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Federal prosecutors filed a fraud charge against Michigan Supreme Court Justice Hathaway on Friday, just a few days before she leaves the state's highest court in a scandal involving the sale of a Detroit-area home and suspicious steps taken to conceal property in Florida.

Michigan Supreme Court justice charged with fraud

DETROIT – Federal prosecutors have filed a fraud charge against Michigan Supreme Court Justice Diane Hathaway, just a few days before she leaves the state’s highest court in a scandal involving the sale of a Detroit-area home and suspicious steps taken to conceal property in Florida.

The charge was filed Friday as a criminal “information,” which means it was negotiated and that a guilty plea is expected in federal court. Defense attorney Steve Fishman declined to comment Saturday.

Hathaway is resigning Monday, months after a series of questionable real estate transactions first were revealed by a Detroit TV station. Hathaway and her husband, Michael Kingsley, deeded a Florida home to Kingsley’s daughter while trying to negotiate a short sale on a house they couldn’t afford in Grosse Pointe Park.

In a short sale, a bank agrees to a sale that wipes out any remaining mortgage, a significant benefit for any borrower. The 2011 deal went through and erased the couple’s $600,000 debt in Michigan. Five months later, in 2012, the debt-free Windermere, Fla., home worth more than $600,000 went back in their names for $10.

The bank fraud charge says Hathaway made false statements to ING Direct, transferred property to others and failed to disclose available cash – all in an effort to fool the bank into believing she had a severe financial hardship. Kingsley, also a lawyer, has not been charged.

Hathaway has refused to make any lengthy public comments. She told WXYZ-TV last spring that the property shuffles were a private matter.

The maximum penalty for bank fraud is 30 years in prison, although that would be a rare punishment for anyone and unlikely for Hathaway. Nonetheless, some time in custody should be expected, predicts former federal prosecutor Lloyd Meyer of Chicago.

“Any bank robber who robs a bank with no gun and just a note goes away to prison. A judge who steals over half a million dollars should enjoy the same fate,” said Meyer, referring to the amount of debt written off after the short sale. “As a former federal prosecutor, it would be unthinkable to have this type of defendant get a slap on the wrist.”

U.S. Attorney Barbara McQuade declined to comment on Hathaway’s possible punishment or other aspects of the case. The case is assigned to U.S. District Judge John Corbett O’Meara in Ann Arbor.

Hathaway, 58, filed retirement papers with the state Dec. 20, but it was not publicly disclosed until Jan. 7 when a state judicial watchdog filed an ethics complaint against her for the real estate transactions, calling them “blatant and brazen” violations of professional conduct as a judge. Her last day as a justice is Monday, although Hathaway has not participated in court business for two weeks and has vacated her offices.

It was no secret Hathaway was under scrutiny by prosecutors. The government filed a lawsuit in November to seize the Florida home as the fruit of bank fraud. The civil case is pending and likely will be consolidated with the criminal case.

Hathaway was halfway through an eight-year term on the court, the result of a major election upset over then-Chief Justice Cliff Taylor in 2008. Her victory put Democrats in control of the court for a two-year period. She was a Wayne County judge before joining the Supreme Court.

Chief Justice Robert Young Jr., a Republican, released a statement, in which he said the scandal diminishes the public’s trust in government. He said Hathaway’s departure and the criminal charge “bring to a close an unhappy, uncharacteristic chapter in the life of this court.”

Republican Gov. Rick Snyder will choose Hathaway’s successor and likely stretch the GOP’s majority to 5-2.

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