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EDA in Focus

County breaks silence on EDA functions, oversight and alleged criminality

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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.

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EDA in Focus

EDA Asset Committee Chairman blasts Town for ‘bad faith’ actions

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As part of his Asset Committee Report at Friday’s Front Royal-Warren County EDA Board of Director’s meeting, Greg Harold began a two-phased counterattack on the Town of Front Royal’s recent actions toward the EDA, particularly as they relate to the Town’s refusal to make good on its legal commitment to repay the EDA for $8.4 million spent thus far on the new Front Royal Police Department headquarters across Kendrick Lane.

“This is an example of Front Royal’s loan commitment process” as he held up a picture of Jennifer McDonald. “This is what they used to approve your loans.”, said EDA Asset Chairman Greg Harold.

“The EDA may soon be sponsoring an introductory level class on Municipal Financing and Understanding Loan Commitments,” Harold wrote in his agenda packet Asset Committee Report, referencing “bad debt and shady accounting” from a “community partner known as the Town of Front Royal” which he described as continuing “to act in bad faith”.

And that was just the start – at the meeting’s outset Harold made a motion to add a statement he wanted to make on the above topic to the meeting agenda. That motion passed unanimously. Harold’s statement read into the meeting record following the second of two closed sessions was titled “The Town of Front Royal’s Charade of Partnership”.

In it Harold describes a pre-Thanksgiving meeting he and Board Chairman Ed Daley had with Town officials that was “cordial, respectful and collaborative”. “However, actions speak louder than words he adds before concluding, “Merry Christmas”.

See Harold’s scathing indictment of Town officials’ recent behavior toward the EDA as a newly re-tooled EDA staff and board of directors works to right its situation in the wake of what stands at a $21.3-million dollar financial scandal alleged to have been forged during some portion of the 10-year executive leadership of Jennifer McDonald in this exclusive Royal Examiner video:

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EDA in Focus

Update: EDA Board grills Tederick on Town’s intent toward this EDA

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Chairman Ed Daley discusses issues with Interim Town Manger Matt Tederick. Photo and video by Mark Williams, Royal Examiner.

The gloves came off at Friday morning’s Front Royal-Warren County Economic Development Authority meeting. A hint of things to come was alluded to at the 8 a.m. meeting’s outset when Asset Committee Chairman Greg Harold made a motion to add a statement on the status of the Front Royal Police Department construction project and the town government. Harold’s agenda addition passed unanimously.

As Interim Town Manager Matt Tederick completed his report on Town business, EDA Board of Directors Vice Chairman Jeff Browne questioned Tederick on several matters related to the status of negotiations with ITFederal on a drainage line through that property; and the Town’s intent as it builds a “war chest” to fund its civil suit against the EDA and discusses creation of a second EDA while the Town-County one continues to exist.

See that exchange and other EDA board member questions to Interim Town Manager Tederick in this exclusive Royal Examiner video:

In response to Browne’s opening question on the Town-ITFederal drainage dispute Tederick reasserted the Town’s stance that it is the owner’s responsibility to install the drainage system across its property, but had no update on that impasse with Tran.

Then Browne asked the interim mayor about his sense of the town council’s attitude in its recent decision to divert scheduled debt service payments to the EDA totaling $282,000 into “the Town’s legal war chest” for its civil suit against the EDA. The Town has filed litigation seeking recovery of “up to $15 million” in allegedly misdirected or promised Town assets from the EDA. The EDA has a civil action against 14 people and business entities for recovery of $21.3 million in misdirected EDA assets at this point.

Browne pointed out that initial statements from Town Attorney Doug Napier at the time the Town suit was filed indicated it was done as a precautionary measure against Statute of Limitations running out on unknown and still unspecified Town assets involved in the EDA financial scandal.

“Do you have a sense where you all are going with all of this?” Browne asked the interim town manager about the Town’s evolving and seemingly more contentious legal stance against the EDA.

“I do have a sense but I’ll have to refer you to our counsel, related to that,” Tederick replied, without elaborating if he was referring to the town attorney or the Alexandria law firm of Damiani & Damiani council authorized payments of up to $200,000 in legal fees to related to its suit against the EDA on November 25. Council also approved $45,000 of those diverted EDA debt service payments to Mitchell & Company for auditing services related to its EDA litigation.

