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Former local bank CEO illegally bought home her bank foreclosed on

Posted at 2:54 PM, Nov 06, 2020
and last updated 2020-11-06 14:54:13-05

BALTIMORE, Md. — The former President and CEO of Cecil Bank was sentenced Friday to two years in federal prison, followed by five years supervised release.

Mary Beyer Halsey, 59, pleaded guilty in July to charges of conspiracy to commit bank fraud, receipt of a bribe by a bank official, and false statement in bank records.

The charges stem from Halsey's 2011 straw purchase of a home in Elkton, which her bank had foreclosed on.

As part of her plea, Halsey will forfeit her interest in the home and pay $145,000 in restitution.

Court documents show on March 28, 2012 real estate developer, Daniel Whitehurst, met with Halsey at a Cecil County restaurant to discuss a half-million-dollar line of credit through Cecil Bank.

Halsey agreed to get Whitehurst the line of credit in exchange for Whitehurst secretly purchasing the foreclosed home, on behalf of Halsey.

That following May, a Cecil Bank loan committee approved the line of credit for Whitehurst and another $500,000 line of credit for his business partner.

The two further muddied the home-buying process up by meeting days later at the site of the foreclosure to discuss repairs.

Whitehurst determined that beyond the $1000 cost of replacing the kitchen subflooring, there were no significant repairs needed.

He then provided Halsey a letter of intent to purchase the home from the bank for $150,000.

Halsey suggested lowering the price to $145,000 to allow room to increase the offer later.

Halsey knew that an exterior-only appraisal of the property ordered by Cecil Bank in November 2011, showed a market value of $263,000.

A full appraisal in September 2012 reflected a market value of $295,000.

To support the below-market price that Halsey wanted to pay, Whitehurst included in the letter of intent a list of lower-priced home sales in the same area that were not comparable or reflective of the property’s actual market value.

Halsey then falsely characterized the property as having “structural deficiencies that require significant repairs,” without disclosing her personal interest in the property nor her business relationship with Whitehurst.

The Board later authorized Halsey to “negotiate the best price," that's when the two agreed on the $150,000 price tag.

Following their agreement, Halsey told Whitehurst he should not use his line of credit from Cecil Bank to purchase the house, but instead get funds from a different bank.

He later applied and obtained a $100,000 loan from another bank under false pretenses that the home was for him.

On October 31, 2012, prior to settling, Halsey wired $75,000 to Whitehurst’s bank account to cover closing costs, the down payment, and upgrades the two had discussed.

To conceal this, Whitehurst sent Halsey a phony real estate contract purporting to show that the $75,000 was the down payment for a different property that Whitehurst owned in Havre de Grace.

On November 21, 2012, both signed the HUD-1 form falsely representing that Whitehurst had paid approximately $52,566 at settlement, when in fact, the down payment and all related closing costs were paid from the $75,000 Halsey had wired to Whitehurst’s bank account beforehand.

Part of the plan was to also transfer the title in a way that would minimize the tax consequences for Whitehurst.

Later when asked a question by a bank examiner for the Federal Reserve of Richmond, 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.”

In April 2013, federal agents began interviewing employees and other borrowers about banking irregularities at Cecil Bank.

In the end, the deal lost the bank approximately $145,000.

Daniel Whitehurst ultimately pleaded guilty under seal to the federal charge of mail fraud in 2018.

He faces a maximum sentence of 30 years in federal prison for conspiracy to commit bank fraud. A date hasn't yet been scheduled for his sentencing.