Town files suit against EDA, McDonald to recover $3 million of Town assets

Jennifer McDonald and then-Councilwoman Bébhinn Egger square off in October 2016 over the substance of public representations about EDA projects, most prominently ITFederal and Workforce Housing. Unfortunately none of her colleagues were listening – several, then Mayor Tharpe and Councilmen Meza and Tewalt, have since apologized for that lapse. Royal Examiner File Photos/Roger Bianchini

After months of unsuccessful efforts to be included with the EDA and County in information gathered on Front Royal-Warren County Economic Development Authority financial improprieties as it applies directly to money that it may be owed, the Town of Front Royal has filed suit to recover an estimated $3 million dollars of Town assets from the EDA and its former executive director, Jennifer McDonald.

The civil action for lost Town taxpayer assets was filed at 9:04 a.m. on June 21, just minutes after the opening of the Warren County Circuit Court Clerk’s Office. Served as agents of the EDA were EDA/County Attorney Dan Whitten, at his Warren County Government Center office, and newly-hired EDA Executive Director Doug Parsons, at his EDA Kendrick Lane EDA office. McDonald was served at the Fairfax County Adult Detention Center where she is now housed without bond on four related felony criminal charges. Judge Clifford L. Athey Jr. has deemed McDonald a flight risk was she to be released on bond.

The aggressively-worded complaint targets, not only McDonald for believed fraud, but the EDA Board of Directors and legal staff for “inexplicable” lapses of oversight in allowing the possible continuation of fraud against Town interests for at least three months beyond a confrontational August 2018 meeting between Town and EDA officials.

The Town complaint demands a jury trial to recover assets it admits it does not yet have a completely accurate estimate of due to the EDA legal counsel’s rejection of multiple FOIA inquiries about the result of the Cherry Bekaert investigation of indicators of fraud in EDA financial operations.

Town Attorney Doug Napier has been at the center of unsuccessful efforts to have the Town included with the EDA and County in information distribution from the EDA fraud investigation.

Of course the Town now has access to those almost 3,000 pages of documentation and its 100-page working paper summary on file in the EDA civil litigation court file. An initial exploration of those documents by Town staff perhaps led to the upping of its estimated losses from the $291,000 of debt service overpayments discovered by Town Finance Director B.J. Wilson in May 2018, to the $3 million dollars now cited as of June 21, the first day of summer 2019.

In addition to its own independent, contracted auditor’s confirmation of Wilson’s May 2018 discovery of years of debt service overpayments, the Town Complaint cites a subsequent August meeting with McDonald, then EDA Board of Directors Chairman Greg Drescher and EDA/County Attorney Dan Whitten at which, “It was Town employees and agents who, on August 23, 2018, caused McDonald to admit, in person and while in the presence of the EDA/County Attorney and in the presence of the Chairman of the Board of Directors of the EDA, that McDonald had personally submitted false, and thereby knowingly and fraudulently, billing invoices to the Town for payment.”

Citing his public schools administrator’s work schedule, Drescher announced he was stepping down as EDA board chairman the following day. He has since resigned from the EDA board. Drescher and Ron Llewellyn submitted their resignations on March 22, effective the following day as the Cherry Bekaert investigation was winding down.

Who could have known? Then EDA Board Chairman Greg Drescher and McDonald field Workforce Housing questions from Supervisors Sayre and Fox during sometimes contentious June 2017 county board-EDA work session.

Also on the day following the apparently volatile August 23 Town-EDA staff meeting, or very close to it, the Town Complaint notes its contact of the Virginia State Police requesting “a complete law enforcement investigation of the EDA and McDonald” which it adds was begun “immediately” and continues “to this day.”

It was VSP that arrested McDonald on May 24 in the wake of Special Grand Jury indictments handed down from the investigation into potential criminality related to EDA financial activities and the EDA civil litigation filed March 26.

It is here on page seven of its nine-page complaint, where the August 23 meeting is addressed, that the Town zeroes in on what it characterizes as an ongoing pattern of “inexplicable” negligence by the EDA Board of Directors.