“How do town residents feel about paying double legal fees when the EDA is willing to sit down and figure out the differences with you?” Browne continued – later elaborating that as dual Town and County citizens, town residents’ tax payments to the County are helping fund County financial support of EDA legal expenses, including in defense of the Town civil action against it.

“I can’t speak for town citizens,” Tederick replied.

About this second EDA

“Then finally on another issue, could you explain the reasoning behind your attempt to create a second economic development authority?” Browne asked, this time eliciting a more detailed response.

“The town council I believe, is of the belief that the EDA is going to be insolvent in February or March based on public comments of the EDA members and Mr. Parsons has made based on financial records. So, we want to be in a position that in the event of the … EDA does become insolvent, we want to be able to have an economic development authority to promote business and to get appropriate financing.

“So, there’s been no decision by the Town to do that,” Tederick added, then describing the process chosen on advice of the town attorney to lobby the State General Assembly for a Code change permitting the Town of Front Royal alone, to be able to create a second EDA while the existing one it created with the Warren County Board of Supervisors in the 1960’s, presumably will still exist.
“A strong argument can be made that until all the debts and bonds of the existing EDA are paid, the existing EDA must remain in existence,” Napier wrote in his agenda summary of December 2.

“It’s not uncommon, there are a number of towns in the Shenandoah Valley that have Economic Development Authorities,” Tederick continued of the second EDA initiative, adding, “So there hasn’t been a firm decision that we actually are going to get one.”

“How many towns have two economic development authorities?” Browne queried Tederick.

“I don’t think any towns have two, no sir, and neither is the Town of Front Royal going to have two – we’re going to have one,” Tederick asserted.

With the town attorney’s recommendation that the Town maintain its founding co-membership in the existing EDA due to the potential of receipt of half of EDA assets if and when it is dissolved, we asked Tederick about his assertion of only one EDA as he was leaving following his presentation and Q and A with the EDA board.

The interim town manager said he meant the Town would have only one solely-created “Town EDA”, not that it wouldn’t still have its membership in the existing Town-County EDA.

Harold then asked Tederick if the Town was in communications with ITFederal and Tran regarding the drainage impasse.

“I know they’re not communicating with me,” Tederick said. However, he added that he was aware of a recent communication with a staff member whose identity he did not know, regarding whether the Town would contribute to the drainage pipe costs.

“I can find out, I’ll go back and ask,” Tederick told EDA officials.

“I think it would be very helpful, sir, if correspondence between the Town and ITFederal on this thing, if we could be included in that … as part of our negotiations with ITFederal … so we can tell if he’s telling the Town one thing and telling us another, just kind of playing the two off there,” EDA Board Chairman Ed Daley told Tederick of re-opening lines of communication the Town seems to have been pulling back from as it strikes a more aggressive litigious stance.

Afton Inn status

The conversation then concluded as the EDA board and Tederick discussed the physical and ownership status of the Afton Inn. A scheduled post closed meeting two vote on terminating the lease/purchase agreement between the EDA and Afton Inn developer 2 East Main Street LLC was tabled to the January EDA Board meeting.

Following the meeting’s adjournment, EDA Executive Director Doug Parsons said he and the board were holding out hope the redevelopment project, derailed by the civil litigation and the uncertain EDA financial situation, might still be saved.

The developer has not been implicated in any of the alleged financial misdeeds; however, it is alleged that McDonald used the Afton Project to move EDA funds to her personal benefit, including payment of credit card debts and attorney fees.

Following the old Town Hall/Afton swap, circa 2014-ish, the Town transferred ownership of the dilapidated 151-year-old Afton Inn building to the EDA for marketing. Friday there was brief discussion of the process of transferring ownership back to the Town should the EDA/2 East Main redevelopment partnership be terminated.

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January 10th set for decision on EDA civil defendant motions to quash

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Attorneys for multiple Front Royal-Warren County Economic Development Authority civil litigation defendants argued for dismissal of their clients’ inclusion in that list in Warren County Circuit Court on Thursday, December 12. After hearing over 4-1/2 hours of testimony surrounding a 45-minute lunch break, Judge Bruce D. Albertson took those arguments and plaintiff counsel counter-arguments under advisement.

