Updated Friday, November 9, 2012 at 08:39 PM
Former Seattle real-estate magnate Michael R. Mastro and his wife, Linda, will remain in a French jail near Lyon, at least for now.
A French court on Friday turned down their bid to be released while they await proceedings to extradite them to the U.S.
The couple’s French lawyer, Thomas Terrier, said he wasn’t surprised by the decision. The three-judge appeals panel in Chambery basically deferred to American authorities while it awaits more information on the case, he said in an interview.
Once that information is available, Terrier said, he probably will move for their release again, perhaps in as soon as a few days.
James Rigby, the court-appointed trustee in Michael Mastro’s massive bankruptcy case in Seattle, applauded the court’s ruling.
“It’s unfortunate that it’s come to this,” he said, “but apparently this is what it’s going to take to get Mr. Mastro to turn over his assets to the creditors.”
The Mastros disappeared in June 2011 after failing to comply with a bankruptcy judge’s order that they turn over two giant diamond rings valued at $1.4 million.
Warrants were issued for their arrest, and they were taken into custody by French police Oct. 24 in an apartment near Lake Annecy, in the French Alps, at the FBI’s request.
They have been indicted by a federal grand jury in Seattle on 43 counts of bankruptcy fraud and money laundering.
Terrier said he’s not surprised that American authorities are reluctant to see the Mastros released.
“I really can understand people being scared, because they already left once,” he said.
But the couple would have been under house arrest, or monitored electronically or required to check in daily with police had they been released, Terrier said.
And before their arrest they had leased a new apartment in the city of Annecy for a year starting Nov. 15, prepaying rent through the end of this year.
“That demonstrates they never planned to go away,” he said.
The decision to leave the U.S. last year “appears to be very irrational,” Terrier said, and apparently was made at Linda Mastro’s initiative.
Michael Mastro, now 87, may have been impaired by a serious head injury several months earlier, the lawyer added: “I’m not sure he realized everything.”
Mastro was hospitalized and in a coma for a time after a fall in February 2011 at his Palm Desert, Calif., rental house. A guardian was appointed to represent his interests in bankruptcy court.
But the guardian, retired state Supreme Court Justice Faith Ireland, was relieved of those duties in May 2011 after she told the court that Mastro, while still not fully recovered, was competent to testify.
Rigby questioned Friday how Mastro could be seriously impaired and still elude police for more than a year.
Mastro was a prominent Seattle real-estate developer and lender for 40 years, but his highly leveraged empire collapsed during the financial crisis. Three bank lenders pushed him into bankruptcy in July 2009.
His debts to unsecured creditors have been estimated at $250 million.
The indictment charges the Mastros concealed assets from bankruptcy officials, including a bank account, the two rings and household furnishings. It also charges they engaged in a series of sham transactions in a bid to put their Medina waterfront mansion off-limits to most creditors.
Terrier said the rings are in a safe-deposit box in France, but he doesn’t know where. A bankruptcy judge has ruled they belong to Mastro’s creditors, but Linda Mastro has appealed.
Rigby has long maintained the Mastros have still more hidden assets. Terrier said he’s seen no evidence of that.
“They may have hidden something very well, but I doubt it,” he said. “They probably have lost everything now.”
But Rigby said he understands the Mastros were paying 5,000 euros (about $6,400) a month for a villa they rented on Lake Annecy until this spring.
“How could they do that and be nearly indigent?” he said.
Eric Pryne: email@example.com or 206-464-2231
Former real-estate mogul Michael Mastro