“Notwithstanding the events of August 23, 2018, the EDA Board of Directors, inexplicably, allowed McDonald to retain her position as Executive Director of the EDA with all of her rights, privileges and duties as before, with no known restrictions as such,” the Complaint begins in paragraph 18, subsection D, adding the word “inexplicably” three more times to describe the EDA board’s lack of disciplinary action or even the implementation of increased oversight of its executive director in the subsection D paragraph.

“The EDA Board of Directors inexplicably did not immediately fire or otherwise discipline McDonald … inexplicably did not restrict McDonald’s access to the EDA offices or her duties … inexplicably did not immediately call law enforcement to investigate McDonald or her activities … not withstanding that the Town’s auditor on that date rightfully and appropriately personally called out McDonald for committing fraud upon the Town in the presence of McDonald … the EDA’s Chairman of its Board of Directors and in the presence of the EDA’s attorney,” paragraph 18-D reads, adding a fifth and final “inexplicably” to describe the failure to place their executive director on administrative leave pending a resolution of the fraud allegation made by the Town auditor on August 23, 2018.

VSP and the FBI descended on the EDA headquarters to search for potentially criminally-related materials regarding EDA financial operations on April 16, 2019. Five weeks later the EDA’s former executive director was arrested by VSP following four felony criminal indictments being handed down by a Special Grand Jury.

Of that series of “inexplicable” EDA board lapses the longest paragraph in the complaint – at one-and-a-half pages – concludes of the period between August 23 and December 2018, “…McDonald was able to continue to and did in fact misappropriate and embezzle EDA’s moneys and taxpayers’ moneys. In fact, according to widely published accounts, on November 28, 2018, McDonald as Executive Director was able to convince the EDA’s Chairman of the Board of Directors to sign a deed of conveyance to a highly publicized and controversial workforce housing project property worth hundreds of thousands of dollars to a third party for a consideration of only ten dollars, concerning which the Chairman was publicly quoted in the press as saying that he had no reason not to trust McDonald when she handed him the deed to sign without him reading the deed, even though at the time she was under State Police investigation, federal government law enforcement investigation, and the EDA and McDonald were under the aforementioned Financial Study for this very same misappropriation and embezzlement of moneys.”

Former EDA Chairman Drescher, back to camera, and Attorney Whitten oversee a lockdown of the executive director’s office, including remote computer access, on Dec. 20, 2018, the day McDonald resigned.

Paragraph 10 of the complaint states that, “As a result of the incorrect and incomplete documentation the Town has received to date from the EDA and McDonald, it is unknown to the Town when the moneys were misappropriated by the EDA and McDonald; or who are the identities of all the persons or entities who might have been involved … or where the moneys misappropriated are now located or if it is now in the United States of America, or if it is even now recoverable.” The following paragraph cites the potential of a statute of limitations kicking on some of the longer misdirected Town money.

The outset of the civil complaint notes that it is currently the Warren County Board of Supervisors that “solely appoints the Board of Directors of the EDA”; and that with the EDA it is the County that funds the EDA’s operational budget, with the Town playing no current role in either. In the wake of the County’s assumption several years ago of the Town’s portion of the EDA’s operational budget as part of the continuing Route 340/522 Corridor agreement compensation negotiations, the Town does continue to contribute to portions of the EDA debt service payments, as illustrated by the discovered years of debt service overpayments continuing into 2018. The Town also contributes by way of a fair-funding formula split for projects of mutual town-county interest.

In March former County Board Chairman Tony Carter and County Administrator Doug Stanley await an EDA Board Closed Session discussion of the Cherry Bekaert financial fraud investigation of the EDA. Carter and Stanley have both caught public meeting expressions of ire over a perceived lack of County oversight of EDA operations allowing questionable transactions to occur over a period of years.

In what may flirt with an editorial observation, it would appear to this long-time local municipal reporter that the Town voluntarily withdrew from EDA oversight and board appointment authority, rather than being compelled to do so by the County’s assumption of its EDA operational funding. That is because that assumption was done as part of negotiated County compensation to the Town for the extension of Town central water-sewer utility into the county to facilitate corridor commercial-industrial development. So if not in the filed civil complaint or open court, behind closed doors town officials might want to whack themselves on the back of the hand for not maintaining more operational oversight of how the EDA was functioning, particularly as much of that functioning continued and continues to involve in-town projects.