Bank of Crooks & Criminals
by Ken Rossignol
With the Great Recession which got underway in 2006, came plenty of trouble for the nation’s economy as many people lost their homes and businesses to the ravages of the economic downturn through foreclosure. This story is about a man who lost everything, not due to the economy but due to the scheming and fraudulent acts of his bank.
Charles “Chuck” Kimball had been selling land and building homes for forty years when he finished his latest projects at the sites of historic old hotels on waterfront locations in St. Mary’s County, Maryland when a new opportunity came available. Kimball, who served in the Marines as a young man, was adept at taking distressed and undervalued properties along the Maryland shoreline and building new single-family and duplex housing. In addition, he was able to successfully develop a large waterfront development after buying the property from a federal agency that wound up with the land, the Resolution Trust Corporation, following a major banking scandal. Kimball had also began a floating development of houseboats which ground to a halt with opposition coming from neighbors who wished to keep their vistas to themselves and not share them with a marina full of floating homes.
Kimball never lacked for imagination and his wife July worked alongside him in renovating, painting and decorating existing properties and in designing new ones. Kimball razed a waterfront mobile home park and replaced it with a community of pricey waterfront duplexes at Piney Point, Maryland. The old Oakwood Lodge was flooded and blown apart during Hurricane Isabel in 2003 and also soon became a new condo project of waterfront pricey homes built from the ground up by Kimball to replace the decades-old lodge.
The day Kimball was signing the contract for the once-bustling Swann’s Pier, the old hotel burned to the ground, speeding up the planned removal and replacement with a dozen duplexes, offering unique views of sunrises and sunsets from each home.
When Bill Blanton, who owned the Evans Seafood restaurant, a famous local crabhouse on St. George Island told Kimball he was ready to sell, Kimball began to get his mind whirring with ideas on what to do with the once-bustling crabhouse. Evans enjoyed such a great reputation that most people planned ahead on waiting more than an hour to get in the front door and did so without complaint. The parking lot would be overflowing with vehicles and those in line would spend time in the bar which had been added on the front of the busy place. Evans was so busy that it only closed up one day a week and finally would shut down for a month after the Christmas parties were over, so the big family of Robert “Bugs” Evans could take a break.
Bugs acted as the host and seated people, kept track of orders and often were the cashier as well, with his children taking over most of the key roles in the place as he and his wife aged. The Evans family served what they caught in the Potomac and bought fresh fish and crabs from scores of local watermen as well, earning the establishment a reputation as having fresh-caught and well-prepared local seafood. There weren’t any fancy French names for entrees or silly ways to cook crabs, fish and oysters perpetrated upon their customers. There were experienced country-folks who knew how to cook local seafood in the kitchen, which is all that matters in a crabhouse.
Joining a large group at the old Evans for dinner one night, for the first time, one customer was up to his elbows in crabs served on the brown paper spread across the table when the waitress said she had to clear up the mess. The customer protested and said he could still eat a bunch more crabs. The woman said she was going to bring out dinner; the man was stunned and said that he thought the crabs were dinner. The woman laughed and said, ‘honey, you ain’t seen nothing yet’. She was right, as the group was getting the Evans Special, all-you-can-eat, family-style, and platters of fried oysters, fish, clams, crab balls, and hushpuppies began to appear, with each refilled every time they were emptied. Homemade coleslaw and oyster stew filled out the offerings as pitchers of beer were constantly brought to the tableside.
Chuck Kimball, with his lodge in the background.
In 2004, Bill Blanton, who had bought the property from the Evans family, and Kimball agreed on a price and transferred ownership to Kimball, who immediately began to plan his changes which included building a three-story lodge and construction of a new restaurant building.
The existing crabhouse had been expanded to include a second-story which offered wide vistas over St. George Creek to the east and the wide expanse of the Potomac River to the west as the property sat aside a narrow strip of the island. Hurricane Isabel had wreaked havoc on the building in 2003 and it was time for it to be replaced.
Kimball leased the restaurant for a time and then was able to accumulate the permits he needed to bring about his planned construction.
