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Originally published Monday, November 19, 2012 at 11:05 AM

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Trustee: ‘Sacks’ of jewelry, two big rings taken from Mastros

Fugitive real-estate developer Michael R. Mastro had much more than the two giant diamonds in French safe-deposit boxes and apartment, says bankruptcy trustee.

Seattle Times business reporter

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A “substantial amount” of jewelry found in the French safe-deposit boxes and apartment of former Seattle real-estate magnate Michael R. Mastro and his wife, Linda, almost certainly will mean more money for Mastro’s creditors, the trustee in Mastro’s bankruptcy case says.

James Rigby said Monday that French police last week seized two safe-deposit boxes — each bigger than a shoebox and “stuffed” with jewelry — in Annecy, a city in the French Alps near the village where the Mastros were arrested last month after more than a year on the lam.

Among the gems: two giant diamond rings, with an estimated value of $1.4 million, that have played a central role in the Mastros’ bankruptcy and criminal cases.

Authorities also impounded from the couple’s apartment more than a dozen large suitcases filled with designer clothes and “sacks — freezer bags — with expensive jewelry in them,” Rigby said.

“It’s got to be worth a tremendous amount of money,” the court-appointed trustee added. While he doesn’t yet have an inventory, he said, the recovered jewels’ value is “potentially millions of dollars.”

They are in the possession of French authorities, he said, but they should be returned to Seattle soon.

And they all belong to Mastro’ s creditors, Rigby said.

Not necessarily, countered James Frush, Michael Mastro’s Seattle attorney.

Some or all of the items could be Linda Mastro’s separate property, or gifts, or items purchased with money Mastro earned after being forced into bankruptcy in 2009, he said.

“But I really don’t know,” Frush said. “That’s still to be determined.”

The Mastros disappeared in June 2011 after failing to comply with a bankruptcy judge’s order that they turn over the two enormous diamond rings, with stones of 27.8 and 15.93 carats.

They were arrested Oct. 24 by French police at the request of the FBI, and have since been in jail awaiting extradition proceedings.

A federal grand jury in Seattle has indicted the couple on 43 counts of bankruptcy fraud and money laundering.

Rigby, whose job is to find Mastro’s assets, liquidate them and distribute the proceeds to creditors, has retained lawyers and investigators in France, and traveled there himself last week.

In a prepared statement and follow-up interview Monday, the trustee also said:

•The Mastros were selling jewelry to pay their living expenses during the year they spent in the Annecy area.

•He has obtained copies of business and personal records and electronic devices, seized by French authorities from the Mastros, that contain “a tremendous amount of information.”

Analyzing those documents could take weeks, Rigby added, and it’s too soon to say whether they will lead to more assets.

•The documents show the Mastros had help from friends and family in the U.S. while they were fugitives. Rigby said he has passed that information on to the FBI.

• He suspects much of the recently recovered jewelry was inside a Range Rover the Mastros had shipped from the U.S. to France.

•The criminal investigation appears to be a top priority for the FBI. Its top agent in France has personally taken charge, Rigby said.

Mastro, 87, a longtime and prolific Seattle real-estate developer and lender, saw his empire collapse when the economy tanked. Three bank lenders forced him into involuntary bankruptcy in July 2009.

His debts to unsecured creditors have been estimated at $250 million. So far those creditors have been awarded just $2.8 million, or a little more than a penny on the dollar.

Rigby suggested that part of any proceeds from the recovered jewelry could go to pay him and his legal team, as bankruptcy law permits. “It’s been very expensive running a bankruptcy investigation on two continents,” he said.

So far the trustee and his team have been reimbursed about $7.8 million from recovered assets. They recently applied to the court for an additional $800,000.

Frush and other critics contend the trustee and his lawyers are getting rich off the case.

Rigby has said that, without his team’s efforts, creditors wouldn’t have received anything.

Frush said Monday he will explore whether the seizure of the Mastros’ jewelry, documents and other possessions may have violated their constitutional rights.

He also said U.S. authorities will have a difficult time pursuing criminal charges against the Mastros’ friends and family members who may have helped the couple while they were in France.

The original warrants for their arrest were for contempt of the bankruptcy judge’s order, a civil offense, Frush said.

Criminal charges against the Mastros were not made public until after their arrests.

“Helping someone charged with civil contempt is not a crime,” Frush said.

Eric Pryne:

or 206-464-2231

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