devastation of losing a prestigious job seemed to be enough punishment for Hathaway, who vaulted to statewide prominence through an extraordinary Supreme Court election in 2008. But U.S. District Judge John Corbett O’Meara rejected community service and instead chose prison. Crying and reading from a statement, Hathaway, 59, blamed her crime on “personal issues” but added: “That is no excuse.”

“I stand before you a broken person,” she told the judge. “I am ashamed, embarrassed, humiliated and disgraced.” The 2011 sale of Hathaway’s Grosse Pointe Park home, near Detroit, erased the balance of her mortgage, $664,000. Prosecutors said that she claimed hardship while still possessing more than $1 million in assets, including a debt-free home in Windermere, Fla.

In short sales, banks let distressed owners sell properties for less than what’s owed on them, providing a significant benefit to borrowers who can’t afford to keep paying the mortgage but want to avoid foreclosure. Hathaway and husband Michael Kingsley put the Florida home in a relative’s name while dealing with ING Bank on the Michigan house, then got the property back in their names in 2012. Before the sale, she also tapped more than $350,000 in cash to buy two homes that were placed in the names of stepchildren, according to the government.

Prosecutors recommended a prison sentence of a year to 18 months, while Hathaway asked for probation and community service. The fraud charge wasn’t related to her work at the Supreme Court, but authorities said her expertise in real estate and law was a factor in the scheme. “We do not ask you to sentence Diane Hathaway based on who she is,” said Assistant U.S. Attorney Dan Lemisch, noting her successful career as a judge and prosecutor. “We ask you to sentence Diane Hathaway based on what she did.”

The 366-day sentence will allow Hathaway to get time off for good behavior, meaning her actual time in custody likely will be nine to 10 months. The judge didn’t elaborate on why he chose that punishment, saying only, “I have thought a great deal about this.”

U.S. Attorney Barbara McQuade hailed the result. “Homeowners who play by the rules should know that those who don’t will be held accountable, no matter who they are,” she said.

See more on mortgage fraud:
10 Worst Cities for Potential Mortgage Fraud
Real Estate Fraud: How to Spot a Scam
Latest in Mortgage Fraud: Flopping

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