Ex-Michigan justice pleads guilty to bank fraud, faces prison time

For years Diane Hathaway sat behind the dais as a Michigan Supreme Court justice. This time, she was the defendant.

Hathaway, who has resigned from the bench, pleaded guilty to bank fraud during a federal court hearing Tuesday in Ann Arbor.

As part of her plea agreement with the U.S. attorney’s office, Hathaway faces a year and a half in prison for concealing information from her bank. Sentencing was set for May 28.

The case stems from 2010, when Hathaway entered into debt forgiveness negotiations with ING Bank for her home in Grosse Pointe, a Detroit suburb. According to court documents, Hathaway concealed some of her assets in hopes of improving the odds that the bank would approve a short sale, allowing her to sell her home for less than her loan balance. The bank OK’d the sale, saving her thousands of dollars.

As part of the plea agreement, Hathaway agreed to pay ING up to $90,000 in restitution.

Hathaway, who avoided reporters’ questions as she walked into the courthouse, dropped her voice to a whisper when she admitted guilt, and eventually cried during the hearing, according to WXYZ-TV, the Detroit news station that first reported her real estate transactions last spring.

For Michigan Atty. Gen. Bill Schuette, whose office helped the FBI with the investigation, Tuesday’s hearing was an important step.

“Public corruption scandals have damaged the public’s trust in government and tarnished our state’s reputation,” he said in a written statement. “But today, we begin to move forward, beyond the cloud of controversy that hung over our state’s Supreme Court.”

Hathaway stepped down Jan. 21, weeks after the Michigan Judicial Tenure Commission filed a 19-page complaint against her.

“Regardless of a person’s stature or position in life, we must all follow the same set of rules,” the FBI said in a statement. “In this case, an individual in a prominent position of public trust made extremely poor choices.”

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marisa.gerber@latimes.com

@marisagerber