Fourteen area residents have been indicted on misdemeanor charges related to an ongoing investigation involving the Front Royal – Warren County Economic Development Authority (EDA). On Friday, September 20, 2019, a Warren County special grand jury handed up 42 misdemeanor counts against 14 individuals.
The Grand Jury charged each of the following with two counts of misfeasance and one count of nonfeasance (Virginia Code Section 1-200) based on the individuals’ knowledge of and inaction of the EDA’s mismanagement of funds.
- Mark A. Baker, 53, of Front Royal, Va.
- William M. Biggs, 77, of Front Royal, Va.
- Alexander G. Blanton, 72, of Front Royal, Va.
- Tony F. Carter, 59, of Linden, Va.
- L. Greg Drescher, 59, of Middletown, Va.
- Bruce N. Drummond, 68, of Linden, Va.
- Archie A. Fox, 78, of Strasburg, Va.
- Linda P. Glavis, 75, of Front Royal, Va.
- Ronald L. Llewellyn, 66, of Front Royal, Va.
- Daniel J. Murray Jr., 72, of Middletown, Va.
- Thomas E. Patteson III, 73, of Front Royal, Va.
- Thomas H. Sayre, 54, of Front Royal, Va.
- Douglas P. Stanley, 50, of Front Royal, Va.
- Daniel N. Whitten, 36, of Front Royal, Va.
The charges stem from an investigation the Virginia State Police Bureau of Criminal Investigation’s Culpeper Field Office initiated in August 2018 related to the business practices of the EDA. The investigation was at the request of Front Royal Police Department.
Since May 2019, multi-jurisdictional grand juries have handed up a total of 28 felony indictments against Jennifer R. McDonald, 42, of Front Royal, Va. McDonald is a former EDA employee and has been charged with six felony counts of embezzlement of more than/equal to $500, six felony counts of embezzlement of more than/equal to $200, eight felony counts of obtaining money by false pretense of more than/equal to $200, two felony counts of obtaining money by false pretense of more than/equal to $500, and five felony counts of conducting an unlawful financial transaction. McDonald was released on bond in July.
Thirteen of the individuals indicted Friday turned themselves in to state police Tuesday (Sept. 24) and went before the magistrate who released each one on a personal recognizance bond. Whitten will meet with the magistrate and state police Wednesday (Sept. 25).
The investigation remains ongoing at this time.
January 10th set for decision on EDA civil defendant motions to quash
Attorneys for multiple Front Royal-Warren County Economic Development Authority civil litigation defendants argued for dismissal of their clients’ inclusion in that list in Warren County Circuit Court on Thursday, December 12. After hearing over 4-1/2 hours of testimony surrounding a 45-minute lunch break, Judge Bruce D. Albertson took those arguments and plaintiff counsel counter-arguments under advisement.
After an explanation to defendants present, including Donald Poe, April Petty and Jesse Poe, about the reason for the time he will take before returning to court to make a ruling on their and other defendants’ counsel arguments, Albertson set a date of January 10, at 2:30 p.m. to make his ruling.
That is the same date the judge continued a scheduled Show Cause hearing on a Civil Contempt charge against primary EDA civil and criminal defendant Jennifer McDonald earlier during the Thursday docket. McDonald’s civil contempt hearing will follow an already scheduled McDonald criminal hearing on the 1 p.m. docket on January 10.
McDonald’s criminal case attorney Peter Greenspun informed Albertson he was taking over his client’s civil case as well in the wake of the withdrawal of her former civil attorney Lee Berlik.
Greenspun told the court he needed additional time to familiarize himself with the civil aspects of McDonald’s legal situation.
A third EDA-related hearing on Thursday morning’s docket was Donald Poe counsel William Ashwell’s motion to Quash a Perjury charge regarding the Earth Right Energy principal’s testimony to the EDA Special Grand Jury. That case went forward first on what was slated to be an 8 a.m. start to Thursday’s docket, delayed by late arrivals of a court reporter and McDonald’s Northern Virginia-based attorney.
After hearing Ashwell and new Rockingham County prosecutor’s arguments, Albertson deferred a ruling on dismissal of Poe’s perjury charge to the January 22 date on which that trial is scheduled to begin.
Ashwell told the court that his client was the one defendant “not on the continuance train” with an originally slated perjury trial date of December 6 having been moved to a three-day slot in January to accommodate the recent placement of a new prosecutor’s office to handle all the EDA criminal cases. Incoming Warren County Commonwealth’s Attorney John Bell has recused himself from EDA cases and current County Commonwealth Attorney Bryan Layton has withdrawn due to his pending departure from the office.
