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Originally published Friday, July 1, 2011 at 5:00 PM

Mastros miss deadline to hand over diamonds

A bankruptcy judge on Friday raised the possibility of incarcerating former Seattle real-estate magnate Michael R. Mastro and his wife, Linda, if they continue to ignore his two-week-old order that they turn over two giant diamond rings.

Seattle Times business reporter

quotes Fining someone who's in bankruptcy court? Hasn't this guy already adequately... Read more

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A bankruptcy judge on Friday raised the possibility of incarcerating former Seattle real-estate magnate Michael R. Mastro and his wife, Linda, if they continue to ignore his two-week-old order that they turn over two giant diamond rings.

For now, however, they'll only have to pay a fine.

Last month Judge Marc Barreca ordered that the rings, appraised at $1.4 million, be handed over June 22 to a Seattle jeweler for safekeeping until the judge decides their rightful owner: Linda Mastro, or the bankruptcy trustee seeking to recover assets for Mike Mastro's many creditors.

That deadline passed — no rings. Mastro's lawyer said his client had told him he would retrieve the rings from an unspecified location out of the country and deliver them by Friday.

That deadline passed, too: Still no rings.

In court Friday morning Mastro's lawyer, Thomas Bucknell, said he hadn't heard from Mastro since June 22 and couldn't say whether the rings would show up. The Mastros now live in Palm Desert, Calif.

Linda Mastro's lawyer, Michael Gossler, said his client had turned the rings over to her husband a year ago and doesn't know where they are.

Barreca wasn't buying that. "I believe she knows where they are," he said. Even if she doesn't, he added, she has sufficient pull with her husband to find out.

The Mastros could comply with his order, the judge said, but are choosing not to.

Barreca brought up incarceration, but said it was too soon to consider that. Instead, he ordered the Mastros to pay trustee James Rigby's court costs associated with his pursuit of the rings, and said the couple would be fined $750 a day starting Thursday if the jewelry doesn't turn up by then.

He scheduled another hearing July 15 to consider additional sanctions if the rings — sporting diamonds of 27.8 and 15.9 carats — still haven't shown up.

Mastro, 86, a longtime real-estate developer and lender, was pushed into one of Washington's largest bankruptcies two years ago. His debts to unsecured creditors total about $325 million, Rigby has estimated.

The trustee contends in a lawsuit that Mastro, before entering bankruptcy, transferred legal control of the rings and other assets to an offshore trust in an illegal maneuver to keep them out of creditors' reach.

Linda Mastro says the rings are gifts from her husband and are her separate property. Another bankruptcy judge agreed last year.

But Barreca set that ruling aside last month.

James Frush, another attorney for Mike Mastro, said he's pleased Barreca didn't go along with Rigby's request to fine the Mastros $10,000 a day retroactive to June 22.

"It's my understanding they intend to comply," he added.

But Frush said he, like Bucknell, had not heard from Mike Mastro in more than week: "I'm a little worried."

Eric Pryne: 206-464-2231 or epryne@seattletimes.com

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