After an explanation to defendants present, including Donald Poe, April Petty and Jesse Poe, about the reason for the time he will take before returning to court to make a ruling on their and other defendants’ counsel arguments, Albertson set a date of January 10, at 2:30 p.m. to make his ruling.

That is the same date the judge continued a scheduled Show Cause hearing on a Civil Contempt charge against primary EDA civil and criminal defendant Jennifer McDonald earlier during the Thursday docket. McDonald’s civil contempt hearing will follow an already scheduled McDonald criminal hearing on the 1 p.m. docket on January 10.

McDonald’s criminal case attorney Peter Greenspun informed Albertson he was taking over his client’s civil case as well in the wake of the withdrawal of her former civil attorney Lee Berlik.

Greenspun told the court he needed additional time to familiarize himself with the civil aspects of McDonald’s legal situation.

A third EDA-related hearing on Thursday morning’s docket was Donald Poe counsel William Ashwell’s motion to Quash a Perjury charge regarding the Earth Right Energy principal’s testimony to the EDA Special Grand Jury. That case went forward first on what was slated to be an 8 a.m. start to Thursday’s docket, delayed by late arrivals of a court reporter and McDonald’s Northern Virginia-based attorney.

After hearing Ashwell and new Rockingham County prosecutor’s arguments, Albertson deferred a ruling on dismissal of Poe’s perjury charge to the January 22 date on which that trial is scheduled to begin.

Ashwell told the court that his client was the one defendant “not on the continuance train” with an originally slated perjury trial date of December 6 having been moved to a three-day slot in January to accommodate the recent placement of a new prosecutor’s office to handle all the EDA criminal cases. Incoming Warren County Commonwealth’s Attorney John Bell has recused himself from EDA cases and current County Commonwealth Attorney Bryan Layton has withdrawn due to his pending departure from the office.

It was another long EDA day at the Warren County Courthouse – Royal Examiner File Photo/Roger Bianchini

In addition to McDonald on her case and Donald Poe, April Petty and Jesse Poe who were present with counsel Thursday, EDA civil defendants represented in Thursday’s Demurrer motions hearing were Truc “Curt” Tran and ITFederal and Poe’s Earth Right Energy Solar Panel Installation company.

The basis of those defense counsel arguments for dismissal of their clients from the civil case revolved around several points. Primary among those is the plaintiff notion of an overarching conspiracy that somehow links the various defendants to central figure and former EDA Executive Director McDonald; and that there were definable contractual breaches by those defendants making them individually liable for funds that came their way through McDonald.

Lead plaintiff attorney Cullen Seltzer argued that there did not have to have to be direct knowledge among all defendants of each interlocking conspiracy McDonald is alleged to having been a party to for that conspiracy to exist.

He used an analogy to a gang that planned to rob every Bank of America in Richmond, saying a gang member assigned to one “bank job” did not have to know the detail of every other bank robbery to be criminally liable for the entire take.

Seltzer dismissed defense arguments that “McDonald is a rouge tornado dumping all this EDA money into all these pockets” without the recipients’ knowledge that something illegal was transpiring that they were beneficiaries of.

However, Jesse Poe and April Petty’s attorney William Schmidheiser argued that such a conspiracy theory did not apply to his clients, whose alleged “unjust enrichment” did not go directly to them, but rather to real estate companies handling the closings on their homes.

Schmidheiser noted his clients’ limited incomes, telling the court the reason he represented them both was a necessity to pool their resources to finance their defenses. He called their being packaged as part of an alleged $21 million civil suit conspiracy for mortgage payoffs of $125,000 (Petty) and $280,000 (Jesse Poe) was, short of the loss of a child or a cancer diagnosis, one of the worst things that could happen to an average person.

He said that while there might be “unjust enrichment” claims the plaintiff could argue – we’ll deal with those down the road, he told the court – the circumstance of his clients’ involvement distanced them from the plaintiff EDA counsel’s conspiracy theory.

He compared his clients’ circumstance to that of the casino McDonald is alleged to have lost at least $750,000 gambling at, noting that while the casino received cash from McDonald that could have been EDA assets, the casino was not a defendant.

In arguing that Earth Right Energy’s (ERE) contracts with the EDA through its then-executive director were valid and binding, attorney Ryan Huttar told the court that at the time those contracts were enacted “Jennifer McDonald (was) the EDA”.

