Former Michigan Supreme Court Justice Diane Hathaway pleads guilty to bank fraud

ANN ARBOR, Mich. (WXYZ) - Former Michigan Supreme Court Justice Diane Hathaway has pleaded guilty to bank fraud. The plea agreement follows a month-long probe by the FBI, sparked by a 7 Action News investigation into Hathaway’s suspicious property shuffle that saved her from having to pay about $600,000 in mortgage debt.

As part of a plea deal, Hathaway has agreed to serve up to 18 months in prison, supervised release for three to five years, a fine of $30,000 and restitution up to $90,000.

Her voice was barely audible as she pleaded guilty. Afterwards, she wiped tears from her eyes and hugged her husband at the defense table.

US Attorney for the Eastern District of Michigan said of the guilty plea, "We have made mortgage fraud a priority in this district because of the harm this crime causes to our housing markets in the aggregate. Home owners who play by the rules should know that those who don't will be held accountable, no matter who they are."

As part of her plea agreement, the U.S. Attorney agreed to drop the civil complaint against Hathaway, which could have forfeited her $740,000 waterfront Florida home. It’s the same home Hathaway moved out of her name to conceal her assets from her bank.

In addition to the property shuffle, Hathaway acknowledged that she under-reported funds that were available to her and misrepresented her employment status.

Hathaway will be sentenced in May.

The guilty plea marks the end of a 9-month saga that cost her her gavel, and reputation.

"Justice Hathaway threw away her career for $600,000….why would anyone rationally make that decision?" said Wayne State Law Professor Peter Henning.

The 7 Action News investigators were first to expose how Hathaway moved property out of her and her husband's names and into her stepchildren's so they could qualify for a short sale on their Grosse Pointe Park home.

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