After five years of owning the old Evans Seafood, Chuck Kimball donated the old building to the Second District Volunteer Fire Department to burn as a training exercise. Kimball moved his plans through the St. Mary’s County permits office, and in the fall of 2008, was ready to start construction on a new three-story hotel and an attractive restaurant and bar on St. George’s Island.
By the spring of 2009, Kimball was opening his new facility, and it looked like a million dollars. Actually, it was well over six million. At this point, he needed to finalize his loans for the project as some costs had exceeded his projections.
Kimball, in a deposition for a civil lawsuit involving the property, stated under oath, that Watts “knowingly altered a personal financial statement to show a value of $13,000,000.” Kimball says this figure was created by Watts so he could influence another bank to pick up part of the loan which had exceeded the ability of Maryland Bank to make by itself.
Kimball was a first-rate builder but had no skills in the restaurant business and no family available to help him run the restaurant and hotel, a tragic combination that often puts the owner on the fast track to financial doom. But Chuck had a close relationship with the son-in-law and son of his late buddy, banker Jack Daugherty, the founder of Maryland Bank & Trust Company. The two heirs to Jack Daugherty, G. Thomas Daugherty, and Thomas B. Watts, had taken over operation of the bank after the senior Daugherty died. Kimball also had “an angel,” a financial backer who had pledged five valuable waterfront lots he owned at The Landings nearby as collateral for the loan.
This source of private lending, Dr. Ngozika J. Nwaneri, with whom Kimball had been doing business for fifteen years, repeated his desire to provide funds Kimball might need to make his payments on the Lodge and restaurant as winter months approached and sales dipped below the costs of carrying the notes and expenses.
The bank’s CEO was Watts, who told Kimball in 2008 he would have the money he needed to build the new hotel and restaurant.
Kimball had been having a few good years in the building business and was able to get his ducks lined up. By May of 2009, he had built the new lodge and restaurant built and open for business. In July Kimball hosted a grand opening in which he invited several hundred persons to sample the food, browse through the lodge and enjoy the first new hotel built on the Potomac River in one hundred and fifty years.
Chapter ThreeWithin six months of opening for business, the customers were not coming to the facility at St. George Island in sufficient volume for Kimball to turn a profit, a very typical situation for any new business; made all the more difficult by the Great Recession and the out-of the-way location of the new River-Creek Lodge and Restaurant.
In the hey-day of Bugs Evans, the late owner of the once popular crabhouse, a visit on a typical Sunday afternoon after church would have meant waiting in line in spite of the island being a million miles from anywhere. On weekends city residents from the Washington area would trek down to St. George Island to soak up the view and enjoy the fare, but now, with the economy and a myriad of choices available, the traffic in the restaurant was slow.
By the fall of 2009, the place was often empty while Kimball began to work the defense contractors in Lexington Park to lease rooms and went from one hotel to another along the strip of Rt. 235 and put out flyers on vehicle windshields at 4 am in order to try to steal some business, sometimes setting off car alarms in the process and earning him nasty notes from the motel managers.
By November of the year in which the business opened, Chuck was still making his payments on time and in full. Kimball contends that he could carry the place for as long as he needed to make it work.
Kimball said he had never missed a payment on his loan to the bank. But Maryland Bank and Trust was nervous about its portfolio of commercial real estate loans, and failure of a loan as big as Kimball’s could endanger the bank, according to statements made later by Watts to ST. MARY’S TODAY. Dozens– more than 300 — banks had failed since the current deep recession had begun.
Attorney John Norris III, then in private practice and formerly the St. Mary’s County Attorney, now serving as Calvert County Attorney, actively represented Maryland Bank and Trust in its quest to have someone take over the Kimball property on St. George’s Island. According to one local business owner, Norris asked him in November of 2009 if he wanted the property for six million dollars. The bank would loan him an extra million to help carry the deal. The businessman said no.
Then, according to Kimball, Watts came to him and told him that he had a person who would lease his place from him, and that he and bank president Tom Daugherty would each put up $15,000 of their own money to cover the mortgage payment for November and proceed to take over the place.