In addition to McDonald on her case and Donald Poe, April Petty and Jesse Poe who were present with counsel Thursday, EDA civil defendants represented in Thursday’s Demurrer motions hearing were Truc “Curt” Tran and ITFederal and Poe’s Earth Right Energy Solar Panel Installation company.
The basis of those defense counsel arguments for dismissal of their clients from the civil case revolved around several points. Primary among those is the plaintiff notion of an overarching conspiracy that somehow links the various defendants to central figure and former EDA Executive Director McDonald; and that there were definable contractual breaches by those defendants making them individually liable for funds that came their way through McDonald.
Lead plaintiff attorney Cullen Seltzer argued that there did not have to have to be direct knowledge among all defendants of each interlocking conspiracy McDonald is alleged to having been a party to for that conspiracy to exist.
He used an analogy to a gang that planned to rob every Bank of America in Richmond, saying a gang member assigned to one “bank job” did not have to know the detail of every other bank robbery to be criminally liable for the entire take.
Seltzer dismissed defense arguments that “McDonald is a rouge tornado dumping all this EDA money into all these pockets” without the recipients’ knowledge that something illegal was transpiring that they were beneficiaries of.
However, Jesse Poe and April Petty’s attorney William Schmidheiser argued that such a conspiracy theory did not apply to his clients, whose alleged “unjust enrichment” did not go directly to them, but rather to real estate companies handling the closings on their homes.
Schmidheiser noted his clients’ limited incomes, telling the court the reason he represented them both was a necessity to pool their resources to finance their defenses. He called their being packaged as part of an alleged $21 million civil suit conspiracy for mortgage payoffs of $125,000 (Petty) and $280,000 (Jesse Poe) was, short of the loss of a child or a cancer diagnosis, one of the worst things that could happen to an average person.
He said that while there might be “unjust enrichment” claims the plaintiff could argue – we’ll deal with those down the road, he told the court – the circumstance of his clients’ involvement distanced them from the plaintiff EDA counsel’s conspiracy theory.
He compared his clients’ circumstance to that of the casino McDonald is alleged to have lost at least $750,000 gambling at, noting that while the casino received cash from McDonald that could have been EDA assets, the casino was not a defendant.
In arguing that Earth Right Energy’s (ERE) contracts with the EDA through its then-executive director were valid and binding, attorney Ryan Huttar told the court that at the time those contracts were enacted “Jennifer McDonald (was) the EDA”.
That was a point the EDA legal team disputed, noting that large dollar (over $10,000) transactions had to be approved by the EDA Board of Directors, which they stated, did not happen.
ITFederal attorney Brandon Elledge argued that the EDA Board did approve the $10 million dollar loan it is seeking recovery of from his client, as well as the subsequent vendor payments of $1.4 million also in dispute.
Sands Anderson plaintiff counsel countered that the loan and the vendor payments were received under false pretenses concocted by Tran and McDonald in concert.
Elledge also stressed that Tran remains current on his loan payments, and that no proof had been offered that his client personally benefited from the payments, rather than professionally as intended. Oddly however, the Deed of Trust on the property was amended so that Tran only has to spend $2 million of the $10 million loan on the Front Royal property.
In setting the January 10 date for a decision on the motions to dismiss the defendants from the civil suit, Judge Albertson compared himself to a student.
“The attorneys teach us their view of what the law is” related to their cases “and it will take several weeks to fact check their arguments – I will treat this seriously, please be patient,” he asked the defendants present.
Following State Law seminars EDA votes to request legal fee assistance
The three Warren County Supervisor-elects, Cheryl Cullers (South River District), Delores Oates (North River), and Walter Mabe (Shenandoah) were all present for seminars on State Freedom of Information Act (FIOA) and Financial Disclosure/Conflict of Interest laws Monday evening, December 9.
The seminars were presented by the Front Royal-Warren County Economic Development Authority (EDA), all of whose board members save Greg Harold out of state on business, were also present for the Special Meeting and seminars held in the Conference Room of the Virginia Inland Port in the county’s North Industrial Corridor.
And after hearing the two seminars totaling nearly two hours, the incoming supervisors were informed they are now legally-certified in FOIA and Conflict of Interest/Financial Disclosures for the first two-years of their coming four-year terms of office – and they got a free meal hosted by the EDA and catered by McAllister’s prior to the meeting’s 6 p.m. start.
Legal and fed – can beat that.
