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Fraud Friday – Community Banker Sentenced to Two Years in Federal Prison

November 13, 2020

By Caity Witucki
Contributing Editor

Fraud Friday – Community Banker Sentenced to Two Years in Federal Prison

A Maryland federal judge has sentenced the former CEO and president of Cecil Bank, Mary Beyer Halsey, to two years in federal prison for fraud related to the purchase of a foreclosed-upon home. In addition, Halsey has been ordered to forfeit her interest in the home and to pay restitution in the amount of $145,000.

Cecil Bank began the foreclosure process for a single-family home in Rising Sun, Maryland in 2011. Although the home needed significant renovations, the bank’s appraisal valued the full property at $295,000. When Halsey saw the appraisal, she allegedly expressed an interest in acquiring the house for herself. However, because she could not buy the house under the bank’s conflict of interest policy, she asked Daniel Whitehurst, an employee of a real estate development company, to act as a straw purchaser in exchange for a $650,000 line of credit.

When Halsey sought authorization from Cecil Bank’s Board of Directors to sell the foreclosed home to Whitehurst, she allegedly told them that she negotiated a fair price of $150,000. To justify the lower sale price, she used inappropriate residential properties as comparables and misrepresented the physical condition of the home.

As a result of Halsey’s misrepresentations and omissions, the bank lost approximately $145,000. By the time the fraud scheme was finally discovered, Cecil Bank had already begun struggling with other bad loans and was forced to sell off branches as a way to boost capital. Cecil eventually filed for Chapter 11 bankruptcy but was ultimately able to undergo successful recapitalization.

Halsey’s coconspirator, Daniel Whitehurst, is still awaiting sentencing. He pleaded guilty in July and now faces a maximum sentence of 30 years in federal prison if convicted on all charges. 

Sources:
Department of Justice
Baltimore Business Journal
The Baltimore Sun



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