That was a point the EDA legal team disputed, noting that large dollar (over $10,000) transactions had to be approved by the EDA Board of Directors, which they stated, did not happen.

ITFederal attorney Brandon Elledge argued that the EDA Board did approve the $10 million dollar loan it is seeking recovery of from his client, as well as the subsequent vendor payments of $1.4 million also in dispute.

Sands Anderson plaintiff counsel countered that the loan and the vendor payments were received under false pretenses concocted by Tran and McDonald in concert.

Elledge also stressed that Tran remains current on his loan payments, and that no proof had been offered that his client personally benefited from the payments, rather than professionally as intended. Oddly however, the Deed of Trust on the property was amended so that Tran only has to spend $2 million of the $10 million loan on the Front Royal property.

In setting the January 10 date for a decision on the motions to dismiss the defendants from the civil suit, Judge Albertson compared himself to a student.

“The attorneys teach us their view of what the law is” related to their cases “and it will take several weeks to fact check their arguments – I will treat this seriously, please be patient,” he asked the defendants present.

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Following State Law seminars EDA votes to request legal fee assistance

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It was a rapt, and well-fed audience for Monday evening’s (Dec. 9) EDA-hosted seminars on Public Financial Disclosure and FOIA laws. Royal Examiner Photos/Roger Bianchini.

The three Warren County Supervisor-elects, Cheryl Cullers (South River District), Delores Oates (North River), and Walter Mabe (Shenandoah) were all present for seminars on State Freedom of Information Act (FIOA) and Financial Disclosure/Conflict of Interest laws Monday evening, December 9.

The seminars were presented by the Front Royal-Warren County Economic Development Authority (EDA), all of whose board members save Greg Harold out of state on business, were also present for the Special Meeting and seminars held in the Conference Room of the Virginia Inland Port in the county’s North Industrial Corridor.

And after hearing the two seminars totaling nearly two hours, the incoming supervisors were informed they are now legally-certified in FOIA and Conflict of Interest/Financial Disclosures for the first two-years of their coming four-year terms of office – and they got a free meal hosted by the EDA and catered by McAllister’s prior to the meeting’s 6 p.m. start.

Legal and fed – can beat that.

Legal and well fed – a good combination for incoming supervisors

The EDA Special Meeting agenda’s one other order of business was a vote on a Resolution reflecting the EDA’s intent to reimburse its past and present EDA board members’ legal fees regarding the now-dropped criminal misdemeanor charges of misfeasance and nonfeasance regarding oversight of former EDA Executive Director Jennifer McDonald in the latter part of 2018, upon requested receipt of that funding from the Warren County Board of Supervisors.

The total amount sought to cover the expenses of those seven current or past members is $36,827.17, with former member and Chairman Greg Drescher topping the list at $10,000 in legal fees and former member and Vice Chairman Bruce Drummond at the bottom end of the legal fee scales of justice at $3,000.

Discrepancies in legal fees have been explained by County staff as relating to when that representation was retained and the varying amounts of work those attorneys put into the cases before they went to court.

The vote on a motion by current Vice Chairman Jeff Browne, seconded by Greg Harold by remote phone connection, was 6-1, with only EDA Treasurer Jorie Martin dissenting. Martin later explained to the media that her dissent was based on her belief the reimbursement does not need to come through the EDA, but rather should be paid directly by the County Board of Supervisors to those EDA board members, most of whom the supervisors appointed.

Prior to the vote all involved current board members – Mark Baker ($4727.50), Gray Blanton ($4665), and Tom Patteson ($4809.67) read public disclosure statements concerning their personal interest in the vote. In addition to Drescher and Drummond, the no-longer serving members seeking reimbursement are William Biggs ($5000) and Ron Llewellyn ($4625).

The County Supervisors have already cast a 4-1 majority vote to compensate its own members’ legal fees on the same dismissed charges. Only dissenting voter Tom Sayre (Shenandoah District) declined to accept the County compensation, choosing to pay his own legal fees.

Despite that rift, Sayre’s colleagues joined in support of the departing Shenandoah District Supervisor’s motion (seconded by Fox) to delay a vote on that EDA legal fee request at the Board of Supervisors meeting the following morning, Tuesday, December 10. Recent public comment has urged the majority lame-duck county board to defer a decision on those legal fee compensations until the new board is seated at the turn of the year. And by a unanimous 5-0 vote they did.

