Update: April Petty awaits Judge’s decision on motion to dismiss EDA civil case seeking return of $125,000 received from Jennifer McDonald during 2016 home sale process

(Author’s note: As of Saturday morning, May 28, at 11:15 a.m. this story has been updated with additional detail on the $125,000 check transferred from an EDA account by Jennifer McDonald to Ocwen Loan Servicing LLC during April Petty’s 2016 home sale process.)

Judge Bruce D. Albertson took dueling arguments on a defense motion to issue a summary judgment dismissing all civil claims regarding the FR-WC EDA’s action against defendant April Petty under advisement Tuesday afternoon, May 24. Cullen Seltzer represented the plaintiff EDA, now trading as the Warren County EDA in the wake of the Town of Front Royal pulling out of involvement as it litigates against the half-century-old joint Town-County EDA over disputed losses tied to the FR-WC EDA financial scandal. Petty was represented by defense counsel William Shmidheiser III.

Petty’s case, among a number of others alleged as beneficiaries and co-conspirators of former EDA Executive Director Jennifer McDonald are scheduled for civil court trials beginning in early July. Following taking the Petty motion under advisement the court dealt with jury selection issues with attorneys for a number of civil case defendants patched in by phone. Those included counsel for Truc “Curt” Tran and ITFederal, Donnie Poe and Earthlink Energy, Ms. Hassenplug, and Samuel North. With input from Circuit Court Clerk Angie Moore, it was decided a rather complex process involving a fairly large jury pool with begin Wednesday and Thursday June 29^th and 30^th.

The Petty dismissal motion filing dated April 21 targets all five aspects of the EDA’s civil case against Petty, scheduled for jury trial on July 5 and 6. All the civil liability aspects of the plaintiff EDA’s case against Petty revolve around receipt of a $125,000 EDA check from Jennifer McDonald that was applied to payment on a mortgage loan at Ocwen Loan Servicing on Petty’s home, during Petty’s 2016 effort to sell that home. That money is cited as part of the estimated $21 million in EDA assets that McDonald is alleged to have misdirected to unauthorized personal use and benefit of herself and others.

The five aspects of the plaintiff’s case against Petty are “Unjust Enrichment”, the receipt of benefit by one party from another without a reciprocal benefit to the other party (in this case the EDA); “Conversion” (unauthorized possession); application of the “ultra vires” standard of acting beyond one’s legal authority; “Conspiracy” in knowingly acting in concert with Jennifer McDonald in the receipt of misdirected EDA assets; and “Fraud” related to the “Conspiracy” allegation that Petty knew that $125,000 McDonald applied to her mortgage loan was money the EDA asserts was stolen.

Plaintiff EDA and civil case defendant April Petty are awaiting the court’s ruling on her motion for dismissal of case against her. Royal Examiner File Photos by Roger Bianchini

Petty’s attorney pointed out that when an earlier grand jury was handing out blanket criminal indictments against alleged McDonald co-conspirators including two full EDA oversight boards, April Petty was not one of those indicted by the grand jury. Pointing to what he believes is a lack of evidence against his client having any knowledge of the alleged embezzlement conspiracy, Shmidheiser asserted to the court that “all the charges” related to the plaintiff’s “conspiracy theory” involving her should be dismissed. Essentially that is the final four of the five above EDA claims against Petty.

“All they had, have today is the check,” Shmidheiser told the court of the $125,000 check drawn on an EDA account appearing to be co-signed by McDonald and then EDA Board of Directors Chair Patricia Wines made to Ocwen (misspelled as Owen) Loan Servicing LLC that was applied to Petty’s home sale price.

At this point Judge Albertson asked defense counsel if McDonald had, in fact, transferred that money to April Petty. “Yes, but April Petty did not know that it was embezzled money,” her attorney said walking a legal tight rope between knowledge and consequence.

“You’re asking me to skip over the trial part of this case,” Judge Albertson told Shmidheiser. “Yes, I am,” defense counsel replied moving toward his argument against the “Unjust Enrichment” aspect of the case against Petty.

Noting his client’s belief McDonald was acting in her role as a real estate agent with Century 21 Real Estate in helping Petty accomplish the sale of her home, Shmidheiser asserted that his client was not by legal definition “unjustly enriched”. He elaborated that in exchange for the $125,000 check Petty believed was fronted to her mortgage loan to help facilitate her home sale, “plus another $210,000 Petty received at Closing on her home, she Deeded her house, which was listed for $330,000, to purchasers Mr. and Mrs. Leary,” Shmidheiser explained.

“She didn’t get money for nothing, she got money for her house,” the defense attorney later elaborated to this reporter on his courtroom arguments. During those arguments in support of his motion for a dismissal of the civil case against his client, Shmidheiser revealed how he prioritized his case for dismissal. And it appeared he felt the optimum legal path forward if a trial was required would be in dispelling the notion that April Petty was a conscious co-conspirator of Jennifer McDonald’s in her alleged embezzlement schemes.

“We’ll live with all but ‘Unjust Enrichment’,” Shmidheiser told the court of the prospect of a two-day trial in early July. “I’m confident we will win at trial,” Shmidheiser added of having to present the defense case to a jury on the conspiracy aspect of the EDA’s civil claims against his client.

Defense counsel also cited an established three-year statute of limitation standard he said the plaintiff had not met in charging his client for liability for funds she received in March 2016. The case of Belcher vs. Kirkwood was cited by Shmidheiser in support of the three-year statute of limitations having expired by the time his client was charged civilly. To not apply the three-year Statute of Limitations precedent would be tantamount to the court altering existing state legal precedent, which the defense attorney theorized would lead to a higher court reversal of denial of his motion for dismissal on the Unjust Enrichment aspect.

Counterpoint

In countering Shmidheiser’s arguments, EDA attorney Cullen Seltzer disputed defense assertions surrounding the applicability of the Belcher vs. Kirkwood case in an alleged financial fraud not discovered at the time it was occurring in 2016 when Ms. Petty is believed by the plaintiff to have been involved. He also argued that the defense points being made in support of a motion for dismissal were more appropriate for a jury to hear for a finding of guilt or innocence.

For dismissal to be granted the defense must show that “no facts are in dispute” Seltzer told the court. And from the plaintiff’s perspective that is not the case. Seltzer noted that Petty admits the $125,000 check went to pay on her mortgage loan during her sale process.

“She was very anxious to sell,” Seltzer told the court of Petty’s motivation to accept money he said she had expressed “suspicion” about when offered. Of his client’s initial “suspicions” about the money offered from an EDA account referenced by the EDA attorney during arguments, Shmidheiser noted that Petty had been assured by, not only McDonald, but others that it was “business as usual” on the economic development/real estate transaction front.

Of Petty’s close friend Robin Richardson, who was said to have brought McDonald to Petty during her attempt to sell her house, plaintiff counsel told the court of a second transfer of funds. Seltzer asserted that when Petty put “almost $42,000 in her pocket from her home sale, she had given Ms. Richardson $10,000. Is there evidence that was money previously owed by Petty to Richardson or was it comparable to a “finder’s fee” for bringing McDonald into the picture to help facilitate the home sale with the $125,000 loan payment on Petty’s behalf, Seltzer asked the court.

And now both plaintiff and defendant are awaiting the court’s ruling on all aspects of the defense motion for summary judgment on dismissal of the case against April Petty.

The EDA office on Kendrick Lane was ground zero as the alleged financial scandal unfolded between 2014 and 2018.