Michigan Supreme Court Judge Gets 1 Year in Jail for Short Sale Fraud

Former Michigan Supreme Court Judge Diane Hathaway was sentenced to 12 months and one day in jail for committing bank fraud during the short sale of her home in Grosse Pointe, Michigan. She will also pay $90,000 in restitution and will spend two years on probation. Hathaway retired January 21, 2013 in the midst of the scandal.

Hathaway was charged with one count of bank fraud after investigators said she transferred ownership of her property in Florida to her daughter so that Hathaway could qualify for the short sale without paying additional penalties to her lender. Hathaway’s bank lost almost $600,000 in the short sale. After the short sale was completed, Hathaway transferred the debt-free Florida home back into her name.

In supporting the FBI’s pursuit of the case and securing prison time for Hathaway, Michigan Attorney General Bill Schuette stated: “Public corruption scandals have damaged the public’s trust in government and tarnished our state’s reputation. No matter who you are or what position you hold, the same rules apply.”

Robert Foley, Special Agent in Charge of the FBI Detroit office, added: “Regardless of a person’s stature or position in life, we must all follow the same set of rules. In this case, an individual in a prominent position of public trust made extremely poor choices that have resulted in criminal activity. The FBI is committed to stopping these illegal acts.”

At sentencing, Hathaway’s attorney argued that the amount of ING Bank’s potential loss was about $40,000, not $90,000 as claimed by prosecutors. He also argued that the bank received $150,000 more from the short sale than if the institution would have had to sell Hathaway’s home through a foreclosure sheriff’s sale after she quit making payments. The court was unmoved by his arguments.