In restarting a public dialogue between the existing Economic Development Authority and the Front Royal municipal government on February 8, EDA Board of Directors Chairman Jeff Brown reminded town officials of his observation to them on that last occasion 18 months earlier while the Town was still involved in a three-pronged effort with the EDA and Warren County to investigate and correct what allowed the now $24-million-dollar-plus EDA financial scandal to fester and develop over a several-year period.
Noting he had also been the one to give that report, Browne revisited it: “I said there was a catastrophic failure of oversight by the EDA, County, and Town with plenty of blame to go around*. I haven’t changed my view on that,” he said in opening.
“There was massive embezzlement, bad investments, poorly written agreements, and a dangerous system of overly centralized check writing and bookkeeping. It all set up for a perfect storm,” Browne echoed from his 2019 report to council, pointing to “insufficient checks and balances, lots of misplaced trust and weak verifications” – concluding, “You had a right to be concerned then.
But that was 18 months ago as the new EDA Board of Directors, with County, and initially, for a short time Town, assistance were already involved in dismantling, replacing, and rectifying the EDA structure as the financial scandal evolved under criminal and civil court scrutiny.
Of the direction since then, Browne pointed to installation of the very checks and balances previously missing, including County-mandated third-party bookkeeping, and “multiple eyes on all transactions”. He said the refurbished EDA Board had developed what he termed “a guns and butter strategy” that freed the new EDA staff – Executive Director Doug Parsons and Administrative Assistant Gretchen Henderson – to pursue economic development initiatives (butter), while the new EDA Board of Directors oversaw the legal and peripheral issues (guns).
However, that year-and-a-half of “Guns and Butter” was a strategy the Town Council missed involvement with, choosing rather what one might term a “Lawyers, Guns and Money” strategy as so poetically described on our Opinion page recently by Fred Schwartz. The lawyers, guns (metaphorically of course) and money to a great degree were pointed directly at the EDA over the objection of then Mayor Gene Tewalt, who unsuccessfully recommended a policy of cooperation and rebuilding with the EDA and County, as opposed to a litigious one supported by council and pushed forward through the office of the former interim mayor and interim town manager.
Browne proceeded into detail on the EDA’s current holdings, in and out of the town limits, and explanations on the EDA’s attempt to divest itself of properties it “never should have been involved in” by the new board’s estimation.
He also pointed to over a million dollars thus far recovered in insurance and settlements with involved parties in the EDA’s civil litigation.
He pointed to the recent recruitment of drone manufacturer Silent Falcon to the county; as well as the potential landing of an eastern regional medical marijuana manufacturer/distributor in Parallel LLC, that could bring a major commercial tax revenue source, along with hundreds of jobs to the county and town, not to mention the purchase of Baugh Drive warehouse the EDA hopes to divest itself of ownership of as soon as possible.
The EDA Board Chairman pointed to a drive west for business relocation into the Valley that he said the EDA and County are working to take advantage of, utilizing advantages like the Interstate Highway system crossroads and Inland Port that are located here. Of working together to achieve the maximum result of that effort, Browne observed, “We either hang together or we hang separately”. As to the advantages of working together economically, Browne pointed to the pending sale of McKay Springs parcels that are jointly owned by the EDA, County and Town.
In response to queries, he admitted the EDA was currently financially insolvent due to repercussions of the financial scandal, and was being financially supported by the County at this time. However, some council members seemed surprised to learn that Warren County had not absorbed the EDA into its departmental structure, which could present a roadblock to the Town actively reengaging its continued membership in the half-century-plus old joint Town-County EDA. While the Town is currently advertising for applicants to a unilateral Town EDA Board of Directors, an EDA it would be totally responsible for the financial support of, the County has kept the EDA’s quasi-governmental, independent status open as a door by which the Town could reenter into active membership with the existing EDA.
And while some council grilling of Browne on details, particularly with pre-prepared written notes, took the tone of hostile cross-examination, the end result of Browne’s report and Q and A with council appeared, four days later, to be positive, as illustrated with the EDA’s Friday move toward the completion of the sale of the Afton Inn for redevelopment without a Town challenge on the title to the property.
