LEGAL NEWSLINE

DETROIT (Legal Newsline) -- The Michigan Judicial Tenure Commission has reportedly dropped its ethics complaint against former state Supreme Court Justice Diane Hathaway.

The JTC, which is responsible for investigating complaints of judicial misconduct by state judges, filed a formal complaint and petition for interim suspension against Hathaway Jan. 7.

According to The Detroit News, the commission met privately earlier this week and agreed not to pursue its complaint since she is no longer a judge.

"Even though the JTC retains jurisdiction over former judges for acts of misconduct committed while they were judges, nothing further could be accomplished by pursuing this matter through the judicial discipline system, other than a public censure from the Supreme Court," the commission said in a statement, the newspaper reported.

Last week, Hathaway pleaded guilty to committing bank fraud in connection with property owned in Grosse Pointe Park.

During a Jan. 29 hearing before U.S. District Judge John Corbett O'Meara, the former judge admitted that between 2010 and 2011 she knowingly engaged in a scheme to defraud ING Direct Bank by concealing assets from the bank to qualify for a "short sale."

A short sale is a forgiveness of debt by the bank to a borrower who claims financial hardship.

It is often used as an alternative to foreclosure because it reduces additional fees and costs to both the creditor and borrower.

U.S. Attorney Barbara L. McQuade said last week that based on Hathaway's guilty plea and felony conviction for committing bank fraud, she is facing a maximum of 30 years in prison, a fine of up to $1 million and up to five years of supervised release.

"We have made mortgage fraud a priority in this district because of the harm this crime causes to our housing markets in the aggregate," McQuade said. "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 says he wants an investigation into Hathaway's ethics and professionalism.

The attorney general, which has filed a complaint with the Attorney Grievance Commission, contends the former judge should lose her law license.

In May, WXYZ-TV in Detroit first aired a story about Hathaway, questioning how ethical she was in convincing her bank to let her out of her mortgage on her Michigan home.

According to the television station's report, which aired on its 11 p.m. newscast May 9, the justice convinced her bank in November 2011 that she couldn't afford to keep making payments on the home, even though her other lakefront home in Florida was paid for.

Hathaway's bank apparently allowed her to do a short sale.

WXYZ reported that the transaction was just part of a "strange real-estate shuffle."

Hathaway announced she would resign from the bench last month. Her resignation was effective Jan. 21.

Gov. Rick Snyder will pick her replacement.

From Legal Newsline: Reach Jessica Karmasek by email at jessica@legalnewsline.com.