In California, homeowners who commit short sale fraud are very rarely investigated or prosecuted for the crime. There is not one conviction of which I’m aware, which is why short sale fraud is so rampant. Nor is there any criminal or civil downside to banks that knowingly approve short sales that are not arm’s-length.
In Michigan, the same property owners are convicted of short sale fraud and they go to prison.
In a long-awaited and much-anticipated decision, Judge John Corbett O’Meara sentenced former Michigan Supreme Court Judge Diane Hathaway to one year and one day in prison.
Hathaway, who also held a real estate license, pleaded guilty in January to one count of bank fraud in the short sale of her Grosse Pointe, Michigan home.
During the short sale of the Michigan home, Diane Hathaway concealed ownership of her second home in Florida when she filed her hardship declaration to lender ING by transferring the home via quit claim to her husband’s daughter prior to the short sale. Following the short sale, the home Hathaway and her husband owned free-and-clear in Windermere, Florida, was quit-claimed back to her.
In addition to her sentence, Hathway must pay $90,000 in restitution to ING and be on probation for two years following her sentence.
Hathaway’s attorney, Steven Fishman, failed in his attempt to convince the judge that she did not deserve prison. In a pre-sentencing memorandum to the court, Fishman wrote of Hathaway that “Her fall from the pinnacle of professional success has been swift, sudden, and tragic.” He also wrote that he felt that Hathaway, who made a bee-line to Florida after the scandal broke, could volunteer at a women’s shelter by doing interior decorating or a local cancer support organization.
U.S. Attorney Barbara McQuade prosecuted the case and was insistent on prison time. “Homeowners who play by the rules should know that those who don’t will be held accountable, no matter who they are.”
Michigan Attorney General Bill Schuette also supported the sentence and commended the FBI for investigating the case. “Public corruption scandals have damaged the public’s trust in government and tarnished our state’s reputation. No matter who you are or what position you hold, the same rules apply.”
Robert Foley, Special Agent in Charge of the FBI Detroit office was quoted, “Regardless of a person’s stature or position in life, we must all follow the same set of rules. In this case, an individual in a prominent position of public trust made extremely poor choices that have resulted in criminal activity. The FBI is committed to stopping these illegal acts.”
Read the original articles in USA Today and in AOL Real Estate. There are also previous postings in the California Real Estate Fraud Report on this case which can be found by using the Search form on the left side of this blog.