The 43-count grand jury indictment accuses Michael Mastro and his wife, Linda, of fraudulently transferring interest in their $15 million home in the tony Seattle suburb of Medina; failing to disclose a bank account that contained hundreds of thousands of dollars; and lying about the whereabouts of two huge diamonds valued at $1.4 million, all to conceal those assets from creditors in a bankruptcy proceeding.
It also alleges the couple withdrew more than $760,000 from their secret account to pay for a variety of personal expenses, including payment on their Bentley and Rolls Royce automobiles.
The Mastros vanished 16 months ago, after a judge ordered them to turn over the 27.8- and 15.9-carat diamonds. French police arrested the pair Wednesday in Annecy, a lake town near the Swiss border in southeastern France.
“Those who flaunt the law and ignore our legal process will be held to account,” First Assistant U.S. Attorney Annette L. Hayes said in a written statement. “Thanks to the unrelenting efforts of law enforcement both here and abroad, the Mastros have been arrested and will face the charges that the grand jury returned in their indictment today.”
Michael Mastro’s lawyer, James Frush, said Thursday the charges simply rehash allegations made during the bankruptcy proceeding. And, he suggested, if it was such serious criminal activity, the government could have charged them long ago.
“This is an attempt to criminalize behavior that occurred in this bankruptcy proceeding and that occurs commonly in others,” Frush said. “There’s a real lack of evidence that this was part of a scheme to defraud.”
Frush said of his client: “He got out over his skis in a bad real-estate market and like a lot of other people, went broke. But he’s not a criminal.”
Frush acknowledged that the Mastros refused to turn over the diamonds in violation of a court order. But he said that’s a civil offense, not a criminal one.
The indictment references many false statements the Mastros are accused of making with regard to the diamonds and other assets as part of the bankruptcy.
Mastro was a developer and money lender who oversaw commercial and residential projects worth an estimated $2 billion over a 40-year career. But the market’s crash left him short, and three banks forced him into bankruptcy in 2009. He owes more than $200 million to creditors, who are expected to receive just pennies on the dollar.
The Mastros are being held without bail in France, Frush said. He said they will fight extradition to the U.S.
Frush said the Mastros had been living under their own names in Annecy, where they had rented an apartment.
Many of the couple’s personal items have been sold at auction to repay Michael Mastro’s creditors. Dozens of designer handbags sold for up to $900 apiece, a baby grand piano sold for $17,000, and a Dale Chihuly chandelier sold for $35,000. Their 2007 Bentley convertible went for $92,500.
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