Footnote: As Royal Examiner has previously reported, while the Town has attempted to distance itself from any portion of “blame” for the EDA financial scandal due to its agreement to no longer have EDA board appointment authority after the County took over full EDA operational funding nearly a decade ago, it was heavily involved with in-town EDA operations throughout the financial-scandal timeframe. In fact, it was the town council that authorized a $10-million-dollar “bridge loan” to the EDA to help facilitate the bank loan for the ITFederal construction project at the Royal Phoenix Business Park at the former Avtex site. That $10-million loan said to have been acquired “under false pretenses” in the EDA civil litigation, is the largest single item in the EDA’s civil suit seeking the return of over $24 million in allegedly misdirected or embezzled EDA, County, or Town assets. In seeking the “bridge loan” then EDA Executive Director Jennifer McDonald told town officials that without that show of “community support” in fronting that $10 million for the ITFederal project in town, the bank was hedging on approval of the loan to ITFederal through the EDA. That was likely because, as Royal Examiner has also previously reported, other than the $2-million value of the 30-acre Avtex property parcel gifted to it for a dollar by the EDA in 2016, ITFederal listed assets of only about $20,000 in its loan application.
County work session takes unexpected turn on EDA front – ‘Reunited’ operational option broached
What had been an hour-plus work session update on Capital Improvement Projects (CIPs) by County Project Manager Jeff Hayes took an unexpected turn about an hour and a quarter into that work session at the conclusion of Hayes PowerPoint presentation. I say “unexpected” because the only open session agenda cover sheet item was Hayes’ CIP report. However, the board elected to take what was labeled “Closed Session” discussion of “Personnel re: Economic Development Authority” into open session discussion.
What followed was County Administrator Ed Daley’s presentation on organizational opportunities presented by the pending October 1st loss of the second and final member of the two-person EDA staff. As previously reported, following Administrative Assistant Gretchen Henderson’s August 27 departure to the Northern Shenandoah Valley Regional Commission, Executive Director Doug Parsons announced his resignation, effective October 1, to take the EDA executive director’s job in Fauquier County.
And what Daley presented to the board in open session echoed what EDA Board Chairman Jeff Browne told Royal Examiner in the wake of the pending loss of the entire EDA staff – this can be an opportunity, rather than a derailing of the EDA’s recovery from the multi-million-dollar financial scandal uncovered in 2018-19 under previous executive and board leadership. And while Browne focused on replacement personnel selection as the opportunity, Daley used that as a jumping-off point to explore previous supervisors discussion dating to early 2020 about an organizational realignment of the EDA. The County has already taken on the role of Financial Agent of the EDA. Continuing the broached realignment would bring the EDA staff into the Warren County Government Center, functioning more like a County Department. That option was first considered by some supervisors in the wake of the Town of Front Royal’s decision to operationally withdraw from the half-century-plus old joint EDA, in favor of creating its own unilateral Front Royal EDA (FREDA).
That decision was driven by the Town Council’s decision, against the advice of then-Mayor Gene Tewalt, to civilly sue the old EDA for a larger portion of the allegedly embezzled and misdirected EDA assets related to County and Town business dealing handled by the EDA. Rather than costly and divisive litigation, Mayor Tewalt urged council to accept the new EDA leadership’s offer to have staffs simply sit down and follow the money to determine who was owed what. However, a council majority wasn’t listening to its then mayor. Consequently, the Town and EDA are currently engaged in dueling civil litigations.
And while Daley’s presentation began as a logistical exploration of processes of incorporating the EDA into the county governmental apparatus, it took a turn when one supervisor posed a legal question. “I’m going to call the elephant out in the room,” North River Supervisor Delores Oates said in pointing out that the existing EDA was jointly founded by the county and town governments over a half-century ago, and legally remains a Town-County EDA. So, can the County legally bring the EDA into its sole administrative oversight, she wondered.
“If I were sitting where you sit, I would invite the town council to participate in a staffed economic development department that works for the EDA but can also work for us in the County and the Town on economic development projects,” the county administrator replied. And as Daley pointed out, neither EDA currently has a staff, though at least one, the old EDA, has an exceptionally competent and proactive re-tooled board of directors.
“And I think that would be the best tactical advantage for the community, is if we would actually collaborate and not create independent organizations. Because otherwise we’re spending twice the money to do the same job,” Oates said in response to Daley’s suggestion.
The first face-to-face discussion of this latter option of reestablishing a jointly functioning Town-County EDA will apparently take place this Thursday, at the first Town-County Liaison Committee meeting since the Town Council decided to cut those quarterly meetings off in the wake of initiating the now dueling Town-EDA/County civil litigations. Daley noted that Liaison Committee opportunity was presented by the inclusion on Thursday’s Liaison agenda of a Town presentation on the status of development of its unilateral Town EDA.
