Back in May I reported that Diane Hathaway, a justice on Michigan’s supreme court, was facing significant public scrutiny for what one account called “a dizzying property shuffle that experts say raise ethical and legal questions.” Things have gotten significantly more complicated for her since then. The FBI has begun an investigation of Justice Hathaway, and at least one of the transactions is now the subject of a federal lawsuit filed Monday against the justice for committing fraud in the context of a short sale. Per the AP, “Hathaway is not charged with a crime, but forfeiture complaints in federal court typically lead to a criminal case.”
Justice Hathaway and her husband allegedly transferred ownership of one of their homes to her stepdaughter before seeking a short sale on another home. After the bank credited their claim of hardship and the house was sold, wiping out $600,000 of mortgage debt, the first home was transferred back to Justice Hathaway. The lawsuit against her called the transfers “systematic and fraudulen[t].” The AP reports the reactions of legal experts:
Former federal prosecutor Lloyd Meyer said authorities are accusing Hathaway of acting like a bank robber – “without a gun.”
Another former prosecutor, John Smietanka, said a forfeiture complaint is a strong tool and a signal that more could be coming.
“This is a very significant action, especially with a person of prominence like Justice Hathaway. There’s no getting around it,” he said.
Michigan Chief Justice Robert Young Jr. said fraud allegations against any judge are a “dreadful development.” In a written statement, he urged Hathaway to “clear the air and explain these transactions.”
As of Tuesday, Justice Hathaway had no plans of stepping down from the court. I will provide updates on the story as it develops.