Jury takes less than hour to find ‘Sammy’ North liable in wife’s ‘scheme’ to move $110,000 from EDA to real estate transaction for personal gain

After just over five hours of testimony, evidence, and opening and closing arguments by plaintiff and defense counsel Tuesday, a seven-person Warren County Circuit Court civil case jury found former Front Royal-Warren County Economic Development Authority Executive Director Jennifer McDonald’s husband Samuel ‘Sammy’ North liable on all of its claims regarding his part in a 2015 real estate purchase on a parcel at 1309 Robinhood Lane achieved with the transfer of $110,000 in EDA funds. Those EDA claims included (i) fraud, (ii) unjust enrichment, (iii) conversion, (iv) conspiracy, (v) ultra vires (related to his wife’s exceeding her authority as an EDA official), and (vi) punitive damages.

Financially, North was found liable for the base compensatory claim of $110,000, as well as $165,000 on a finding of Statutory Conspiracy, another $350,000 in Punitive Damages on a ruling of Malicious Intent, bringing liability to $625,000. With interest, estimated at $268,000 added, North’s total liability is approximately $893,000.

Defense attorney Frank Reynolds indicated he would file a motion to overturn the verdict as unsubstantiated by civil case law just as counsel for four other EDA financial scandal civil defendants tried and found liable in July have done. Hearings on those defense motions are scheduled to be heard by Judge Bruce D. Albertson on November 30. A schedule for defense filings and plaintiff responses to facilitate the North case’s inclusion in that late November hearing was discussed prior to adjournment around 5 p.m. Tuesday afternoon, October 25. North’s civil liability trial was originally scheduled for July but was continued in the wake of a bankruptcy filing by North, which according to plaintiff counsel was later withdrawn.

Asked about the verdict, current FR-WC EDA Board of Directors Chairmen Jeff Browne, present for the trial as he was for the July cases, told Royal Examiner, “Well, it’s another win. It shows that we’ve got a good legal team and we had a good case. And it makes a real difference for the people of Warren County.”

EDA lead counsel Cullen Seltzer and assistant Kimberly Paulsrud, the latter who handled the projected graphic presentations in support of the plaintiff’s case at trial Tuesday. Royal Examiner file photos

Asked if he was concerned when alerted that the jury had reached a verdict so quickly – about 45 minutes, Browne said, “No, not really. My sense was that, that was a good sign.”

It might be noted that in closing arguments both sides’ counsel had called the evidence presented to the jury as “simple” in its nature, though disagreeing on the substance of that evidence as to the defendant’s knowledge or lack thereof on McDonald’s use of EDA assets.

“And the jury listened to that evidence and made a decision,” Browne noted of the verdict and the time taken to reach it. He noted that more civil cases will be coming to court in March to April of 2023. Of the November hearing on the recent defendant motions to overturn jury verdicts, Browne added, “I don’t think there will be any changes in November, I hope not. And we’ll have the opportunity to start gathering assets.”

With the North verdict and liability ruled by the jury added to the four made in July, pending no reversal of verdicts on November 30, the EDA is poised to recover over $15 million in assets on these five cases. Coupled with an out-of-court “no-fault” settlement with McDonald, on paper at least, involved civil case defendants have been ruled or offered liability for about $24 million of the estimated $26-million EDA “financial scandal” circa 2014-2018.

Trial debate

As with the July civil trials of April Petty, William Lambert, Donald Poe and Earthright Energy, and Truc “Curt” Tran and ITFederal related to the EDA financial scandal uncovered in 2018, plaintiff and defense arguments in the EDA versus North case revolved, at least in part, around what the defendant knew or didn’t know about Jennifer McDonald’s lack of unilateral authority to move EDA assets related to the defendant’s use of those assets in what plaintiff counsel referred to as “a scheme”.

Defense counsel Reynolds argued that plaintiff council had failed to present any evidence proving his client knew his wife did not have the authority to transfer $110,000 of EDA funds for his purchase of a townhouse at 1309 Robinhood Lane in September 2015. In fact, defense counsel argued that the $110,000 transfer to facilitate the $107,500 purchase, plus closing costs, by her husband could have been authorized by an EDA Asset Committee. Reynolds pointed to his client’s and Settlement Title staff’s recollection of the presence of then-EDA Board Chair Patty Wines, since diseased, at the Robinhood Lane property closing, to argue that it could have been an authorized transfer related to the EDA’s efforts to develop affordable workforce housing for young professionals.

