County breaks silence on EDA functions, oversight and alleged criminality

The county supervisors were not expecting the forensic audit result they got – but were there signs that were ignored? Royal Examiner File Photos/Roger Bianchini

The nine-defendant, 199-point civil suit filed Tuesday, March 26, on behalf of the “Warren EDA” as it is referred to in the lawsuit has broken the Warren County Board of Supervisors months of silence regarding its Economic Development Authority’s operations. As of yesterday they are operations alleged to have concealed for at least three years a criminal embezzlement and theft conspiracy directed by former EDA Executive Director Jennifer McDonald.

It is an allegation the lawsuit states McDonald admitted to, at least in part, as of December 20, 2018, the day she resigned under increased scrutiny by her board as a forensic audit of several years of EDA finances completed its third month of what eventually became a six-month investigation.

Named as co-defendants with McDonald in the civil action seeking recovery of a minimum of $17.6 million, are Warren County Sheriff Daniel T. McEathron; Truc “Curt” Tran and his ITFederal tech solutions company contracted as the first commercial client at the former federal Avtex Superfund site’s Royal Phoenix Business Park; local businessmen Donnie Poe and Justin Appleton and their Earth Right Energy Solar Commercial company; and two real estate companies started by McDonald. See Related Story:

Sheriff, ITFed principal Tran, Donnie Poe named with McDonald in EDA civil suit

In a press release issued at 9:40 a.m., Wednesday, March 27, listing Board Chairman Dan Murray as contact person, County Administrator Doug Stanley begins, “First let me say that we are all shocked at the breadth of the allegations,” and concludes, “Due to the ongoing nature of the continuing investigation, the Board will have no further comment on the matter until it is concluded.”

County Administrator Stanley, right, and Supervisor Tony Carter prepare to hear the worst in March 22 EDA board closed sessions.

In between Stanley deflects blame for a conspiracy alleged to have occurred for a minimum of three years under the noses of the EDA Board of Directors, County and Town officials. It is noteworthy that the county attorney also serves as EDA attorney and that the EDA board is appointed by the county board of supervisors.

“Every year the EDA has a professional audit performed by a CPA to provide a level of comfort to the EDA Board of Directors, the Board of Supervisors, the Town Council, and the citizens of Warren County that the financial operations of the Authority are handled appropriately. We have relied on those audits to ensure that the EDA was, in fact, using taxpayer dollars for the purposes intended,” Stanley observes.

The annual audit of the EDA is handled by Yount-Hyde-Barbour at an approximate cost of $17,000. The last audit commenced in mid-September 2018, about a month after Town of Front Royal Finance Director B. J. Wilson discovered a nearly decade-long pattern of annual overpayments by the Town to the EDA totaling over $291,000.

And while the annual audit was again commissioned to Yount-Hyde-Barbour at a price of $17,500 according to EDA and County Attorney Dan Whitten, this time it was accompanied by a forensic audit conducted by a thus-far unnamed certified public accounting firm which has been paid to this point $150,000 of county taxpayer money.

Also eventually contracted to handle the EDA and County’s legal interests resulting from the forensic audit was the law firm of Sands-Anderson. That Richmond-based law firm has thus far been authorized for payment of up to $100,000, also of county taxpayer money.

Unidentified participant in EDA closed sessions, left, and Sands-Anderson attorney Cullen Seltzer chat between Friday’s closed sessions.

“We know that expending funds to hire these two firms has drawn the ire of citizens; however, the Board of Supervisors found it necessary to bring in outside help to ensure that any and every issue has been identified and investigated thoroughly,” Stanley states in the release, adding, “The expenditure of these funds has caused great anxiety for the Board, but it was necessary to perform a thorough analysis and identify appropriate actions to ensure that we begin restoring the public’s trust.

“The Board of Supervisors has faith that the current EDA Board of Directors, the forensic auditor, and Sands-Anderson (legal counsel) will get to the bottom of these issues, make sure that all of those responsible are held accountable, and make every effort to recover the money that has been embezzled.”

Stanley’s press release addresses both past EDA successes and the hope community does not lose faith in the EDA’s mission. He cites 2500 jobs created and $500 million invested in the community since the mid-1990’s, primarily surrounding development of the Route 340/522 North Corridor.

“This activity allowed Front Royal-Warren County to recover from the loss of its largest taxpayer and employer, Avtex, which was shuttered in 1989. This effort took the hard work of many individuals and the financial support of the community.”

The County asks citizens not to forget that positive things have been accomplished through the EDA – most prominently development of the Rt. 340/522 commercial corridor.

Related to that corridor development, the County took over the Town’s share of operational funding of the EDA several years ago as part of ongoing compensation negotiations surrounding the 1998 Corridor Agreement that saw the Town extend water-sewer service into the county facilitating that commercial development.