Seminar dynamics

EDA Attorney Sharon Pandak introduces State Conflict of Interest/Ethics Council Executive Director Stewart Petoe to EDA board and staff and incoming County supervisors.

The seminar presenters were newly-contracted EDA Attorney Sharon Pandak of the Woodbridge law firm of Greehan, Taves & Pandak (FOIA law) and Virginia Conflict of Interest and Ethics Council Executive Director Stewart Petoe, the latter up from Richmond. Pandak deferred to Petoe to begin due to his longer trip home. And as Petoe informed the group during his presentation, overnight accommodations paid for by non-employers can run afoul of ethics law in certain circumstances.

As for adherence to conflict of interest and ethics standards, while there are many detailed rules, Petoe’s short advice was “if it seems squirrely” or “it doesn’t seem right, it probably isn’t.”

To expand slightly you can’t enrich yourself, family members or friends “from confidential information received in the conduct of your job until that information becomes common knowledge” available to the general public.

And take special care when inducements or gifts are offered by lobbyists, lobbyists’ employers and contractors seeking work from you or your board.

Petoe tells assembled officials a good rule of thumb on potential conflicts of interest is, ‘If it doesn’t seem right, it probably isn’t.’

There are many detailed rules and guidelines and when you get elected or appointed to an involved public entity, you better contact the COI/Ethics Council – anonymity assured on all specific queries – and find out what they are.

On the FOIA side, Pandak’s advice in a nutshell was that to conduct public business in governmental or quasi-governmental settings, the former like an EDA, it must generally be done in a public meeting setting advertised at least three days in advance.

Specific exceptions to open meeting requirements are noted in law, as in the familiar to the press “consultation with legal counsel” on matters where public disclosure could have a detrimental effect on the body’s litigation or pending business dealings; not to mention “personnel matters”.

But regardless of those exceptions to open meetings, action “on any matter” must be done at a public or special meeting properly advertised in advance – “NO secret ballots” to establish public policy. (Hmm, I wonder if there is any public record of that EDA board – the old one – decision to give ITFederal and Curt Tran that 30-acre Royal Phoenix parcel for a dollar when all the open meeting discussion this reporter, and apparently all others, ever heard revolved around a $2 million dollar sale price?)

As for producing public records requests showing adherence to public policy informational guidelines, the short advice was if those records exist, produce them within five working days; if there are difficulties you may request additional time; and if the request is extremely broad and encompassing, charge a justifiable price for the time and effort required to comply in whatever timeframe is authorized.

Pandak’s advice on Public Meeting and Public Information requests was – follow the law; and when there are questions reference AG opinions, court rulings and FOIA Council published opinions.

Pandak also noted that electronic communications, on public or personal devices, related to public business ARE subject to FOIA request. Her bottom line – follow the law and where questions exist rely on Attorney General opinions, court decisions or FOIA Council published opinions.

And like we said above, when you’re elected or appointed to a public body and need to know more – contact the relevant state councils and get schooled on the details.

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A new EDA? Town Council approves resolution seeking state’s blessing

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FRONT ROYAL — The Front Royal Town Council on Monday unanimously passed a resolution seeking a change in the Code of Virginia that would allow the Town to create its own Economic Development Authority (EDA) if it sees fit to do so.

Specifically, the Town’s newly approved resolution requests that the Virginia General Assembly amend a portion of the State Code to allow just Front Royal, VA, to establish a new EDA that’s “separate and independent” from the existing Front Royal-Warren County EDA, which is embroiled in a multi-million-dollar financial scandal.

“Upon deliberate and studied consideration,” the Town Council “finds that it is to the benefit and betterment of all the inhabitants of the Commonwealth of Virginia, and in particular to the inhabitants of the Town of Front Royal,” that the Town be able to form a Front Royal EDA so that it “can forge its own path forward in the future, unencumbered by the tremendous financial, legal, and reputational burdens currently encumbering the Existing EDA,” according to the resolution.

“First and foremost,” explained Councilman Jacob Meza after motioning to adopt the resolution, “what we are doing is approving a resolution to request the ability to establish our own EDA if we so desire to do so. Photos and video by Mark Williams, Royal Examiner.