Members of both council and the board of supervisors have recently suggested an altered, more collaborative Town-County path forward from the divisive and litigious one launched by council during the tenure of Interim Town Manager Matt Tederick. So, it will be interesting to see how Thursday’s Liaison Committee discussion develops with a new town manager involved; and how the full council will react to the idea of realigning into a jointly functioning EDA apparatus, possibly including collaboration in selecting the new FR-WC EDA staff were a speedy, positive reaction achieved.
The EDA discussion begins at the 1-hour-16-minute-30-second mark of the linked county video; Oates calls out the “elephant in the room” at the 1-hour-44-minute-45-second mark. The Capital Improvement Project PowerPoint and Q&A takes up the first hour-and-15-minutes of the video. And between the CIP and EDA portions of the work session, Board Chair Cullers gave an update on news of the birth of her newest grandchild Tuesday evening. – Welcome to the world on September 14, 2021, Ella Louise.
About those CIP projects
Prior to that turn toward the EDA and Town-County relations regarding cost-effective cooperation versus costly, counterproductive competition in future economic development initiatives, there were some interesting turns on the CIP front. Those included discussion of downtown Front Royal parking issues and the County’s ability to impact those issue with owned property in the Historic Downtown Business District vicinity. Also, under board scrutiny was the cost and effectiveness of air purification devices under consideration for other County facilities after being installed at the Warren County Courthouse to allow more normal judicial proceedings to be reinitiated during the COVID-19 Coronavirus pandemic. Discussion of the potential effectiveness against, not only the COVID-19 Coronavirus but other virally spread illnesses was broached in considering the purchase of as many as 60 of the machines at a cost of $2100 per unit.
See Hayes’ CIP power point on renovations to the Commonwealth Attorney’s Office; the Parks & Rec Department Splash Pad Pavilion; Rivermont Volunteer Fire Company 2 renovations; Shenandoah Farms Company 6 renovations; the Morgan’s Ford Boat Landing project; and Juvenile and Domestic Court renovations and related parking issue, including the observation that you “don’t build a court facility over or under a parking deck – BOOM!” (due to domestic terrorist concerns).
On the downtown parking deck front, Ed Daley noted that the Winchester City Council was scoffed at for proposing a downtown parking deck 20 years ago, adding that now the city has four.
EDA develops transition plan through staffing losses
The Front Royal/Warren County EDA’s Executive Committee met on September 10, 2021, at 9:00 a.m. to discuss personnel matters arising from the upcoming vacancy of its executive director, and a transition plan for continuity of EDA operations.
The Executive Committee is developing a detailed plan to handle all aspects of the EDA’s operations including business retention and attraction, finance, legal, personnel, and day-to-day office operations. Both the Board and the Executive Director are confident that this plan will ensure a seamless transition and ensure the EDA remains a competitive entity for investment and expansion of businesses in Warren County.
(From a Sept. 10 Press Release by the WC EDA)
EDA dealt a staffing blow as executive director joins administrative assistant in moving on to new horizons
On Tuesday, September 7, both Warren County Economic Development Authority (EDA) Board of Directors Chairman Jeff Browne and Executive Director Doug Parsons confirmed Parsons’ resignation, effective October 1. So, the EDA will lose its two post-financial scandal staffers within three weeks. As previously reported, Administrative Assistant Gretchen Henderson resigned last week to take a higher-paying job in the field of accounting across the EDA office hallway at the Northern Shenandoah Valley Regional Commission (NSVRC).
Parson’s new job will require a little more travel than across the hallway – 18 extra miles each way from his West Virginia home, he told us – as he will assume the Economic Development Authority Executive Director’s position in Fauquier County.
We first spoke to Browne, who, while admitting the staffing losses were a blow coming in rapid succession as they have, preferred to look on the bright side. “Certainly it is tough short term. We were lucky to have them both for two years as they helped us through difficult times in recovering from what we inherited here,” Browne said of the re-tooled EDA Board’s navigating the aftermath of a $26-million to $62-million financial scandal alleged to have revolved around the EDA’s former executive director, Jennifer McDonald.
“But long-term, I look at this as an opportunity to find folks who will help navigate us into the future as we finish resolving our legal situations, and continue to refocus on this community’s economic development and retention. In the meantime, EDA Board members are stepping up to keep working with prospects and developing opportunities. I can only wish both Doug and Gretchen the best in their new endeavors,” Browne concluded.
