Prosecutors Want Ex-State Supreme Court Justice Diane Hathaway Behind Bars

May 23, 2013, 4:29 PM by  Allan Lengel

Prosecutors want disgraced ex-Supreme Court Justice Diane Hathaway to serve time behind bars for bank fraud.

In a sentencing memorandum filed Thursday in federal court, the U.S. Attorney's office recommended that Hathaway serve 12 to 18 months under the sentencing guidelines. Sentencing is set for Tuesday at 2 p.m. in U.S. District Court in Ann Arbor.

"Such a sentence would serve to adequately punish the defendant for her methodical, thoughtful, and sophisticated criminal conduct that spanned over two years and  caused approximately $100,000 in losses to a financial institution," Assistant U.S. Attorneys Daniel L. Lemisch and Patrick Hurford wrote. "In addition, this sentence would deter the defendant and others from future criminal conduct and, in particular, economic  crime."

Hathaway, 58,  pleaded guilty in January to a real estate scheme in which she transferred properties out of her name to make it look as if she had less assets, all so she could get a short sale on her Grosse Pointe Park home and get out of $600,000 she owed the bank, ING Direct.  The original mortgage was $1.4 million and the home was sold for $800,000 in the short sale.

Under the short sale,  the loss to the bank was approximately $100,000, according to the government. The government noted that she did bring $10,000 to the closing for the short sale as a closing fee, bringing the actual loss to $90,000.

In the filing on Thursday, the government stated Hathaway, who has a real estate license, failed to mention money and other assets she owned including a $600,000-plus waterfront home in Windermere, Fla. The feds say she siphoned money from her retirement accounts to purchase properties that she hid in her stepchildrens’ names.

"Accordingly, the defendant, in an attempt to gain approval from ING for approximately $601,000 in debt relief via a short sale, intentionally failed to disclose assets worth more than $1,000,000—enough to pay the ING mortgage debt in full and retain over $400,000 worth in assets.

"The defendant simply did not lie about the value of her assets ad fail to disclose ownership of the Florida property," the sentencing memorandum said. "The defendant went to great effort to hide these assets from ING."

Hathaway's attorney Steve Fishman filed a motion earlier this week suggesting Hathaway get probation, reasoning that she's paid enough already by losing her job and being humiliated publicly. He has insisted that the loss to the bank was far less than the government claims under the short sale.

Read the government's sentencing memorandum.



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