Disgraced ex-Mich. judge gets prison for fraud

Updated at: 05/28/2013 4:06 PM
By ED WHITE

(AP) ANN ARBOR, Mich. - 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 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.

In his remarks to the judge, Fishman made arguments that are common in white-collar crimes involving high-profile people, including public humiliation and the loss of a professional livelihood. He said Hathaway had lost her $165,000-a-year job, as well as her law and real estate licenses, and endured deep shame. Hathaway insisted that friends and family stay away from the courthouse Tuesday.

Hathaway’s name and reputation have a "permanent stain," Fishman said. "Is that enough? I say it’s enough."

He filed documents to show that ING would have approved the short sale even without Hathaway’s scheme. Although she had escaped from a $664,000 mortgage balance, Hathaway only will be required to pay $90,000 as restitution because the bank greatly marked down the value of the loan under weak market conditions in the Detroit area.

Fishman said Hathaway would immediately submit a check for that amount. He described her as "petrified" of going to prison.

Hathaway declined to comment outside court, but a woman heckled her as she got into a car with her husband.

In February, Gov. Rick Snyder appointed David Viviano to replace Hathaway on the Supreme Court, extending the Republican majority to 5-2.

Hathaway joined the court after upsetting Republican Chief Justice Cliff Taylor in the 2008 election. She benefited from a controversial TV ad that accused Taylor of sleeping on the bench. Democrats then controlled the court for two years before GOP victories in 2010 put Republicans back in charge.

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