We then reached Parsons by phone at the EDA office and asked about his experience of landing in the Warren County EDA job at a rather chaotic point in its half-century-plus history.
“It’s been a pleasure to serve as Executive Director of the Front Royal/Warren County Economic Development Authority over the last 28 months. The Board of Directors here has been the best I’ve ever worked with. Many of them have volunteered an incredible amount of their time to rebuild this organization. Chair Jeff Browne is essentially working 40 hours a week, and several others are putting in nearly that amount of time. I want to thank the Board of Directors, the Warren County Board of Supervisors, the County Department heads and staff, and everyone else that worked in collaboration with us to untangle the past and to help us with recruiting new business and assisting our current businesses.
“The taxpayers of Front Royal and Warren County now have an EDA they can be proud of that is working to bring more jobs and investment to the community. My successor will have many assets with which to work and great people to help accomplish the goals in the EDA’s strategic plan. I wish the people of Front Royal and Warren County the very best,” Parsons concluded.
And on that bright side that Browne chose to focus on – the multi-talented and very committed EDA Board of Directors Parsons lauded, remains in place as the County endeavors to fill the EDA staffing gap with people of comparable character and talent to those it has lost in this ninth month of 2021.
Update: Federal Prosecutors charge McDonald on 34 criminal counts in EDA financial scandal
On Tuesday morning, August 31, former Front Royal-Warren County Economic Development Executive Director Jennifer McDonald was arrested on a 34 count indictment handed down by the Western District of Virginia Federal Prosecutor’s Office in Harrisonburg. The 40-paragraph True Bill elaborating on the charges to a Harrisonburg Grand Jury is dated August 25, and signed by Acting U.S. Attorney Daniel P. Bubar. Of those 34 counts, 16 are for money laundering, 10 for bank fraud, 7 for wire fraud, and 1 count of aggravated identity theft regarding someone identified only as “T.T.”
The charges and outline of the case in support of them (Jennifer McDonald Indictment) echo earlier criminal indictments filed at the state level before the State Special Prosecutor’s Office in Harrisonburg turned the case over to federal authorities in late 2019. The state special prosecutor had dropped the indictments it had filed to avoid speedy trial issues due to the volume of evidentiary material – estimated at 800,000 to over a million pages at the time. Failure to meet speedy trial deadlines could have led to defense motions for dismissal of charges on the criminal side of the EDA financial scandal case.
An attempt to reach McDonald attorney Peter Greenspun at his Fairfax office for detail on his client’s arrest and bond situation was unsuccessful prior to publication. However, a check of the RSW Jail website indicated no new booking of McDonald at the tri-county regional facility.
In a statement on the McDonald prosecution released by the U.S. Attorney’s Office in Harrisonburg at 3 p.m. Tuesday afternoon, it was noted that McDonald had an initial court appearance on the new federal charges earlier in the day and that she was released pending trial.
While not reaching McDonald’s attorney, Royal Examiner did reach Warren County EDA Board of Directors Chairman Jeff Browne, who circulated the indictment document Tuesday morning. We asked Browne for a reaction to the long-awaited development on the criminal side of the EDA financial scandal case.
“We’re going to continue to pursue the civil case and are pleased that justice is being served on the criminal side – it’s been a long time coming,” Browne said of the nearly two-year lag time on refiling of criminal charges related to what was a $26-million-dollar civil litigation related to the allegations of criminal misdirection and embezzlement of Town-County EDA assets. That total has climbed to a $62-million claim after McDonald’s bankruptcy filing involved the state bankruptcy court in the case.
“We don’t control the criminal side, but there are some familiar numbers in this criminal filing that reflect work done by the Cherry Bekaert staff,” Browne commented of the company the EDA contracted to investigate EDA financial records during the later years of McDonald’s executive director’s tenure. “Any help we can offer, we’ll be there for federal prosecutors. But our focus is on the civil side and bringing assets back to the community,” Browne added. He noted that federal authorities are forecasting a criminal trial for McDonald in 2022.
As recently reported out of the bankruptcy process, the EDA and McDonald have reached a no-fault agreement on a debt of $9-million by the former EDA executive director to the EDA. That agreement in which McDonald admits no wrongdoing, has also been accepted by EDA civil case Judge Bruce D. Albertson. Exactly how that agreement will result in payment of that debt remains to be seen on the civil case side.