However, EDA lead attorney Cullen Seltzer countered those arguments with one of the three witnesses he called, former Warren County and EDA attorney Dan Whitten. In fact, Tuesday’s trial was accomplished in one day with the calling of a total of only four witnesses: Closing company Service Title’s Records Custodian Kelly Shaney, Whitten, and Jennifer McDonald by the plaintiff, and defendant Samuel North by the defense.

Under direct examination Whitten pointed out that any transfer of over $50,000 of EDA funds for acquisitions would have to be approved by the full EDA Board of Directors in an open session vote. Whitten testified that McDonald’s 2015 transfer of $110,000 for her husband’s purchase of 1309 Robinhood Lane had never been discussed in open or closed session, and never approved by the EDA board. EDA counsel Seltzer also pointed to North’s invocation of his 5th Amendment right not to self-incriminate when asked at deposition why the Robinhood Lane parcel had been purchased.

Jeff Browne, left, and Dan Whitten at EDA Board of Directors meeting prior to Whitten’s departure to another county attorney role.

On cross examination, Whitten expressed no knowledge of an EDA Asset Committee in 2015 that might have discussed or forwarded the transaction. Also on cross examination by the defense, McDonald testified that the EDA’s Asset Committee predated her 2008 to 2018 tenure as EDA executive director. During defense closing argument, Reynolds hammered at Whitten’s lack of knowledge of and absence from any EDA Asset Committee meetings to indicate a gap in the plaintiff’s case alleging the $110,000 transfer was unauthorized. But in his rebuttal closing argument, EDA attorney Seltzer countered that no EDA committee, likely comprised of two board members, could have authorized a transfer of $110,000 per the EDA policy on full-board approval of such transfers over $50,000.

Financial difficulty or not

In opening arguments and some evidentiary submissions, EDA counsel presented a scenario of financial difficulty by North and his wife in 2015 leading to the decision to move EDA assets to facilitate North’s purchase of 1309 Robinhood Lane. Seltzer presented records indicating that North’s plumbing business had lost over $71,000 between 2013 to 2016, while the couple was claiming gambling income/losses totaling $1.125-million over the same four-year period. Defense counsel countered that the “income/losses” tax claims actually indicated a break-even gambling scenario, rather than a high loss one of over $500,000 creating financial difficulty for the couple.

In closing, Reynolds told the jury that the plaintiff had failed to show “one bit of information here other than they were married to each other” to implicate his client in a conspiracy to defraud the EDA. North had testified on direct examination that his wife handled the couple’s taxes and financial affairs, and he had been unaware of the large gambling claims until shown them at deposition. In response to a question from his attorney, North estimated the most he’d ever lost gambling in a year was $2,000. Queried by EDA counsel about his signing off on tax returns he had not reviewed, North said he trusted his wife on such matters, adding that, “Finances were never my niche.”

Implication of 5th Amendment responses

One key piece of plaintiff evidence that opened their evidentiary case was a video excerpt of the above-referenced deposition given by the defendant to EDA counsel on March 30, 2021. During questioning on details of the Robinhood Lane purchase, North invoked his 5th Amendment right not to self-incriminate what Seltzer later told the jury was a total of 45 times. Called as the plaintiff’s final witness, questioned about her transfer of the $110,000 for her husband’s September 2015 purchase of the 1309 Robinhood Lane parcel, a parcel EDA counsel noted North would gift to his wife in November of that year, McDonald invoked her 5th Amendment right not to self incriminate about 11 times before Seltzer ended his direct examination.

‘Sammy’ North’s arrest on criminal charges – later dropped along with others facing speedy trial statute violations – related to the EDA financial scandal swirling around his wife’s tenure as EDA executive director, is a reminder of the potential criminal liability around the EDA civil litigations surrounding alleged co-conspirators of Jennifer McDonald related to her movement of EDA assets over a several year period. Since the criminal aspect was turned over to federal authorities from a state special prosecutor’s office, only McDonald has been re-indicted on criminal charges.

During closing arguments plaintiff and defense counsel debated the implication of those 5th Amendment responses by both North at deposition and McDonald on the stand. Reynolds noted simple care in the face of possible criminal indictments on related matters, while Seltzer for the EDA stressed to the jury that the 5th Amendment is invoked specifically in support of one’s Constitutional right not “to self-incriminate” regarding potential criminal charges.

It would appear from its quick finding of civil liability that the latter plaintiff argument held the most weight for the seven jurors during their deliberations.

The Warren County Courthouse has seen a flurry of EDA civil case activity in recent months resulting in 5 of 5 verdicts of personal liability, 7 of 7 including 2 related company liability findings in 2 of those cases.