“Here’s the thing,” Meza continued. “Our current EDA — which you could make the easy argument is ineffective — is going to be really difficult to operate through… at least in the next coming year and possibly years.”

Because of that fact, Meza said the Town Council wanted to be sure to submit its approved resolution prior to the start of the General Assembly’s legislative work that begins in January, “essentially hedging our bets that if our EDA becomes ineffective as a joint Town-County operation, then the Town has the ability to establish its own EDA so that we can continue moving forward on Town projects, especially related to property acquisitions and developments.”

If Front Royal were to miss submitting its request now, then the Town would have to wait to submit it in July 2021, said Meza.

“We wanted to get the ball rolling on this so that we have the option and the ability to continue if needed,” he added.

Councilman Gary Gillispie echoed those sentiments on Monday night.

“Please keep in mind, just because we are asking the General Assembly to authorize Front Royal to have an EDA, it does not necessarily mean that we’re going to launch into it,” Gillispie read from a prepared statement. “Once authorized, we can commence the process to determine if it’s in the best interests of the community.”

To avoid a potential legal hurdle, the Town Council seeks the State Code change without withdrawing from its current legal interest in the existing EDA.

“It appears to the Town that as long as there are outstanding and unpaid Existing EDA bonds and indebtedness, the Town cannot even rescind it ordinance co-creating the Existing EDA all, in which case the Town would not even be able to create a separate Town EDA which could fund Town EDA facilities either inside the Town’s corporate boundaries,” the resolution states.

In fact, the current EDA is saddled with outstanding and unpaid bonds and other indebtedness for private and public facilities, including hospitals and schools, states the resolution, which also pointed out that “apparently the Existing EDA likely will become insolvent sometime in the year 2020.”

“In my opinion, the current EDA is insolvent,” Councilman Gillispie read from his prepared statement. “I don’t see a way to get it back to solvency.”

The Town Council’s resolution also acknowledges, among other items, that if the Town did rescind its ordinance for co-creating the existing EDA, then it would waive its rights to share in one-half of any of the funds and properties held by the existing EDA at the time it was dissolved.

Such action “might well be construed as wastage of Town assets by Town Council, and thereby construed as legal misfeasance on the part of Town officials, which would be unacceptable to the Town,” the resolution.

The Town Council in its resolution also wasn’t shy about laying out reasons for why it wants to form its own EDA.

For instance, the six-page document outlines “the legal and financial troubles” of the existing EDA’s former executive director Jennifer McDonald, who “has been creditably accused and has been indicted in excess of 30 felony charges in connection with criminal charges related to alleged misappropriation of Existing EDA and Town funds.”

Additionally, the resolution says that McDonald — who isn’t named in the document but only referred to as the ‘former executive director’ — “has been civilly sued in the Circuit Court of Warren County, Virginia, by the Existing EDA for over $21 million in damages in relation to said alleged misappropriation of said funds.”

The resolution also makes it clear that the “Town, Town Council, Town officials and Town employees had no role whatsoever in the former executive director’s actions,” and is civilly suing the existing EDA and McDonald in Warren County Circuit Court for $15 million in damages.

The resolution also says that the “brand” of the current EDA “has been so badly damaged as to make it very difficult, if not impossible, for the Existing EDA to attract new commerce and industry
into the Town.”

And the Town charges that “there is an inherent conflict of interest” on the part of existing EDA officials and employees who appear to favor attracting new commerce and industry “to benefit the County as opposed to the Town.”

For these and other reasons, the Town Council proposed a change to Virginia Code 15.2-4905 (Powers of authority section) that would grant the Front Royal Town Council the power to create its own industrial development authority (IDA).

“The purpose of an EDA or IDA is to bring economic development to a community where it is authorized,” Gillispie read. “It is also important to give existing businesses support to help them compete and stay profitable.”

Front Royal needs good-paying jobs, the councilman added, and there are several business parks within the Town limits that also need development.

“We just need someone who can market our Town and be able to go to Richmond or wherever it’s needed to get this accomplished,” said Gillispie, who added, if the General Assembly accepts the Town’s request and amends State Code, then Town Council members will work diligently to put safeguards in place that ensure such financial fraud never happens again.

