Home > Uncategorized > The Saga of Former Justice Hathaway

The Saga of Former Justice Hathaway

Former Michigan Supreme Court Justice faces sentencing for Bank Fraud

Diane M. Hathaway, a former justice of the Michigan Supreme Court, will be sentenced
on May 28 after pleading guilty to one count of bank fraud on January 29, 2013.

Before the deterioration of her legal career, Hathaway worked as an assistant prosecutor
in Macomb County for 6 years, and in 1992 she was elected to the Wayne County Circuit
Court. After two reelections, a total of 16 years on the bench, Hathaway launched a
successful Democratic campaign to unseat conservative Chief Justice of the Court,
Cliff Taylor. Hathaway officially took office for the Supreme Court in January of 2009;
however, her time with Michigan’s court of last resort would be cut short after only four-
years.

A scandal involving Hathaway surfaced on November 19, 2012, when U.S. Attorney
Barbara McQuade’s office filed a civil complaint against the former Justice and her
husband, attorney Michael Kingsley. According to the complaint filed by McQuade,
Kingsley and Hathaway “systematically and fraudulently transferred property and hid
assets in order to support their claim to ING (Bank) that they did not have the financial
resources to pay the mortgage on the Michigan property”.

On January 7, 2013, the Michigan Judicial Tenure Commission (JTC) filed a formal
complaint against Hathaway, accusing the former judge of “Blatant and brazen
violations” of judicial ethics. Their allegations against the judge included bank fraud,
tax fraud, money laundering and lying to investigators. Additionally, the JTC included
a petition that Hathaway be suspended from the court while the matter was investigated.
On January 21, 2013, two weeks into her suspension, the former justice resigned from her
position on the bench. Hathaway’s retirement prompted the judicial commission to drop
their formal complaint. The JTC justified their decision, stating, “nothing further could
by accomplished” by pursuing the complaint against Hathaway.

In the course of a hearing conducted on January 29, 2013, before U.S. District Judge John
Corbett O’Meara, Diane Hathaway pled guilty to committing bank fraud in connection
with property owned in Grosse Pointe Park, MI. The former judge admitted that between
2010 and 2011 she knowingly engaged in a scheme to defraud ING Direct Bank by
concealing assets from the bank to qualify for a “short sale”.

In March of 2010, Hathaway quitclaimed her Florida residence, valued at $664,682, to
her stepdaughter for a grand total of $10. Later in October of that year, Hathaway and
her husband listed their Grosse Pointe Park residence for $1.2 million. On December
14, 2010 the couple submitted an application requesting a short sale on their property in
Grosse Pointe Park to ING Direct Bank. They stated that their savings had been drained
to make house payments, maintain property, pay taxes, and defend Kingsley in a lawsuit
related to his law practice. After receiving the bank’s approval, Hathaway and Kingsley
sold their Grosse Pointe Park property in a short sale on November 7. 2011.

By engaging in the short sale of their $1.5 million property, Kingsley and Hathaway sold
their Grosse Pointe Park home for $850,000; consequently, erasing nearly $600,000 in
mortgage debt.

When a homeowner cannot afford their mortgage payments and simultaneously the value
of their property drops, making it impossible for them to refinance their home, they
may be eligible for a legal short sale. When conducting a short sale, the bank decides
that selling the property at a loss is more advantageous than forcing the owner into
foreclosure. Essentially, a short sale is a bank’s forgiveness of debt to a borrower who
has claimed financial hardship.

It is considered illegal to hide assets as a means of justification for the conduction of a
short sale when the action is done to defraud the bank or financial institution that holds
the mortgage.

The 58-year-old mother of 5 will faces a prison sentence and up to $120,000 in fines
and restitution. Due to negotiations between the Federal Prosecutor and Hathaway’s
attorney, Steve Fishman, Hathaway’s punishment will be limited to a maximum of 18
months behind bars. As a part of their negotiation, Hathaway waive her right to appeal
the case after sentencing. If a pre-sentence report determines there was no financial loss,
sentencing could be as little as 4-10 months.

Fortunately, there is light at the end of the tunnel for Hathaway. Earlier in January,
pension officials calculated that Hathaway will earn approximately $99,000 every year
for the rest of her life.

Sources:

http://milawyersweekly.com/news/2013/01/29/hathaway-pleads-guilty-to-bank-fraud/

http://judgepedia.org/index.php/
Michigan_Supreme_Court_Justice_Hathaway_retires_amidst_claims_of_fraud_and_mon
ey_laundering

http://judgepedia.org/index.php/Diane_Hathaway

http://www.michigan.gov/som/0,4669,7-192-29701_29703—,00.html

http://jonathanturley.org/2013/01/08/michigan-justice-diane-hathaway-resigns-after-
agency-accused-her-of-blatant-and-brazen-violations/

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