Monday, February 4, 2013

Ex-Michigan High Court Justice Cops Guilty Plea To Illegal 'Short Sale Shuffle' As Feds Drop Related Pending Forfeiture Snatch On Her Florida Home

In Ann Arbor, Michigan, The Detroit News reports:

  • U.S. Attorney Barbara McQuade says her office will pursue prison time for former state Supreme Court Justice Diane Hathaway, who pleaded guilty Tuesday to a felony bank fraud charge stemming from personal real estate transactions.

    Whether U.S. District Court John Corbett O'Meara gives Hathaway jail time could depend on how much he determines she defrauded mortgage lender ING Direct by hiding assets and misleading bank officers to secure a financial hardship and unload a $1.5 million Grosse Pointe Park home for $850,000 on a short sale.
  • Hathaway appeared Tuesday morning before O'Meara in his Ann Arbor courthouse just eight days after stepping down from the high court. [...] O'Meara set a May 28 sentencing date. Depending on how much the judge rules Hathaway defrauded her bank in a scheme to get a short sale, she'll pay up to $90,000 in restitution, according to her attorney, Steve Fishman.

    Federal prosecutors have accused Hathaway of concealing assets and transferring homes to stepchildren in a scheme to get mortgage lender ING Direct to forgive $600,000 owed on a $1.5 million Grosse Pointe Park home and unload the lakefront property in a November 2011 short sale.

    Outside the Ann Arbor courthouse, Hathaway attorney Steve Fishman could not explain why his client shuffled the homes around, resulting in the fraud. "It was dumb," Fishman told reporters. "There wasn't any reason for it. It made no sense."

    Prosecutors are letting Hathaway keep her posh second home in Florida she transferred to a stepchild in an effort to conceal her assets from the bank while applying for the short sale.

    Fishman said Tuesday he'll argue Hathaway and her husband, attorney Michael Kingsley, saved the bank $150,000 by negotiating a short sale of their home rather then letting it be sold at a foreclosure auction.

    But prosecutors have tripped up Hathaway on a fraud charge because she and Kingsley deeded the Windermere, Fla., home, valued at $664,000, to one of Kingsley's daughters while applying for the short sale — and then got the house back after selling the Grosse Pointe Park home.
  • During the short sale process, in 2010 and 2011, Hathaway also acquired two other homes in Grosse Pointe Park on Windmill Pointe and Balfour Street and transferred them to her stepchildren. Hathaway's stepdaughter, Sarah Kingsley, transferred the Balfour Street back to Hathaway after the short sale of the home on Lakeview Court, public records show.
  • Kingsley, whose name was on the Lakeview Court mortgage in question, was not charged and neither were his children who participated in the housing shuffle.

    "The government determined there is insufficient evidence to charge anyone else but Justice Hathaway," Assistant U.S. Attorney Daniel Lemisch. told the judge. [...] During the Detroit press conference, McQuade said Hathaway was the only person involved in the scheme who had "criminal intent."
  • McQuade had sought to seize the Florida home Hathaway and Kingsley own that prosecutors allege was transferred to Kingsley's daughter, Kathryn Sterr, to hide the asset from ING Direct during the short sale application process. The U.S. Attorney's office is dropping the forfeiture case contingent upon the restitution being paid, McQuade said.

    Until the sentencing date, Hathaway is free on her own recognizance and able to travel to her Florida home. The judge gave her one guideline, though.

    "The defendant will not transfer ownership of any property unless authorized by the court," O'Meara said.

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