Kimball thought it over and realized that as long as his payments were covered, why not? He wasn’t a restaurateur, and this didn’t sound like a bad deal.
In fact, Kimball said, Watts told him it wasn’t a matter of choice; he either agreed or Watts would immediately foreclose.
Commercial loans are typically written, so that regardless of any of the terms, the lending institution could “call” the loan at any time, giving the borrower few options other than paying off the loan, thus Kimball says that as long as he still owned the property he would bow to Watt’s wishes.
Watts told him to be at bank attorney John Norris’s office within one hour to sign the lease, or Watts would start foreclosure proceedings that day.
Under direct order from Norris, Kimball says he signed the lease. The lease did not disclose the name of the tenant and Kimball was told a signed copy would be provided to him afterwards.
But Watts told him he had someone to lease the project from him. Kimball says on November 25, 2009, Watts arrived and changed the locks, cleaned out the safe, and told Kimball that Bree Whitlock and a new tenant were going to take over.
THE FACTSKimball says he called his attorney, Marc Cohen, who then called Norris and instructed him to not allow Kimball to sign anything until he could get there and review the papers. Kimball says that, once again, Norris told him to sign as soon as he arrived at the law office. He wanted to wait for Cohen, but Norris told him to sign, or the bank would foreclose.
The lease Kimball was told to sign didn’t have anyone’s name filled in as the person or entity that would be leasing from him.
Kimball’s account of that day is supported by a letter written by his attorney, Marc Cohen. Kimball was under duress but, according to him, he repeatedly represents he never missed a payment. Yet one morning before he arrived at the Island Inn, Kimball says his business was entered, the money taken from his safe, the locks changed, and not a single court order had authorized the act.
Cohen protested to Norris about having violated his instructions in forcing Kimball to sign the blank lease and told Kimball that he could have Norris disbarred for his actions.
Breaking and Entering by Banker
On Nov. 24, 2009, following the illegal breaking and entering of the property, allegedly by Watts and his new manager, Bree Whitlock, Cohen sent this letter via email to John Norris, with a copy to Kimball:
“I am becoming confused. When I first spoke to you I said the leases were not adequate for Chuck’s needs and you said you would be willing to negotiate them to his satisfaction. The next day Tom Watts called Kimball and said he needed something immediately. The next day, Friday morning, he called me and said he absolutely needed something for the auditors on Monday or everything would fall apart. I said I could not draft and negotiate the leases on a few hours’ notice but would give him a License would promise a forthcoming lease. He said he was satisfied and I sent it to you and to him.
“Chuck went to your office to sign the License and instead was prevailed upon to sign the two leases which we had discussed were unacceptable and would not work either party.
“He was also asked to sign an affidavit regarding his relations with Watts and Nwaneri which is not entirely accurate and a Resolution and an Assignment assigning away his interest in Potomac Land Ltd., to an unnamed purchaser for an unstated price. Finally, he was presented with and executed the License which is inconsistent with every other document he was asked to sign. He was not given counter-signed documents for any of the foregoing and we have no idea who the license manager or members are.
“Bree started Friday running the place presumably as the licensee and someone changed the locks without authority. Someone also took over the cash and inventory on hand.
What is going on?”
The abrupt takeover of the restaurant and lodge took place without a legal lease or any type of written authorization. According to Kimball and the documents available, including the reference above, the takeover was a criminal act. A law enforcement official contacted for comment said that the statute of limitations has not run out on this alleged act and those involved could be charged with grand theft and burglary.
Kimball said that Thomas Watts and Bree Whitlock were the two people involved, that they entered his premises without his permission, changed the locks, that they cleaned out his cash registers, opened and removed money from his office safe, took over his inventory of food and liquor and emptied his bank account of funds which had been processed from credit card charge transactions in the days prior to this event.
Kimball still didn’t have a signed copy of the lease, which Watts said had been negotiated with the grandfather of Bree Whitlock, a former employee of Kimball. At this point, his building and contents were taken from him; he had no signed lease and had never missed a mortgage payment.
