Fugitive Mastro and wife arrested in France
The fugitive real-estate magnate and his wife, Linda, have been on the lam for 16 months.
Seattle Times business reporter
Fugitive Seattle real-estate magnate Michael R. Mastro and his wife, Linda, were arrested Wednesday in France after 16 months on the lam.
Details were not immediately available, but the U.S. Attorney's Office in Seattle confirmed the arrests in a statement Wednesday afternoon.
The office also unsealed a criminal complaint filed against the Mastros in August 2011, charging them with six counts of bankruptcy fraud.
James Frush, Michael Mastro's Seattle attorney, said he learned of the arrests Wednesday morning. The couple are in the custody of French authorities, he said.
Frush said neither he nor members of Mastro's family have spoken with Mastro since his arrest. Linda Mastro's Seattle lawyer, Michael Gossler, said he had not spoken with her.
Another attorney with knowledge of the case said the Mastros were arrested at Lake Annecy, in the French Alps. An FBI spokeswoman said she could not confirm that.
The Mastros were arrested by French police at the request of the FBI's legal attaché office in Paris, she said.
Frush said he doesn't know whether Mastro will fight extradition.
He also said "there are some real issues of proof" with the factual allegations underlying the bankruptcy-fraud charges, and he suspects more serious charges are in the works.
"I think this is just the tip of the iceberg," Frush said.
The Mastros disappeared in June 2011, days after the judge in Michael Mastro's massive bankruptcy case ordered the couple to turn over two giant diamond rings valued at $1.4 million.
They officially became fugitives a month later when warrants were signed for their arrest. But those warrants were for contempt of court, a civil violation, and experts said it would be difficult to extradite the Mastros without a criminal charge.
Warrant for arrest
Documents unsealed Wednesday indicate there also has been a warrant for their arrest for more than a year on the bankruptcy-fraud charge.
The complaint alleges that, after entering bankruptcy, the Mastros failed to disclose a bank account to the court, then used the account over the next eight months to write checks for about $285,000 in personal expenses.
They also didn't disclose the account on several occasions under oath or penalty of perjury, the complaint says. Their intent was to defraud creditors who were rightfully entitled to the money, it adds.
The Mastros opened the account in the name of a limited-liability corporation and were signatories to it, the complaint says.
Checks were written for American Express payments, loan payments on the couple's Bentley and Rolls-Royce, the purchase of $100,000 in gold, and purchases from department stores, including Macy's, Barney's and Nordstrom, according to the complaint.
Michael Mastro also used the account to write checks to his wife totaling about $18,000, the complaint says.
Frush, Mastro's lawyer, questioned whether the corporation that was the legal owner of the bank account was an asset to which creditors were entitled. "This all comes down to very technical bankruptcy arguments," he said.
A bankruptcy judge ruled in March 2010 that the creditors were the corporation's rightful owners, but Frush said that was the Mastros' first indication they shouldn't be writing checks from the account — and by then most of the money had already been spent.
Michael Mastro, now 87, was a longtime and prolific real-estate developer and lender whose website alluded to his "billion-dollar career." But his highly leveraged empire fell apart when the market tanked.
Three lenders pushed Mastro into bankruptcy in 2009. The most recent estimate of his debt to unsecured creditors is $250 million, and court-appointed trustee James Rigby has said those creditors will be lucky to get back more than a few pennies on the dollar.
Federal authorities began a criminal investigation of Mastro nearly three years ago.
Rigby said Wednesday he was pleased to learn of the arrests. He has maintained for years that Mastro has hidden assets that should go to his creditors — allegations Frush has denied.
"This is a good day for the bankruptcy system, and this is a good day for the criminal-justice system," Rigby said. "Now Mr. Mastro can come back to Seattle and explain to his friends and family and creditors where the money's at."
If the Mastros bring back the diamonds, that would be even better news, Rigby added. A bankruptcy judge ruled after the Mastros' disappearance that the jewels rightfully belong to creditors.
Emily Langlie, spokeswoman for the U.S. Attorney's Office, said the Mastros could be extradited from France, or deported, or return voluntarily. The path that's followed may hinge on their legal status in France, she said, and that's still under investigation.
Frush said he suspects other, more serious charges have been prepared, and may already have been approved by a grand jury, but remain sealed. Those charges probably name other defendants in addition to the Mastros, he added.
The bankruptcy-fraud charges are "relatively chippy counts" that under sentencing guidelines would put the Mastros in prison for no more than two years if they are convicted, he said.
But in earlier discussions with federal prosecutors, Frush added, they were talking about more serious charges, involving more money, that carry longer sentences.
The prosecutors were most interested in a bid by Mastro and others to put his Medina waterfront mansion out of most creditors' reach, Frush said. That arrangement eventually was struck down by a bankruptcy judge, and the mansion was sold for $9.1 million in November 2010.
Eric Pryne: 206-464-2231 or email@example.com