The EDA Special Meeting agenda’s one other order of business was a vote on a Resolution reflecting the EDA’s intent to reimburse its past and present EDA board members’ legal fees regarding the now-dropped criminal misdemeanor charges of misfeasance and nonfeasance regarding oversight of former EDA Executive Director Jennifer McDonald in the latter part of 2018, upon requested receipt of that funding from the Warren County Board of Supervisors.
The total amount sought to cover the expenses of those seven current or past members is $36,827.17, with former member and Chairman Greg Drescher topping the list at $10,000 in legal fees and former member and Vice Chairman Bruce Drummond at the bottom end of the legal fee scales of justice at $3,000.
Discrepancies in legal fees have been explained by County staff as relating to when that representation was retained and the varying amounts of work those attorneys put into the cases before they went to court.
The vote on a motion by current Vice Chairman Jeff Browne, seconded by Greg Harold by remote phone connection, was 6-1, with only EDA Treasurer Jorie Martin dissenting. Martin later explained to the media that her dissent was based on her belief the reimbursement does not need to come through the EDA, but rather should be paid directly by the County Board of Supervisors to those EDA board members, most of whom the supervisors appointed.
Prior to the vote all involved current board members – Mark Baker ($4727.50), Gray Blanton ($4665), and Tom Patteson ($4809.67) read public disclosure statements concerning their personal interest in the vote. In addition to Drescher and Drummond, the no-longer serving members seeking reimbursement are William Biggs ($5000) and Ron Llewellyn ($4625).
The County Supervisors have already cast a 4-1 majority vote to compensate its own members’ legal fees on the same dismissed charges. Only dissenting voter Tom Sayre (Shenandoah District) declined to accept the County compensation, choosing to pay his own legal fees.
Despite that rift, Sayre’s colleagues joined in support of the departing Shenandoah District Supervisor’s motion (seconded by Fox) to delay a vote on that EDA legal fee request at the Board of Supervisors meeting the following morning, Tuesday, December 10. Recent public comment has urged the majority lame-duck county board to defer a decision on those legal fee compensations until the new board is seated at the turn of the year. And by a unanimous 5-0 vote they did.
The seminar presenters were newly-contracted EDA Attorney Sharon Pandak of the Woodbridge law firm of Greehan, Taves & Pandak (FOIA law) and Virginia Conflict of Interest and Ethics Council Executive Director Stewart Petoe, the latter up from Richmond. Pandak deferred to Petoe to begin due to his longer trip home. And as Petoe informed the group during his presentation, overnight accommodations paid for by non-employers can run afoul of ethics law in certain circumstances.
As for adherence to conflict of interest and ethics standards, while there are many detailed rules, Petoe’s short advice was “if it seems squirrely” or “it doesn’t seem right, it probably isn’t.”
To expand slightly you can’t enrich yourself, family members or friends “from confidential information received in the conduct of your job until that information becomes common knowledge” available to the general public.
And take special care when inducements or gifts are offered by lobbyists, lobbyists’ employers and contractors seeking work from you or your board.
There are many detailed rules and guidelines and when you get elected or appointed to an involved public entity, you better contact the COI/Ethics Council – anonymity assured on all specific queries – and find out what they are.
On the FOIA side, Pandak’s advice in a nutshell was that to conduct public business in governmental or quasi-governmental settings, the former like an EDA, it must generally be done in a public meeting setting advertised at least three days in advance.
Specific exceptions to open meeting requirements are noted in law, as in the familiar to the press “consultation with legal counsel” on matters where public disclosure could have a detrimental effect on the body’s litigation or pending business dealings; not to mention “personnel matters”.
But regardless of those exceptions to open meetings, action “on any matter” must be done at a public or special meeting properly advertised in advance – “NO secret ballots” to establish public policy. (Hmm, I wonder if there is any public record of that EDA board – the old one – decision to give ITFederal and Curt Tran that 30-acre Royal Phoenix parcel for a dollar when all the open meeting discussion this reporter, and apparently all others, ever heard revolved around a $2 million dollar sale price?)
As for producing public records requests showing adherence to public policy informational guidelines, the short advice was if those records exist, produce them within five working days; if there are difficulties you may request additional time; and if the request is extremely broad and encompassing, charge a justifiable price for the time and effort required to comply in whatever timeframe is authorized.
Pandak also noted that electronic communications, on public or personal devices, related to public business ARE subject to FOIA request. Her bottom line – follow the law and where questions exist rely on Attorney General opinions, court decisions or FOIA Council published opinions.
And like we said above, when you’re elected or appointed to a public body and need to know more – contact the relevant state councils and get schooled on the details.
