EDA civil complaint details allegations surrounding key projects

While attorneys for defendants in the EDA civil litigation have focused on what they contend are vagaries in details of the cited misdirection of EDA assets, the complaint itself lists some detail, including specified amounts of money moved on a variety of projects contended to be conduits for the alleged embezzlement or misuse of EDA or EDA-enabled resources.

As previously reported by Royal Examiner, the projects or methods identified as those conduits for misdirection of EDA assets in the civil complaint are: the ITFederal Loan; Subsequent Payments to ITFederal; Workforce Housing – Royal Lane Property Embezzlements; Afton Inn Project Embezzlements; Criminal Justice Training Academy aka Skyline Regional Justice Training Academy; Unlawful Payments Concerning Earth Right Energy LLC; and Unlawful Payment of Town and Warren County Funds for Defendant McDonald Owned/Controlled Real Estate”.

Due to the voluminous material cited in the 199-paragraph, 32-page EDA civil complaint concerning the above-cited EDA projects, loans, private business and contractual arrangements, we will begin Royal Examiner’s more detailed exploration of the EDA lawsuit and initial defense responses by narrowing on specific portions of the complaint. Note that Royal Examiner is not asserting the truth of either the allegations in the complaint or defense responses to those allegations – merely reporting their existence and some detail.

Of particular focus regarding alleged false information being used to prop up the movement of the largest amount of misdirected EDA assets, a $10-million bank loan little of which appears to have been spent here nearly four years on is ITFederal’s recruitment as the first commercial redevelopment client at the former Avtex Superfund site. Six pages of the complaint are devoted to the ITFederal loan process.

The lone ITFederal construction nearing completion on May 2, 2019, as a one-story, 10,000 s.f. building – Royal Examiner File Photos/Roger Bianchini

Of the securing of a $10-million dollar loan to ITFederal the complaint states in paragraph 89, “Tran and Defendant McDonald represented, through McDonald, to the Town, the County and the Warren EDA multiple times that (a) Tran was a high-net worth individual, (b) he did not need any financial assistance from the Town, the County and the Warren EDA to make the ITFederal Project financially viable, (c) ITFederal/VDN Systems had procured a $140 million contract with the Nuclear Regulatory Commission to provide information technology services on a long-term basis and (d) Tran had the endorsement and support of U.S. Congressional Representative Robert Goodlatte …”

Continuing in paragraph 99, “On information and belief, despite any nominal award of any federal contracts to ITFederal and/or VDN, the actual work and payments under any such federal contracts … appear to be not more than $5,000 over the last five years.”

Paragraph 100 of the complaint states, “The websites for ITFederal, VDN and ACRC (three Tran companies) all appear to be bogus websites with little or no substantive information or recent activity in connection with purported businesses. In some cases it appears they have not been updated since 2012. Based on information and belief, these websites were created to convey a false impression that ITFederal, VDN and ACRC were active businesses with a substantive source of income with the intent of fraudulently inducing the Warren EDA to make the ITFederal loan.”

As previously reported here, in motions filings McDonald attorney Lee Berlik has contested the assumption that McDonald was consciously lying in regard to many of the allegations against her, rather than simply repeating lies she was being told; or in other instances following through on methods of moving EDA assets approved by the EDA board to facilitate projects it later regretted becoming involved in.

Jennifer McDonald, grey sweater, with five of seven EDA board members, circa 2015-16. Pictured from left facing the camera are Ron Llewellyn, Vice-Chairman Greg Drescher, McDonald and Chairman Patty Wines; back to camera from left are Bill Sealock and Billy Biggs.

“The Warren EDA, Plaintiff in this action, is engaged in an attempt to smear Ms. McDonald by blaming her for every bad decision made by the Warren EDA board over the last several years and turning business deals the Warren EDA now regrets into implausible conspiracies,” Berlik wrote on the first page of a defense motions filing on April 16, adding emphasis in context, “Plaintiff suggests every statement by every counterparty it now regrets crediting was a false statement by Ms. McDonald … instead of a false statement to Ms. McDonald.”

Beginning with her presentation of Tran and ITFederal to the EDA board and town government in 2014, the complaint alleges a lengthy effort by McDonald to mitigate Tran and his company’s costs and liability while at the same time working toward securing of a $10-million loan the complaint asserts she repeatedly told local officials Tran did not really need to accomplish his project.

Rather, the Town’s initial assistance in the way of a $10-million dollar “bridge loan” to facilitate a $10-million bank loan then EDA Attorney Blair Mitchell noted Congressman Goodlatte had requested in a 2015 email correspondence with McDonald, was presented as a means of promoting long-sought commercial redevelopment at the site. It is perhaps also noteworthy that the EDA put up the 117-acre balance of the Royal Phoenix Business Park property as collateral for the $10-million dollar ITFederal loan from First Bank & Trust.

As work progresses on his building in background, ITFederal CEO Truc ‘Curt’ Tran on site at the EDA office complex on Dec. 20, perhaps ironically the day Jennifer McDonald resigned as EDA executive director.

“Tran and Defendant McDonald stated that Tran did not need the financial support of the Town and the Warren EDA, but that such assistance was requested by Rep. Goodlatte,” graph 90 of the complaint states; further noting the request that 30 acres of the 147-acre Royal Phoenix Business Park be donated to Tran and his company “free of charge” – well he did end up paying a dollar for the parcel valued at $2 million in open EDA meeting discussion – and to secure the loan to facilitate construction “of all or a part of the ITFederal Project.”