Early in the civil process, then presiding Judge Clifford L. “Clay” Athey Jr. froze some real estate assets McDonald held in her name alone, while leaving others she co-held with other family members free of possible civil liability. However, since that time several of her family members have been named as co-defendants in the EDA civil litigation alleging a McDonald-led conspiracy to move EDA assets to the personal benefit of her and others. The defendant list in that civil case has climbed to as many as 23 co-defendants alleged to have conspired and/or benefitted from the alleged embezzlements.
What implication movement on the McDonald criminal case might have on charges against some, if any, of the civil case co-defendants, some who also previously faced criminal charges dropped by the state Special Prosecutor’s Office on speedy trial/dismissal concerns, remains to be seen.
Royal Examiner will publish additional information on this evolving situation as it becomes available. This story was updated at 3:55 p.m.
EDA deals with banking issues, marketing strategies – and bids a fond farewell to administrative assistant
The EDA Board of Directors met today for their regular monthly meeting. After an approximately 90-minute Closed Meeting, several motions were presented:
Royal Arms Bond Conversion
On a motion by Greg Harold, seconded by Jim Wolfe, and by unanimous vote, the Board approved the following resolution:
“To authorize the Chairman and Secretary and/or other officers of the Authority to execute, seal as appropriate, and deliver the Amendment to Multifamily Housing Note (Fixed Rate) and the Replacement Certificate, and any related certificates or documents to evidence the conversion of the Authority’s $15,400,000 Multifamily Housing Revenue Construction/Permanent Note (Royal Arms Apartments) 2019 Series A-1 from the construction draw-down note to the fixed rate note effective on the conversion date which is expected on August 27, 2021.”
EDA Loan Restructuring with First Bank & Trust
On a motion by Tom Patteson, seconded by Jim Wolfe, and by unanimous vote, the Board approved the following resolution:
“To authorize the Chairman and Secretary and/or other officers of the Authority to execute and deliver, as appropriate, the proposal from First Bank & Trust (the “Bank”) entitled ‘First Bank Term Sheet for Warren EDA Loans Restructuring (including Exhibits A and B thereto)’ and to proceed to prepare final loan restructuring documents for review and approval by the Authority.
Other items that the Board of Directors addressed included unanimously approving a settlement with Steve diPasquale d/b/a Front Royal Premier Copiers for an outstanding balance on his RBEL loan, lease, and utility reimbursements. The Board also unanimously approved updates to the EDA Bylaws.
In other news, Director Jim Wolfe reviewed how current EDA activities in marketing and finance are fulfilling the goals of the Strategic Plan. He also discussed the desire of the board to have final FY2018 and 2019 audits for presentation next month.
Finally, Chairman Jeff Browne led the Board in bidding a fond farewell to EDA Administrative Assistant Gretchen Henderson, whom he cited as being a pivotal staff cog willing to put the extra time in to help the EDA “turn a corner where we’re beginning to put things behind us” and look toward the community’s economic development future, rather than spend so much time cleaning up the past.
“Gretchen has been a wonderful help … I’ve frequently gone, ‘Well, how would you like to take this on’ and she did it magnificently. And I just want to day how much we appreciate her, and I think I speak for everyone – You were a Godsend to have here; we were lucky to have you for three years.” And Browne noted that she wasn’t going far, just moving “next door” where she will become a full-time staff accountant for the Northern Shenandoah Valley Regional Commission. The now vacant EDA position, Friday was her last day, will be advertised on the Warren County government website, as well as Indeed.com, and on LFCC Workforce Solutions.
(From an EDA Press Release)
County taking over EDA client rental and small business loan payments
Starting October 1, 2021 the Warren County Finance Department will take over and manage payments made to the EDA for rents and the Small Business Loan Program (RBEL and IRP). The EDA will no longer be accepting payments at their office or office address. You must hand carry or send your payments to:
Warren County Government
ATTN: Finance Department
220 N. Commerce Ave.
Front Royal, VA 22630
Small business loan clients will each receive one official notice and a copy of their account balance and previous year’s payment history in the mail. This balance is what will be sent to the county. If there are any questions or concerns, it is imperative to contact the EDA prior to October 1 to discuss. Also, if any small business loan client is in a position to pay off their loan, they are encouraged to do so before October 1. Please contact EDA Executive Director Doug Parsons to schedule.
Thank you for your attention to this matter.