Following Meza’s motion on adoption of the resolution, with a second from Councilman Chris Holloway, the members of the Front Royal Town Council, including Vice Mayor William Sealock and Councilmen Gillispie and Letasha Thompson, all voted yes to approve it.

Watch the Town Council meeting on this Royal Examiner video:

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EDA in Focus

Town skirts EDA request for FRPD construction back payments

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The Front Royal Town Council passed a series of four motions Monday, November 25, authorizing expenditures totaling $1.02 million dollars related to its civil litigation against the Economic Development Authority, as well as payments to contractors regarding construction of the new Front Royal Police headquarters across Kendrick Lane from the EDA office complex.

Of that million dollars plus total, $527,800 approved in a series of three motions is for legal and auditing fees related to the Town’s civil suit against the EDA. The $492,284.34 approved in the last of the four motions is for vendor (contractor) payments recently come due on the FRPD construction project.

The motions were all approved by 5-0 votes, with Mayor-Elect Gene Tewalt not voting as Mayor Pro Tempore as he was declared at the meeting’s outset. As noted above, over half of the authorized payments are for attorney and auditing fees for services related to the Town’s attempt to recover “as much as $15 million” from the EDA. The $492,284 was approved to cover direct payments to contractors on the Front Royal Police Headquarters construction project.

The motions were all approved by 5-0 votes, with Mayor-Elect Gene Tewalt not voting as Mayor Pro Tempore as he was declared at the meeting’s outset. Photos and video by Mark Williams, Royal Examiner.

However with its litigation still pending as the EDA struggles to right its financial situation, the Town did not make good on an EDA request for back payments totaling over $8 million dollars for vendor/contractor payments it has made on the FRPD headquarters project on behalf of the Town.

In a letter from EDA Board of Directors Chairman Ed Daley to Town Finance Director B. J. Wilson dated November 15, 2019, included in the agenda packet on the final of the four EDA-related payment authorization requests, the EDA appears to attempt to force the Town’s hand on making up those back payments to the EDA.

After informing Wilson of the EDA’s receipt of FRPD project Requisition (invoice) “# 45” dated October 22, 2019, Daley wrote, “After speaking with our Board of Directors, I write to advise the Town that we will hold this pay requisition without paying until the Town of Front Royal pays the principal and interest due on this project.

“The principal, legal fees and draw fees paid by the EDA for the Town to date is $8,440,797.17,” Daley continues, adding, “The interest amount is $291,856.21 which covers interest on the previous 44 pay requisitions, up to October 31, 2019.” The recently-installed EDA Board Chairman closes by informing the Town, “Once we receive the past amount due on this project, we will process pay requisition # 45 accordingly.”

The Daley letter seeking reimbursement on the $8.44 million in police headquarter construction payments indicates an FRPD project payment and interest accrued history attached. But in the council motion on authorization of vendor payments there is no amount attached to Requisition # 45. However, in the “Revised Item # 15 motion made by Jacob Meza, seconded by Chris Holloway, an amount of $492,284.34 is cited to cover payments directly “to vendors Dustin Construction, Mosley Architects and JTS LLC for construction of the Police Department Project.”

The motion continues to cite the use of money “previously budgeted for the Police Department Project” and notes the Dustin Construction payment will be released “after signed waiver of lien is obtained.”

Contacted by phone on Tuesday, EDA Administrative Assistant Gretchen Henderson said that Dustin Construction ($243,843.48) and JTS LLC ($893.84) were included in payment Requisition # 45, but not the Mosley payment which may be from a separate invoice.

So it appears that the Front Royal Town Council has decided to respond to the EDA’s most recent request it make good on its $8.4-million FRPD project payment debt to the EDA by bypassing the EDA on that debt as the Town’s civil suit against the EDA moves forward; while simply making future invoice Requisition payments directly to the vendors.

The first EDA-related Council payment authorization of Monday’s meeting was $282,800 for “attorney fees and auditing services related to the Town’s civil suit against the Front Royal-Warren County Economic Development Authority (EDA)”.

