Mastro’s bankruptcy has been described as the largest personal bankruptcy in the history of Washington state. Prior to the bankruptcy, the Mastros' moved many of their assets, including a $15 million home in Medina, into an Irrevocable Trust in Belize.
Michael Mastro has been in the real estate business since 1967. He has developed real estate projects worth at least $2 billion over 40 years, including commercial buildings and houses. He was involved in hard money loans, mostly to desperate real estate developers, with second or third deeds of trust on the project as collateral. His company, Michael R. Mastro Properties, is well known in and around Seattle, the location of most of its projects and properties. The company's developments include Vancouver's Town Plaza, originally called the Tower Mall, the Oasis waterpark (sold in 2001) in Palm Springs, Allison Park Apartments in Des Moines and Ballard Lofts in Seattle.
In 1974, Michael Mastro met divorcee Linda Ann Gale(b. 1949) in the Peoples Bank where they both worked, she as loans officer, he as branch manager. They were married on June 3, 1989.
In 1989 Mastro sold office buildings which he developed with a partner to Boeing for $211 million. In the early 2000s Mastro started buying raw land for development of residential housing.
Mastro was forced into involuntary bankruptcy in July 2009, and filed for Chapter 7. On September 9, 2009, he listed assets in excess of $249 million and liabilities of over $586 million in a filing with the U.S. Bankruptcy Court for the Western District of Washington.
In May, 2010 a ruling was handed down by Bankruptcy Judge Samuel Steiner that two diamond rings valued at $1.4 million were not available to creditors since they belonged to Linda Mastro.
In February, 2011, Michael Mastro suffered a head injury while residing in Palm Desert. He was hospitalized for two weeks and underwent brain surgery.
June 2011 a judge ordered Michael and Linda Mastro to hand over two diamond rings owned by Mrs. Mastro.
In May 2013 it was reported that the bankruptcy trustee, James Rigby, had filed an 82-page report which valued of all jewelry seized from the Mastros at $3 million.
Mastro's bankruptcy is believed to be the largest personal bankruptcy ever in the state of Washington.
The couple did not comply with the judge's order to hand over the diamond rings and disappeared in June 2011. In August 2011 a sealed criminal complaint was filed against Michael Mastro and his wife Linda charging them with bankruptcy fraud. After warrants for contempt of court (civil violation) were issued for their arrest they were apprehended and taken into custody in France on October 24, 2012.
On October 25, 2012, a day after being arrested in France, Mastro and his wife, Linda were indicted by a federal grand jury on forty three counts of bankruptcy fraud and money laundering. They were accused of hiding assets from creditors. They remained in custody in Chambéry after their hearing held on Nov 7, 2012. A panel of three French judges rejected the couple's plea, based on their age and poor health, for a conditional release. The court felt that the charges against them for bankruptcy fraud and money laundering were serious enough to keep them in jail until such time as the US files for extradition. Prior to their arrest the Mastro's were pursued by both the FBI and U.S. marshals for sixteen months.
On Nov 15, 2012, the Seattle Times reported that the two diamond rings were in French authorities' possession. According to Thomas Terrier, the Masto’s French lawyer, the rings were in a safety box in Annecy.
On December 12, 2012 the Seattle Times reported that Michael and Linda Mastro had been released from jail after being incarcerated for seven weeks. A three judge panel ruled that their health was suffering. They were to wear electronic monitoring devices and were free to walk around Annecy.
By December 12, 2012, the United States had not filed for extradition, which according to James Rigby, the United States court-appointed bankruptcy trustee, must be filed by December 26, 2012.
On February 23, 2013 the Seattle Times reported that the Court of Appeals in Chambery, France ruled that the Mastros cannot be extradited to the United States unless American authorities guarantee that the couple will not face any sanctions other than electronic surveillance. The extradition treaty between France and the United States allows France to deny extradition when the extradited party faces serious consequences related to health or age. Eighty-seven-year-old Michael Mastro and his wife have been wearing surveillance devices but were free to walk in Annecy, France after spending seven weeks in a French jail.
On June 5, 2013, La cour d'appel de Chambéry denied the extradition of Michael and Linda Mastro from France to the United States basing this decision on Michael Mastro’s age (88), poor health, and daily dependence on his wife. The appeal was filed by the U.S. Department of Justice. The United States request that the case be taken to the French Supreme Court was turned down by French prosecutors who found no grounds for appeal. As a result, the couple no longer is prevented from leaving their home in the evenings.
Before their bankruptcy the Mastros lived in a large waterfront house in Medina, a city in the Seattle metropolitan area. They moved to California in 2010. In 2011 they started a journey that began at Mr. Mastro’s sister's house in Seattle, went on to Toronto, Canada and according to investigators Focus Ltd. ended in a €5,000 per month house in Veyrier-du-Lac, France, on the eastern shore of Lake Annecy. Then they moved to Marceau, France where the Mastros were arrested in 2012.
Tom Hazelrigg is a longtime business associate of Michael Mastro who was forced into bankruptcy by James Rigby and two other creditors in February 2012. On December 14, 2012 judge Timothy Dore denied Hazelrigg a discharge of his debt. Hazelrigg owed Mastro $76 million. In March 2015 he was sentenced to four and a half years in prison for tax evasion.
In November 2012 judge Marc Barreca denied Jack Dorssers, a former business associate of Mastro a share in the $8.36 million proceeds from the sale of Mastro’s Medina, Washington home. The judge ruled that the contention that Mastro had put up the house as collateral in 2009 for a $1.2 million loan was a sham designed to keep the house away from the reach of other Mastro creditors. Jack Dorsser is appealing Basrreca’s decision.
On September 9, 2014 Rami Grunbaum of the Seattle Times wrote that a federal appeals court in San Francisco ruled that Linda Mastro is entitled to appeal the bankruptcy court ruling about her assets.