A new EDA? Town Council approves resolution seeking state’s blessing
FRONT ROYAL — The Front Royal Town Council on Monday unanimously passed a resolution seeking a change in the Code of Virginia that would allow the Town to create its own Economic Development Authority (EDA) if it sees fit to do so.
Specifically, the Town’s newly approved resolution requests that the Virginia General Assembly amend a portion of the State Code to allow just Front Royal, VA, to establish a new EDA that’s “separate and independent” from the existing Front Royal-Warren County EDA, which is embroiled in a multi-million-dollar financial scandal.
“Upon deliberate and studied consideration,” the Town Council “finds that it is to the benefit and betterment of all the inhabitants of the Commonwealth of Virginia, and in particular to the inhabitants of the Town of Front Royal,” that the Town be able to form a Front Royal EDA so that it “can forge its own path forward in the future, unencumbered by the tremendous financial, legal, and reputational burdens currently encumbering the Existing EDA,” according to the resolution.
“Here’s the thing,” Meza continued. “Our current EDA — which you could make the easy argument is ineffective — is going to be really difficult to operate through… at least in the next coming year and possibly years.”
Because of that fact, Meza said the Town Council wanted to be sure to submit its approved resolution prior to the start of the General Assembly’s legislative work that begins in January, “essentially hedging our bets that if our EDA becomes ineffective as a joint Town-County operation, then the Town has the ability to establish its own EDA so that we can continue moving forward on Town projects, especially related to property acquisitions and developments.”
If Front Royal were to miss submitting its request now, then the Town would have to wait to submit it in July 2021, said Meza.
“We wanted to get the ball rolling on this so that we have the option and the ability to continue if needed,” he added.
Councilman Gary Gillispie echoed those sentiments on Monday night.
“Please keep in mind, just because we are asking the General Assembly to authorize Front Royal to have an EDA, it does not necessarily mean that we’re going to launch into it,” Gillispie read from a prepared statement. “Once authorized, we can commence the process to determine if it’s in the best interests of the community.”
To avoid a potential legal hurdle, the Town Council seeks the State Code change without withdrawing from its current legal interest in the existing EDA.
“It appears to the Town that as long as there are outstanding and unpaid Existing EDA bonds and indebtedness, the Town cannot even rescind it ordinance co-creating the Existing EDA all, in which case the Town would not even be able to create a separate Town EDA which could fund Town EDA facilities either inside the Town’s corporate boundaries,” the resolution states.
In fact, the current EDA is saddled with outstanding and unpaid bonds and other indebtedness for private and public facilities, including hospitals and schools, states the resolution, which also pointed out that “apparently the Existing EDA likely will become insolvent sometime in the year 2020.”
The Town Council’s resolution also acknowledges, among other items, that if the Town did rescind its ordinance for co-creating the existing EDA, then it would waive its rights to share in one-half of any of the funds and properties held by the existing EDA at the time it was dissolved.
Such action “might well be construed as wastage of Town assets by Town Council, and thereby construed as legal misfeasance on the part of Town officials, which would be unacceptable to the Town,” the resolution.
The Town Council in its resolution also wasn’t shy about laying out reasons for why it wants to form its own EDA.
For instance, the six-page document outlines “the legal and financial troubles” of the existing EDA’s former executive director Jennifer McDonald, who “has been creditably accused and has been indicted in excess of 30 felony charges in connection with criminal charges related to alleged misappropriation of Existing EDA and Town funds.”
Additionally, the resolution says that McDonald — who isn’t named in the document but only referred to as the ‘former executive director’ — “has been civilly sued in the Circuit Court of Warren County, Virginia, by the Existing EDA for over $21 million in damages in relation to said alleged misappropriation of said funds.”
The resolution also makes it clear that the “Town, Town Council, Town officials and Town employees had no role whatsoever in the former executive director’s actions,” and is civilly suing the existing EDA and McDonald in Warren County Circuit Court for $15 million in damages.
The resolution also says that the “brand” of the current EDA “has been so badly damaged as to make it very difficult, if not impossible, for the Existing EDA to attract new commerce and industry
into the Town.”
And the Town charges that “there is an inherent conflict of interest” on the part of existing EDA officials and employees who appear to favor attracting new commerce and industry “to benefit the County as opposed to the Town.”
For these and other reasons, the Town Council proposed a change to Virginia Code 15.2-4905 (Powers of authority section) that would grant the Front Royal Town Council the power to create its own industrial development authority (IDA).
“The purpose of an EDA or IDA is to bring economic development to a community where it is authorized,” Gillispie read. “It is also important to give existing businesses support to help them compete and stay profitable.”