In the HBO hit series The Sopranos, all of this would have happened in addition to Kimball being taken out on a boat in the Bay and never seen again. But that’s about the only part of The Sopranos that was missing from the saga of Maryland Bank and the takeover of Chuck Kimball’s Island Inn.
This alleged act of misconduct alone could result in Norris being disbarred according to an expert in rules for attorney conduct. Kimball’s attorney, Marc Cohen, was kind enough to have supported Kimball’s story with a written reference to that allegation, a copy of which is among all pertinent documents of the affair which Kimball received in response to his complaint to the Maryland Attorney Grievance Commission.
Cohen revealed his opinion of the competence of the person Watts installed as the manager of the Kimball property.
In an email to Norris on December 1, 2009, Cohen wrote the following:
“John; It seems to be that we are best served by some informality at this time. I therefore am responding to you in this simple email format.
First, Chuck has been entirely compliant with the MBT directions and wishes. He did not put his company in bankruptcy try to reorganize or to dispose of any company assets to help continue financing the business. Instead, as counseled, he agreed to lease it to a friend of Tom Watts, a fine woman, who has little experience and no demonstrable means to make the lease payments. He has also let her commence operation using his stock-in-trade. In return for this risk and cooperation, he wants a release on all personal liability on the MBT note.
Second, Tom Watts advised Chuck that he would pay the legal expense for this transaction and you could represent both MBT and Chuck and his company since everybody wanted the same thing. He met with you and Tom together and separately to reach an acceptable agreement. However, it is apparent from the documents he signed that everybody clearly did not want the same things. Some of the problems with the documents were fundamental, such as a rent that did not even approximate the carrying costs. Other issues were just the usual drafting effort to give one party more favorable terms and advantages than the other. Accordingly, going forward Chuck will need independent counsel (and as things stand now he has no cash flow to pay for such help.) I will therefore expect either the lease agreements or a separate note from Tom committing to pay my fees. Currently, my bill is modest and if we move forward amicably and expeditiously I presume it will remain so.
Last, the few lease changes needed are not at all dramatic, but will still be adequate to show an arms-length negotiation. However, I would like to confirm that the first two elements discussed above are acceptable to your client before we attempt to finalize the desired leases. If we cannot reach an agreement on the terms set forth above, I will for reasons we have discussed, refer Chuck to other counsel. Marc”
On December 7, 2009, Norris sent this email to Cohen:
“Marc; Chuck called me moments ago. I asked that if he is represented by counsel that he speak with that attorney and that I could not speak with him without that attorney’s consent. Chuck mentioned your name. So you are aware, drafts amending the Minimum Annual Rent for each the Hotel and Restaurant and ratifying the Leases have been prepared. I didn’t want you to work on something that was already done in the event you are still involved. I copied Bipper in the event you are not. Thanks, John”
Watts and Norris ordered Kimball to sign blank leases or face foreclosure, and then Norris created a “phantom corporation” to take over the property. Watts had a personal relationship with Bree Whitlock which may have colored his comprehension of having an unqualified person operate the business.
On Nov. 24, 2009, Watts and Norris had Kimball sign blank leases and failed to give him copies. On Dec. 7, 2009, Norris refers to the new leases he has drafted. By Feb. 10, 2010, attorney Walter Sawyer is claiming the mortgage was two months in arrears, which it was not, and announcing a foreclosure on the property.
Cohen knew Whitlock wasn’t capable of running the business for Kimball and didn’t act to protect Kimball. Cohen continually took steps to give a vigorous representation for Kimball, which show in the trail of the blizzard of paperwork generated by this saga. His failure to act on Kimball’s behalf as aggressively as possible was in part due to Kimball’s refusal to file bankruptcy.
It is understandable for Kimball to not want to bankrupt his companies and seek court protection as the bank was warning it would also take his house and leave Chuck and July Kimball on the street. At least Kimball was hoping to walk away with his house, which Cohen apparently was able to skillfully negotiate, which balances some of his other failures as Kimball’s attorney.