“Restoration of the public’s trust and confidence is as important to the Board of Supervisors as recovering the public funds that have been taken from our community and holding those responsible accountable for their actions. To that end, at its regular meeting on March 22, 2019, the EDA Board of Directors adopted a resolution to request the County to serve as the fiscal agent for the EDA; this will require that all financial transactions be handled by the County and its Treasurer and will provide additional layers of oversight and protection. This is just the first step in a long recovery process.

“The EDA Board, like many others, was apparently misled by the former Executive Director. They did ask questions and were given plausible explanations at the time, but unfortunately, they were unaware of the extent and magnitude of the scheme.”

Plausible, hmm – wonder if Mark Egger and his daughter, former Councilwoman Bébhinn Egger Rowland would agree?

Better late than never

Stanley’s release does address the months of scathing criticism the board has come under regarding EDA operations and a perceived lack of meaningful municipal oversight of those operations. That criticism has come primarily from two sources, the above-mentioned Mark Egger, and Birth Local critics of EDA and municipal handling of Valley Health’s now EDA bond-issued financing of a new hospital will not provide several medical services, including maternity, that the old Warren Memorial Hospital did.

Mark Egger picked up the baton of EDA scrutiny left behind and unattended by both Town and County officials for over a year in the wake of his daughter’s June 2017 resignation from council to marry and relocate to Maryland. Over the past year Egger has most regularly appeared before the supervisors, who as noted above are now most directly involved in municipal oversight of the EDA.

Mark Egger addresses council on Monday – ‘The chickens are coming home to roost’ he warned. The next day those chickens began landing at the Warren County Courthouse.

However on Monday in the wake of the EDA board’s March 22 authorization of litigation to be filed on its behalf regarding the alleged conspiracy to misdirect and embezzle EDA funds, with his daughter Mark Egger appeared before the town council with a reminder to its longer term members:

“Well, the chickens are coming home to roost … My daughter Bébhinn, when she was on this Council, asked the necessary questions in order to bring out the truth, and you all were either completely disinterested in the truth, or actively tried to impede her in exposing the truth.  And two former members actually publicly berated her from this Council dais.”

And of her appearance, Egger’s daughter told council:

“The main reason I am here tonight is to implore you to recognize your grave errors, publicly admit them, and work to bring about solutions to the problems that have been created by those errors. For some of you, the best possible thing you could do now to help our community is to leave public office and let those who are more capable try to lift our town out of the hole that you’ve played a major part in creating.”

Bébhinn Egger Rowland asks public officials to admit their collective mistakes, and learn from them. But for some former colleagues on the town side she suggested resignation as the best course of action.

While there was no Tuesday county board meeting this week for Egger and his daughter to echo their message of the previous day to the county’s elected officials, for many the County shares in that municipal culpability, perhaps even more prominently with their direct responsibility for EDA operations and board appointments.

Stanley addressed that criticism.

“We know over the past few years that citizens have raised issues to the Board of Supervisors and staff. Please know that while citizens may not have seen any visible or public response to those concerns, the issues were certainly noted and looked into.

“When additional information was brought forward, including the concerns raised by the Town relative to the debt service payments, this ultimately led to the Board’s encouragement and financial support for the County Attorney’s hiring of a forensic auditor to perform a thorough and complete review of the EDA finances for the past 13 years.

“At the time, the Board of Supervisors was not sure if the issues were simply accounting errors or something far more concerning. The audit left open the potential to continue to dive deeper if and when any such issues were identified, and as we now know, the issues do indeed run much deeper and appear to show a long period of misuse of funds that hurt the reputation of the EDA, the Town of Front Royal, and Warren County. As problems were identified by the forensic auditors, the County also assisted the EDA Board of Directors by retaining the law firm of Sands-Anderson to help identify legal issues and pursue appropriate methods for the recovery of identified funds.”

But for many in the community, like Mark Egger and his daughter, if some basic due diligence had been exercised by a majority of Town and County elected officials when then Councilwoman Egger, as well as this media source, were raising questions about easily-identifiable gaps between what was being said and what was verifiable about EDA projects being brought forward in 2016, the additional scrutiny leading to yesterday’s civil action and who knows what next, could have begun at least two years earlier.

Stanley addresses how administrative oversight failed in the EDA’s case.

“The issues appear to be systemic in the manner in which the EDA has operated. The reality is that the scope of the EDA’s operations have changed considerably in the past two decades, however, the processes and procedures for financial management did not. This ultimately led to the ability for the misuse of funds to occur. The Board is committed to working with the consultants and the EDA Board to put safeguards and policies in place to ensure that something like this will never have a chance to occur again in the future in our community.”

Well you know what they say – better late than never.