Former Cecil Bank CEO indicted on fraud, bribery charges

The alleged offenses came as Cecil Bank received $11,560,000 in federal taxpayer funds in 2008, under the Capital Purchase Program, as part of the Troubled Asset Relief Program (TARP).

In neighboring Delaware, former officials of Wilmington Trust, including the former bank president, were convicted on charges related to concealing information on bad loans that led the collapse of the bank and its purchase by M&T. Wilmington Trust also received TARP assistance during the financial crisis.

Those individuals remain free pending final appeals.

According to court documents, on  April 20, 2011, Cecil Bank initiated the foreclosure of a single-family house located at 127 Ebenezer Church Road in Rising Sun. 

Later that year, Cecil Bank ordered an exterior-only appraisal of the property the showed a market value of $263,000.  On September 10, 2012, Cecil Bank ordered a full appraisal of the property that showed a market value of $295,000.

According to the six-count indictment, from 2012 to 2013, Halsey conspired with Daniel Whitehurst, an employee of a real estate development company that did business in Maryland, to defraud Cecil Bank and another bank to purchase a home through false pretenses, representations and promises.  The indictment alleges that Halsey agreed to help Whitehurst to obtain a $650,000 line of credit from Cecil Bank, in exchange for Whitehurst agreeing to serve as the straw purchaser of 127 Ebenezer on behalf of Halsey.

The indictment alleges: that Halsey provided Whitehurst with her personal e-mail address, so that they could communicate about the plans to purchase 127 Ebenezer; Halsey and Whitehurst understated the physical condition of the property; and that they used inappropriate residential properties as comparables to justify the sale price of $150,000 for the property, which was less than its fair market value.  Halsey sought authorization from Cecil Bank’s Board of Directors to sell 127 Ebenezer to Whitehurst, but allegedly did not disclose her personal interest in the property, nor Whitehurst’s role as her nominee to acquire the property on her behalf.

Specifically, the indictment alleges that on March 28, 2012, Halsey and Whitehurst met at a restaurant in Cecil County and Halsey agreed to review Whitehurst’s request for a $650,000 personal line of credit from Cecil Bank in return for Whitehurst agreeing to secretly buy 127 Ebenezer on Halsey’s behalf. 

On May 9, 2012, the indictment alleges that Halsey participated in a loan committee meeting at Cecil Bank that considered and approved a $650,000 line for credit for Whitehurst. 

As detailed in the indictment, on May 23, 2012, Whitehurst e-mailed Cecil Bank his offer to purchase 127 Ebenezer for $145,000, which has previously been approved by Halsey.  On the same day, during a meeting of the Cecil Bank Board of Directors, Halsey advised the Board that Whitehurst had made a purchase offer of $140,000 for 127 Ebenezer, $5,000 less the actual offer, and further noted that the property had “structural deficiencies and will require significant repairs.” The Board authorized Halsey to “negotiate the best price.”  Thereafter, Whitehurst submitted a contract for him to purchase 127 Ebenezer from Cecil Bank for $150,000, which Halsey signed on August 17, 2012 on behalf of Cecil Bank.

According to the indictment, in October 2012, Whitehurst applied for and obtained a $100,000 loan from another bank to purchase 127 Ebenezer, fraudulently claiming that he was purchasing the property for himself.  The indictment alleges that Halsey subsequently wired $75,000 to Whitehurst’s bank account prior to the settlement of 127 Ebenezer to cover the cost of the down payment as well as closing costs and upgrades to the property that Halsey directed Whitehurst to arrange.  On November 21, 2012, the settlement of 127 Ebenezer was held with Halsey representing Cecil Bank as the seller, and Whitehurst as the purported purchaser, selling the property to Whitehurst for $150,000. 

In December 2012, in response to a question from a bank examiner for the Federal Reserve Bank of Richmond inquiring about the sale of the property to Whitehurst, Halsey falsely stated that she was “not totally familiar with [that] property” and that the bank had difficulty marketing the property and had not listed it with a realtor because of “issues with the county over the bonds outstanding.”

Finally, the indictment alleges that Halsey and Whitehurst exchanged e-mails concerning money Halsey owed Whitehurst for improving and maintaining 127 Ebenezer, including the monthly mortgage payment and loan fees on the $100,000 loan he had secured from Rosedale Federal to purchase the property for Halsey.  Halsey allegedly issued three checks to Whitehurst totaling $60,000 in response to Whitehurst’s request.

If convicted, Halsey faces a maximum sentence of 30 years in federal prison for each offense. Actual sentences for federal crimes are typically less than the maximum penalties.

 At today’s initial appearance in U.S. District Court in Baltimore, U.S. Magistrate Judge Thomas DiGirolamo ordered that Halsey be released pending trial under the supervision of U.S. Pretrial Services.

Daniel Whitehurst,  35, of Bel Air, Maryland, pleaded guilty under seal to mail fraud on April 6, 2018.  His guilty plea was also unsealed today.  Whitehurst faces a maximum sentence of 30 years in federal prison for conspiracy to commit bank fraud. 

Cecil Bank has struggled with bad loans and sold off branches as a way to boost capital. The bank also had lending relationships with businesses in neighboring New Castle County, DE.

Cecil  filed for Chapter 11 bankruptcy protection as it worked to raise additional capital. It has since undergone a successful recapitalization.