The funds for that payment were requested to be transferred from scheduled FY 2019 and FY 2020 Town debt service payments to the EDA on a number of projects. Those projects and transferred amounts were cited as Success Farm ($10,370), Baugh Drive Extension ($6,535), Happy Creek ($6,845), Stephens Industrial Park ($11,725), Leach Run Parkway ($105,925), and “Appropriated Funds Forward ($141,400), totaling the $282,800 authorized for attorney and audit fees related to the Town lawsuit against the EDA.

The now $21.3-million EDA financial scandal revolving around former EDA Executive Director Jennifer McDonald began unraveling in late spring to early summer of 2018 when Town Finance Director Wilson discovered about eight years of Town debt service overpayments to the EDA. EDA officials told Royal Examiner they have not yet seen a number on those believed Town overpayments.

Might one take a guess based on that $282,800 transfer of future scheduled debt service payments to the EDA; or might one look at the fact that transfer comes within $9,056 of the disputed FRPD interest payments of $291,856.21?

Hey, guessing is always a gamble, isn’t it?

As those keeping a scorecard on the now multi-faceted EDA financial scandal and related civil and criminal litigation know, the Town Council authorized its legal department to file the aforementioned civil action against the EDA seeking recovery of “as much as $15 million dollars” of allegedly misdirected Town assets as a precaution against unknown variables, including possible statute of limitation issues. Included in the Town’s suit for recovered assets is exactly what interest rate the Town should be paying on the FRPD construction project.

The EDA is paying 3% interest on the FRPD construction project. However, the Town is holding out for a 1% rate that would coincide with what it contends was promised to it by the EDA, or at least by its then Executive Director McDonald, as part of the New Market Tax Credit Program for which the project did not qualify because it was not a job-creating economic development project.
In fact as Royal Examiner has previously reported, then Town Manager Joe Waltz and Finance Director Wilson, as well as People Inc. regional administrator of the NMTC Program Brian Phipps all advised Council against “gambling” on competing for the NMTC funding versus accepting a guaranteed, 30-year fixed 2.65% interest rate offered to the Town in late 2017 through a private sector bank.

Town Attorney Doug Napier and Interim Town Manager Matt Tederick.

Contacted Tuesday, Town Attorney Doug Napier said that after Phipps’ early January 2018 work session appearance before council, Town officials contacted McDonald, who assured them Phipps “didn’t know what he was talking about” and that the NMTC bond issue had been achieved to include the FRPD project.

Consequently a council majority decided to take that gamble on the best case scenario of nine years of interest-free payments significantly reducing the total interest due on a project bond issue.
The other two EDA-related payment authorizations unanimously approved by council Monday evening were “up to $45,000 to Mitchell & Company PC for auditing services to support litigation in the Town’s civil suit against … (the EDA)” and “payment not to exceed $200,000 to Damiani & Damiani for legal services related to the Town’s civil suit against the …(EDA).”

Contacted Tuesday for a reaction to the Town Council’s response to the EDA board’s request the Town make good on its FRPD payment debt, current EDA Executive Director Doug Parsons said,
“What the Town does is their business, what they chose to pay, what they chose not to pay it’s entirely up to them. We feel confident in the figures we provided on the invoice for the Front Royal Police Department. We would love to work out this difference of opinion with them; and we’re always ready to work with them on other projects while we work out our differences.”

Watch the entire Front Royal Town Council meeting of November 25th here:

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‘Tis the Season

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December 14 is the 220th anniversary of George Washington’s death. Today we will learn more about this great leader of our country and celebrate his legacy. Refreshments will be served. For ages 7 to 18.[...]
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Science Scouts and More @ Samuels Public Library
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Science Scouts and More @ Samuels Public Library
Tuesday, December 3: Kids will explore popular books and book series through science, games, food, and more! After reading a Christmas story, we’ll discuss giving and how it affects us and the people around us.[...]
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Christmas Concert @ Boggs Chapel on the R-MA Campus
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10:15 am Toddler and Preschool Story Time @ Samuels Public Library
Toddler and Preschool Story Time @ Samuels Public Library
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Toddler and Preschool Story Time @ Samuels Public Library
10:15 Toddler story time | 11:00 Preschool story time Wednesday, December 4 and Thursday, December 5: Gingerbread and Candy Canes will be the delicious theme of our stories, songs, and craft this week! Siblings welcome.[...]
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Annual Holiday Open House @ St. Luke Community Clinic
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