Front Royal needs good-paying jobs, the councilman added, and there are several business parks within the Town limits that also need development.
“We just need someone who can market our Town and be able to go to Richmond or wherever it’s needed to get this accomplished,” said Gillispie, who added, if the General Assembly accepts the Town’s request and amends State Code, then Town Council members will work diligently to put safeguards in place that ensure such financial fraud never happens again.
Following Meza’s motion on adoption of the resolution, with a second from Councilman Chris Holloway, the members of the Front Royal Town Council, including Vice Mayor William Sealock and Councilmen Gillispie and Letasha Thompson, all voted yes to approve it.
Watch the Town Council meeting on this Royal Examiner video:
Town skirts EDA request for FRPD construction back payments
The Front Royal Town Council passed a series of four motions Monday, November 25, authorizing expenditures totaling $1.02 million dollars related to its civil litigation against the Economic Development Authority, as well as payments to contractors regarding construction of the new Front Royal Police headquarters across Kendrick Lane from the EDA office complex.
Of that million dollars plus total, $527,800 approved in a series of three motions is for legal and auditing fees related to the Town’s civil suit against the EDA. The $492,284.34 approved in the last of the four motions is for vendor (contractor) payments recently come due on the FRPD construction project.
The motions were all approved by 5-0 votes, with Mayor-Elect Gene Tewalt not voting as Mayor Pro Tempore as he was declared at the meeting’s outset. As noted above, over half of the authorized payments are for attorney and auditing fees for services related to the Town’s attempt to recover “as much as $15 million” from the EDA. The $492,284 was approved to cover direct payments to contractors on the Front Royal Police Headquarters construction project.
However with its litigation still pending as the EDA struggles to right its financial situation, the Town did not make good on an EDA request for back payments totaling over $8 million dollars for vendor/contractor payments it has made on the FRPD headquarters project on behalf of the Town.
In a letter from EDA Board of Directors Chairman Ed Daley to Town Finance Director B. J. Wilson dated November 15, 2019, included in the agenda packet on the final of the four EDA-related payment authorization requests, the EDA appears to attempt to force the Town’s hand on making up those back payments to the EDA.
After informing Wilson of the EDA’s receipt of FRPD project Requisition (invoice) “# 45” dated October 22, 2019, Daley wrote, “After speaking with our Board of Directors, I write to advise the Town that we will hold this pay requisition without paying until the Town of Front Royal pays the principal and interest due on this project.
“The principal, legal fees and draw fees paid by the EDA for the Town to date is $8,440,797.17,” Daley continues, adding, “The interest amount is $291,856.21 which covers interest on the previous 44 pay requisitions, up to October 31, 2019.” The recently-installed EDA Board Chairman closes by informing the Town, “Once we receive the past amount due on this project, we will process pay requisition # 45 accordingly.”
The Daley letter seeking reimbursement on the $8.44 million in police headquarter construction payments indicates an FRPD project payment and interest accrued history attached. But in the council motion on authorization of vendor payments there is no amount attached to Requisition # 45. However, in the “Revised Item # 15 motion made by Jacob Meza, seconded by Chris Holloway, an amount of $492,284.34 is cited to cover payments directly “to vendors Dustin Construction, Mosley Architects and JTS LLC for construction of the Police Department Project.”
The motion continues to cite the use of money “previously budgeted for the Police Department Project” and notes the Dustin Construction payment will be released “after signed waiver of lien is obtained.”
Contacted by phone on Tuesday, EDA Administrative Assistant Gretchen Henderson said that Dustin Construction ($243,843.48) and JTS LLC ($893.84) were included in payment Requisition # 45, but not the Mosley payment which may be from a separate invoice.
So it appears that the Front Royal Town Council has decided to respond to the EDA’s most recent request it make good on its $8.4-million FRPD project payment debt to the EDA by bypassing the EDA on that debt as the Town’s civil suit against the EDA moves forward; while simply making future invoice Requisition payments directly to the vendors.
The first EDA-related Council payment authorization of Monday’s meeting was $282,800 for “attorney fees and auditing services related to the Town’s civil suit against the Front Royal-Warren County Economic Development Authority (EDA)”.
The funds for that payment were requested to be transferred from scheduled FY 2019 and FY 2020 Town debt service payments to the EDA on a number of projects. Those projects and transferred amounts were cited as Success Farm ($10,370), Baugh Drive Extension ($6,535), Happy Creek ($6,845), Stephens Industrial Park ($11,725), Leach Run Parkway ($105,925), and “Appropriated Funds Forward ($141,400), totaling the $282,800 authorized for attorney and audit fees related to the Town lawsuit against the EDA.