Then U.S. Congressman Goodlatte, R-6^th, participated in the October 2015 ITFederal ribbon cutting, taking credit for the company’s arrival here and promoting a promised $40-million ITFederal investment in the community that would create 600-plus high-paying, largely tech industry jobs.

The EDA complaint filed by the Sands-Anderson law firm of Richmond also addresses Tran’s alleged ties and access to resources from the federal EB-5 Visa Program created to trade U.S. citizenship in exchange for significant private investment – cited at $1 million dollars – in the U.S. economy.

“Tran and Defendant McDonald represented, through McDonald, on multiple occasions to the County, the Town and the Warren EDA that ACRC had obtained or was in the process of obtaining EB-5 financing to finance the ITFederal Project,” the complaint asserts.

“The new venture must create and sustain at least ten full-time employees for at least two years in order for the investor seeking citizenship to convert his or her green card into full citizenship … ACRC (American Commonwealth Regional Center) is another entity established and controlled by Tran … ACRC represents it is an approved EB-5 regional center … However, based on a search on the USCIS website on February 12, 2019, ACRC does not appear to be an approved regional center for EB-5 financing.

“There is no evidence that ACRC has ever successfully obtained or used EB-5 financing in connection with the ITFederal Project or for any other purpose,” the complaint states.

The complaint also notes that in 2017 Tran requested a modification of his Borrowers Note and Deed of Trust that would have forced the initially-discussed purchase price of about $2 million to kick in if certain developmental conditions were not met by specific dates. That extension to September 2020 significantly reduced the required scope of the project from its initial three-building complex housing all those high-dollar jobs Goodlatte had trumpeted in a press release.

Above, architectural drawing of proposed two-story, approximate 26,000 s.f. ITFederal building, one floor of which was eventually built; below, drawing of two other proposed ITFederal structures, including cloud building and office/training center earmarked for the western portion of the 30-acre parcel. Courtesy Graphics FR-WC EDA

“On information and belief, little to no proceeds of the ITFederal Loan has been applied to the ITFederal Project … Tran and Defendant McDonald have converted all or a portion of the proceeds of the ITFederal Loan to their own personal benefit,” that section of the complaint concludes.

But there’s more – under “Subsequent Payments to ITFederal” an additional four pages of the EDA complaint allege an additional $1.82 million dollars of “Unauthorized ITFederal Payments”. Those payments include $1,432,771.32 in reimbursements to ITFederal for work done at the site and over $392,000 in vendor payments.

Above, piles of fill dirt brought to site sit in proximity of where second and third ITFederal buildings pictured above are scheduled for construction; below, Dec. 20 photo of first phase of the Town-constructed West Main connector road (aka western bypass) through ITFederal property that would eventually connect Kendrick Lane and the West Main/Criser Road intersection near the skatepark/soccer complex – if it’s ever finished.

McDonald attorney Berlik also contends that the complaint fails to meet a legal obligation “to connect any alleged facts to specific claims” against defendants, limiting their ability to construct a viable defense against those claims against them.

But regarding those “Unauthorized ITFederal Payments” the complaint offers some specificity. It disputes McDonald’s initial explanation to her board that those payments were draws on the ITFederal Loan. “The proceeds of the $10 million loan made to ITFederal was issued in full at the time of closing in 2015; there is no evidence that the Warren EDA retained those funds or had any ability to approve invoices or otherwise control or direct those funds.”

The complaint then disputes representations attributed to McDonald that those payments would be reimbursed to the Warren EDA by a grant from the Virginia Economic Development Partnership (VEDP). “It is clear from the VEDP documentation that Tran and Defendant McDonald met with the VEDP relating to ITFederal in the 2014/2015 timeframe, but that Defendant McDonald was unable to provide the information VEDP was requesting to award a grant related to the ITFederal Project …Defendant McDonald deliberately took Warren EDA funds and gave them to Tran/ITFederal with no reasonable expectation that such funds would be repaid or otherwise funded from another source,” the EDA litigation states.

The complaint concludes with an assertion that McDonald personally benefitted from those payments “as part of a scheme with Tran to fraudulently obtain Town and County funds for their own benefit.”

Well laid out, fraudulent schemes or implausible conspiracies?

That will be at issue for attorneys on both sides when and if the civil litigation proceeds into the courtroom for the requested jury trial. As previously reported, several defendants have moved for either dismissal of charges or delays in the civil process until the special grand jury investigating potential criminality related to the EDA civil suit is completed.

Next up, Workforce Housing – not as much money, a total loss to the EDA cited at $651,700, but perhaps an even more convoluted trail to that loss on a project initially presented in 2014 as a free land “gift” to the EDA. That cited financial loss appears to have been cemented by the EDA’s November 28, 2018 sale of the involved 3.5-acre Royal Lane parcel for $10. It is a sale accomplished over two months into the ongoing Cherry Bekaert forensic audit of EDA finances that resulted in the current civil litigation to recover lost assets.

Now why, you may wonder, would they do that?!?

Dead End – Did the ‘Warren EDA’ acquiesce to a $651,700 loss on the controversial Workforce Housing property at the dead end of Royal Lane by way of a Nov. 28, 2018, $10 sale? And if so, who’s to blame?