Feds accuse Michigan judge of real estate fraud

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Associated Press

Posted on November 20, 2012 at 7:36 PM

Updated Tuesday, Nov 20 at 7:37 PM

DETROIT (AP) — Federal authorities filed a lawsuit to seize the Florida home of a Michigan Supreme Court justice, accusing her of committing 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 filed 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.

Hathaway's unusual real estate transactions were first reported last spring by WXYZ-TV. At that time, Chief Justice Robert Young Jr. urged her to speak publicly and "clear the air." 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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