Grand jury investigating Justice Hathaway's property dealings - DC Breaking Local News Weather Sports FOX 5 WTTG

By Charlie LeDuff
Fox 2 News Reporter

GROSSE POINTE PARK, Mich. (WJBK) -- As if the feds weren't already hanging more paper than an interior decorator on suspect government officials out of Wayne County, Fox 2 has confirmed yet another grand jury investigation.

This time it's Michigan Supreme Court Justice Diane Hathaway, who told her bank she was too poor to live in tony Grosse Pointe Park, and the bank agreed.

So what's she doing living in tony Grosse Pointe Park?

This is a tale of four houses.  Let's begin with the one of Lakeview where she lived with her husband, a successful slip and fall lawyer.  They said they couldn't afford the $1.5 million mortgage and had to move out, so the bank allowed them to sell the home for about half of what they owed on it.  That's called a short sale.

"You have to demonstrate a hardship, something that's changed in your life that no longer allows you to meet your obligations on a mortgage loan.  What we see most commonly is a change in employment status, a change in marital status or some sort of health concerns," said real estate lawyer T. Scott Galloway.

But what hardship?  She's got a job, he's got a job, and they own two other houses.  The feds think this whole deal might be garbage.

Before she was approved for the short sale, she gave away one of her homes to her stepdaughter, a swanky pad in Florida with a boat dock worth three quarters of a million dollars.  A house that they owned outright.

She also gave a home to her stepson just a stone's throw away from the short sale house.  She paid $170,000 cash for it in 2010.

Last November, the short sale went through and Hathaway sold her $1.5 million mortgage to a guy for $850,000.

So Hathaway is homeless, right?  Wrong.  Yet another stepdaughter bought a house in Grosse Pointe Park for $200,000 just months before the short sale, and just a few months after the short sale that stepdaughter signed it over to the judge.  Then the other stepdaughter after the short sale went through signed the Florida house back over to the judge.

One more thing.  According to documents obtained by Fox News, the feds are looking at a possible tax fraud because when Hathaway owned the home that she gave to her stepson and the short sale house, tax breaks were claimed on both when you're only entitled to claim it on one.

Justice Hathaway wouldn't answer our questions.