Retired Michigan Supreme Court Justice Diane Hathaway faces up to 18 months in prison after short-selling her Michigan home to erase some $600,000 owed on the mortgage.
Prosecutors said Hathaway and her husband transferred a second home in Florida to a relative prior to claiming they couldn't afford to make payments on their $1.5 million Grosse Point, Mich., home. The couple short sold the house, meaning they sold it back to the lender then repurchased it at a lower price, clearing it of some $600,000 in debt. The process has become more common since the 2008 housing collapse as a method to prevent people from defaulting on their home loans.
A judicial conduct board investigating the transaction called Hathaway's actions "blatant and brazen" bank fraud, the Detroit Free Press said Tuesday. Hathaway retired shortly after the allegations surfaced.
Hathaway denied using her position as a state judge to impact the outcome of the housing transaction with mortgage lender ING Direct when asked by Eastern District Court Judge John Corbett O'Meara in federal court in Ann Arbor, Mich., Tuesday.
Sentencing is scheduled for May 28.
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