The now $21.3-million EDA financial scandal revolving around former EDA Executive Director Jennifer McDonald began unraveling in late spring to early summer of 2018 when Town Finance Director Wilson discovered about eight years of Town debt service overpayments to the EDA. EDA officials told Royal Examiner they have not yet seen a number on those believed Town overpayments.
Might one take a guess based on that $282,800 transfer of future scheduled debt service payments to the EDA; or might one look at the fact that transfer comes within $9,056 of the disputed FRPD interest payments of $291,856.21?
Hey, guessing is always a gamble, isn’t it?
As those keeping a scorecard on the now multi-faceted EDA financial scandal and related civil and criminal litigation know, the Town Council authorized its legal department to file the aforementioned civil action against the EDA seeking recovery of “as much as $15 million dollars” of allegedly misdirected Town assets as a precaution against unknown variables, including possible statute of limitation issues. Included in the Town’s suit for recovered assets is exactly what interest rate the Town should be paying on the FRPD construction project.
The EDA is paying 3% interest on the FRPD construction project. However, the Town is holding out for a 1% rate that would coincide with what it contends was promised to it by the EDA, or at least by its then Executive Director McDonald, as part of the New Market Tax Credit Program for which the project did not qualify because it was not a job-creating economic development project.
In fact as Royal Examiner has previously reported, then Town Manager Joe Waltz and Finance Director Wilson, as well as People Inc. regional administrator of the NMTC Program Brian Phipps all advised Council against “gambling” on competing for the NMTC funding versus accepting a guaranteed, 30-year fixed 2.65% interest rate offered to the Town in late 2017 through a private sector bank.
Contacted Tuesday, Town Attorney Doug Napier said that after Phipps’ early January 2018 work session appearance before council, Town officials contacted McDonald, who assured them Phipps “didn’t know what he was talking about” and that the NMTC bond issue had been achieved to include the FRPD project.
Consequently a council majority decided to take that gamble on the best case scenario of nine years of interest-free payments significantly reducing the total interest due on a project bond issue.
The other two EDA-related payment authorizations unanimously approved by council Monday evening were “up to $45,000 to Mitchell & Company PC for auditing services to support litigation in the Town’s civil suit against … (the EDA)” and “payment not to exceed $200,000 to Damiani & Damiani for legal services related to the Town’s civil suit against the …(EDA).”
Contacted Tuesday for a reaction to the Town Council’s response to the EDA board’s request the Town make good on its FRPD payment debt, current EDA Executive Director Doug Parsons said,
“What the Town does is their business, what they chose to pay, what they chose not to pay it’s entirely up to them. We feel confident in the figures we provided on the invoice for the Front Royal Police Department. We would love to work out this difference of opinion with them; and we’re always ready to work with them on other projects while we work out our differences.”
Watch the entire Front Royal Town Council meeting of November 25th here:
Sunday afternoon matinee: What do Dixon, Illinois, Front Royal and Warren County have in common?
A sizeable crowd gathered Sunday afternoon at 2 p.m. at the Villa Avenue Community Center for a viewing of the documentary film “All The Queen’s Horses”. The film about a city financial official in Dixon, Illinois, who is currently serving a nearly 20-year prison sentence for embezzling $53.7 million dollars over a 20-year period, seems to be of particular interest locally due to our own developing municipal-EDA financial scandal.
Rita Crundwell was arrested by the FBI in 2012 on what is to date the largest municipal embezzlement in U.S. history. Film producer/director and public accounting professor at DePaul University Kelly Richmond Pope was present to introduce her film and do a post-viewing question-and-answer session centered around what similarities she does or doesn’t see between the Dixon, Illinois situation and Front Royal and Warren County’s Economic Development Authority financial scandal.
And based on what she heard in questioning or perceptions from locals, as well as what she may know about the 15-defendant EDA civil suit and related criminal charges against multiple defendants surrounding principal defendant and former EDA Executive Director Jennifer McDonald, Pope said the local situation may be more similar to the one Dixon dethroned as the largest U.S. municipal embezzlement scandal, a $48 million dollar one in Washington, D.C.
That similarity is based on the fact that the evidence assembled indicated that Dixon Comptroller, or Chief Financial Officer, Crundwell is believed to have acted alone, whereas the D.C. situation involved multiple people.
Yes, Pope told the local audience, Crundwell’s family members did benefit from her spreading her wealth around, but no hard evidence was produced that any were legally complicit in Crundwell’s crimes. Of course, those charged civilly or criminally here have yet to have their day in court to contest the allegations against them.
