Feds accuse Michigan judge of real estate fraud

November 20, 2012 - 9:33 PM
Michigan Judge Fraud

FILE - In this Jan. 8, 2009 file photo, Michigan Supreme Court Justice Diane Hathaway smiles following an investiture ceremony at the Michigan Hall of Justice in Lansing, Mich. On Tuesday, Nov. 20, 2012, federal authorities filed a civil suit in Detroit accusing Hathaway of fraud in a real estate transaction and seeking to seize a home she owns in Florida. The suit says Hathaway and her husband, Michael Kingsley, put a home in Windermere, Fla., in the name of Kingsley's daughter while they tried to persuade a bank to allow a short sale on their home in the Detroit suburb of Grosse Pointe Park. The lawsuit says the Windermere home was put back in the couple's hands after the short sale was approved. (AP Photo/Al Goldis, File)

DETROIT (AP) — Federal authorities filed a lawsuit to seize the Florida home of a Michigan Supreme Court justice, accusing her of fraud by hiding control of the real estate while persuading a bank to allow a short sale on another property.

Diane Hathaway is not charged with a crime, but forfeiture complaints in federal court typically lead to a criminal case.

In 2010, Hathaway and her husband, Michael Kingsley, submitted a hardship letter to ING Bank seeking a short sale on their home in Grosse Pointe Park, a Detroit suburb. The couple did not disclose that they had put their home in Windermere, Fla., in the name of Kingsley's daughter, the government said.

After the short sale in Michigan, which erased $600,000 in mortgage debt, the Florida home was transferred back to Hathaway and Kingsley, according to the lawsuit, filed Monday.

"Hathaway and Kingsley systematically and fraudulently transferred property and hid assets in order to support their claim to lNG that they did not have the financial resources to pay the mortgage on the Michigan property," the government said.

A short sale means a bank and a borrower agree to sell a property for less than what's owed on the mortgage.

Hathaway's attorney, Steve Fishman, declined to comment. Earlier Tuesday, before news of the lawsuit, Hathaway emailed court staff and other justices to deny speculation that she was quitting the court.

In a forfeiture action, Hathaway and Kingsley will have an opportunity to challenge the government. The government must show by a preponderance of the evidence — not beyond a reasonable doubt — that the asset is tied to bank fraud.

Former federal prosecutor Lloyd Meyer said authorities are accusing Hathaway of acting like a bank robber — "without a gun."

Another former prosecutor, John Smietanka, said a forfeiture complaint is a strong tool and a signal that more could be coming.

"This is a very significant action, especially with a person of prominence like Justice Hathaway. There's no getting around it," he said.

Michigan Chief Justice Robert Young Jr. said fraud allegations against any judge are a "dreadful development." In a written statement, he urged Hathaway to "clear the air and explain these transactions."

The unusual deals were first reported last spring by WXYZ-TV. At that time, Young, a Republican, said Hathaway needed to speak publicly. She declined.

Hathaway, a Democrat, was elected to the court in 2008, thanks to aggressive campaign ads that accused a Republican justice of sleeping on the job. Republicans control the court, 4-3. Kingsley also is a lawyer.

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