Piggybankblog posted: FBI investigating Michigan Supreme Court Justice Diane Hathaway

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FBI investigating Michigan Supreme Court Justice Diane Hathaway

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Piggybankblog posted on 11/03/12

Cross linked with freep.com

The FBI is investigating Michigan Supreme Court Justice Diane Hathaway over a questionable real estate deal involving a $1.5-million waterfront home in Grosse Pointe Park, according to a source familiar with the probe who spoke on condition of anonymity.

The transaction allowed Hathaway to erase nearly $600,000 in mortgage debt on the home by moving other properties around to relatives and then selling the $1.5-million house in a short sale for $850,000, according to public records.

Hathaway has consistently declined to comment on the allegations, which first came to light last spring. Hathaway’s lawyer, Steve Fishman, declined to comment Tuesday.

Former metro Detroit FBI chief Andrew Arena, who retired just weeks before the Hathaway investigation would have started, declined to comment Tuesday on the investigation, saying he is unaware of specifics. But he said home swapping is a common mortgage fraud scheme in metro Detroit.

“This is a plausible scheme. It is one that I’ve seen in the past,” Arena said of the alleged Hathaway transactions. “It’s a shell game — you move properties around.”

FBI officials declined to comment, as did officials with Michigan Attorney General Bill Schuette’s office.

Hathaway came under scrutiny following a May news report by WXYZ-TV (Channel 7), which revealed she and her attorney husband, Michael Kingsley, transferred at least two of their homes to relatives before a bank allowed them to get rid of their home on Lakeview Court in a November 2011 short sale. According to the news report, months before the short sale, the couple transferred two homes through quit claim deeds to Hathaway’s stepchildren. One of the homes was in Florida, the other on Windmill Pointe Drive in Grosse Pointe Park.

Shortly after the short sale, the two homes were transferred back to Hathaway and her husband, the report said.

Hiding assets to justify a short sale can be considered illegal because it is done to defraud the bank or financial institution that holds the mortgage on the property. According to WXYZ’s report, the bank that handled Hathaway’s short sale said it requires that homeowners disclose all properties in their name.

Reports of the FBI involvement in the Hathaway case stirred memories in Michigan’s political circles of past judicial scandals, including one from the 1970s that led to the resignation of Justice John Swainson, a former governor, after he was convicted of perjury.

They also could spill over into this year’s campaigns for three seats on the Supreme Court, although Hathaway isn’t up for re-election. State Republicans and their allies have been seeking — without much success — to tie the allegations against Hathaway, who was nominated for the court by the Democratic Party, to the three Democratic 2012 nominees.

Bill Ballenger, editor of the newsletter Inside Michigan Politics, said a federal investigation, regardless of where it leads, makes it harder for this year’s Democratic nominees to depict themselves as reformers aiming to restore confidence in a court (where Republicans hold a 4-3 majority) they contend has been too political.

“I think it’s something (the GOP) can make hay with,” Ballenger said. “If it was the other way around, (Democratic Chairman) Mark Brewer sure would.”

A Wayne County Circuit Court judge in 1993-2008, Hathaway was elected to the Michigan Supreme Court in 2008, and her term expires Jan. 1, 2017. She earns $164,610 a year as a state Supreme Court justice.

Staff writer Dawson Bell contributed to this report.

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