If locally McDonald spread the story that her high cash flow was based on an improbable three-year run of luck on the slot machines at Charles Town, West Virginia’s Hollywood Casino, Crundwell had a variety of “rumors” floating to cover her family generosity and high-dollar quarter horse stable operation. Among those were an inheritance from rich, former boyfriend who passed away years earlier; and high-dollar horse sales from her high-profile, 400-quarter and show horse operation that took her around the country.
But nearly $54 million dollars out of a small city of around 16,000 residents’ annual budget for so many years – the question lay heavy on that community as a similar one now does on ours: “How did a high-school educated municipal clerk pull it off?”
Well, Crundwell was an attractive, gregarious, well-though-of local girl the community was proud of, and upon which the city’s mayor and council relied heavily on to conduct Dixon’s financial operations.
“It’s human nature to trust them,” one Dixon resident told Pope’s documentary camera of the local girl making good in an $80,000 a year city position.
Another question asked was how could so much money be removed from a small city budget over such a long period of time without somebody noticing?
Well, someone did notice – a municipal financial official from a neighboring city, Sterling, Illinois. In fact, the Sterling official wrote to Dixon officials citing the similarity in the two cities’ annual operational budgets, citing a RED FLAG in that while Sterling carried a surplus, Dixon carried a “huge” deficit of around $20 million. However, that warning was filed away without action, as the rationale that Dixon was doing a lot of borrowing at the time was self-generated to explain the difference.
Another factor in how it happened to Dixon was cited as its “Commissioner” form of government, which essentially does not carry multiple administrative and financial staff positions. Dixon’s staff was small with no direct oversight of Crundwell’s activities, other than by a poorly-paid, part-time elected council and mayor.
“Rita was the checks and balances,” one person told the documentary camera.
So, when she added seven bank accounts to facilitate her fraud to the City’s six legitimate bank accounts, no one noticed – for a long time.
However in November of 2012, after finally-alerted Dixon municipal officials notified the FBI of possible financial crimes in their midst, Crundwell eventually pled guilty to federal money laundering and wire fraud charges. The 19-year-and-7-month sentence handed down was above guidelines and near the maximum 20 years she faced. Crundwell is scheduled for release from prison on March 5, 2030.
And much as locally here, as McDonald’s alleged embezzlement schemes were uncovered essentially by accident when Front Royal Finance Director B. J. Wilson was asked by his elected council to find a way to make a half-million dollar, interest-free internal loan to fund a new town police radio system; in Dixon a Crundwell assistant Kathe Swanson uncovered some questionable financial transactions while covering for Crundwell during an absence from the office. It is noted in the film that Crundwell took four months a year off, apparently to take care of her horse operation, and maybe to spend some of her embezzled funds on some additional personal expenses.
And while it took a while to get to it in the film, once uncovered and successfully prosecuted, public outrage targeting Dixon’s elected officials saw a total turnover of the city’s elected leadership.
Towards the end of her Q & A with the audience, which included Mark Egger’s recounting of his daughter’s experience of outright vilification at times in trying to raise questions about EDA operations and projects while on the Front Royal Town Council in 2016-17, and other audience assertions of municipal and even law enforcement cover ups, filmmaker Pope told the crowd she might well return to explore the local dynamics of this community’s unfolding experience.
One interested observer of Sunday’s matinee was New York Times reporter Abbey Ellin, who apparently hooked up with Pope at the airport on the way into Front Royal. In fact, as the Q & A was breaking up around 5 p.m. from the 2 p.m. showing, Ellin was being maneuvered toward the airport return trip with the filmmaker by local transport service operator Michael Williams to assure Pope did not miss her return flight out of the D.C. area.
So, as the involved numbers of sought assets for recovery climb, along with the number of both civil and criminal defendants, along with conspiracy theories about how it happened, it seems national interest in Front Royal and Warren County’s slice of what Pope described as a $3.7-trillion-dollar national embezzlement problem is rising as well.
Looks like us local first chroniclers of our town and county histories better get cracking on those side projects …
Removal Petition hearing on County Board continued to December
An as-yet undetermined date in December was set for the continuation of a hearing on the citizen-launched Removal Petition against the five sitting Warren County Supervisors. The hearing was on the Warren County Circuit Court docket Friday morning, November 22, at 8:45 a.m.
Judge Bruce D. Albertson heard motions and the reasoning for the continuance by video hook up from his home courtroom base in Harrisonburg. When a suggested date of December 6, when Albertson will be in court on EDA-related criminal hearings, did not work for one of the two defense attorneys, James Cornwell, the judge said he would like a specific December date agree upon within two working days.
As he had the previous day during hearings on EDA-related criminal charges, Commonwealth’s Attorney Bryan Layton notified the court of his intention to remove himself from EDA prosecutions with a newly-elected Commonwealth’s Attorney John Bell slated to take over at the turn of the year, prior to any EDA-related trials getting under way. And with Bell planning to recuse himself from EDA prosecutions to assure there is not even a perception of possible conflicts of interest that might impact future EDA legal proceedings, Layton suggested that despite his desire to continue with the EDA cases, that they, like yesterday’s criminal cases, be turned over to the office of Rockingham County Commonwealth’s Attorney Marsha Garst.
Rockingham Assistant Commonwealth’s Attorney Michael Parker appears poised to take on the bulk of cases Layton has been working, along with the EDA Special Grand Jury investigation. Layton again noted Parker needed time to get up to speed on the background of the various cases he is taking on.
Defense co-counsel Cornwell and Acting County Attorney Jason Ham had no objection, by remote phone hook up, to Layton’s call for the continuance of the Removal Petition hearing.
During Friday’s hearing it was reported that notice of certification of the required amount of signatures had been received from Warren County Voter Registrar Carol Tobin. That certification, which came despite the loss of 107 signatures that could not be verified as registered county voters, allows the Petition for Removal from office of the supervisors to proceed.
The filing required a minimum of 10% of the number of registered county voters who voted in the last election. That number is cited as 6,958, requiring a total of 696 countywide. Even with the 107 lost signatures, the petition contained 835 verified signatures.
The petition was filed October 18 as part of the grass roots public reaction to the Front Royal-Warren County Economic Development Authority financial scandal that has led to a number of dueling civil litigations surrounding the EDA’s attempt to recover $21.3 million dollars in allegedly misdirected or embezzled EDA assets. The EDA civil litigation alone has already cost the County and its taxpayers $1.31 million dollars in legal and investigative financial audit costs.
And with a $750,000 cap on attorney’s fees payable to the Sands Anderson law firm of Richmond removed by the supervisors on Tuesday, that number is anticipated to keep climbing over the coming year or more as the civil cases proceed and what is anticipated to eventually be in the neighborhood of a million pages of related documentation is submitted for those civil, and related criminal, cases.
The Removal Petition contends the County’s elected Supervisors were directly negligent and in dereliction of their official duties in allowing the alleged EDA financial embezzlements to develop under their indirect stewardship since at least 2014-15.
After the Front Royal Town Council voluntarily abdicated certain oversight functions several years ago when the County took over the Town’s operational funding of the EDA, the County Board alone now appoints EDA Board of Director members. It is those appointed members of the quasi-governmental EDA that have direct oversight authority of EDA staff, a defense motions filing in the Removal Petition case states.
The Removal Petition cites the board members’ three misdemeanor criminal indictments on misfeasance and nonfeasance charges filed September 20 as one primary legal basis of the recall. Those charges targeted the supervisors, along with current and former EDA board members, for an absence of due diligent oversight of the actions of former Warren County Economic Development Executive Director Jennifer McDonald in the final four months of 2018.
However, the fact those indictments were dismissed by Judge Albertson as non-criminal by Virginia Statutes, even dating to English Common Law under which they were filed, may complicate the petitioners’ argument.
Just two days before Friday’s hearing defense co-counsel Cornwell and Ham filed a Demurer with the court seeking dismissal of the petition. Grounds cited for dismissal include a lack of jurisdiction for the filing; a lack of legal authority for the supervisors to act directly to limit the activities of EDA staff; and “Legislative Immunity” precluding the Judicial Branch of State Government from a “quasi-criminal” investigation of a Legislative body such as the county supervisors regarding how they conduct their business.
It would appear that while the timing of the defense Demurrer filing might have precluded proceeding with arguments Friday, a December hearing date could see arguments on these crucial legal points of contention.
On October 28, Judge Albertson denied a petitioner’s motion to immediately remove the five sitting supervisors prior to any arguments on the legal dynamics of the Removal Petition.
Targeted by the Removal Petition are Daniel J. Murray of the North River District, Thomas H. Sayre of the Shenandoah District, Tony F. Carter of the Happy Creek District, Archie A. Fox of the Fork District, and Linda Glavis of the South River District. As of the turn of the year in the wake of Murray and Glavis’s retirements and Sayre’s defeat at the polls in November, only Carter and Fox will be impacted by the Removal action.
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