Court takes Petty motion for removal from EDA civil suit under consideration

There’s been no ‘Stopping’ the action surrounding EDA civil litigation and criminal case hearings at the Warren County Courthouse. Royal Examiner File Photos/Roger Bianchini

Chief 26^th Judicial Circuit Judge Bruce D. Albertson took several Warren Economic Development Authority (EDA) civil case defense motions under advisement following legal arguments in Warren County Circuit Court Thursday morning, October 17.

Albertson also granted the EDA’s motion to amend its complaint, adding $3.7 million dollars to the original $17.6 million dollars being sought for recovery and adding six of the seven new defendants added to the amended litigation.

The status of that seventh new defendant, April D. Petty, was one of the matters taken under advisement for a ruling by the court. Albertson promised a decision on Petty counsel’s motion to remove her from the amended complaint within two to three weeks.

Petty attorney Bill Shmidheiser told the court he believes his client was wrongly included in the amended complaint submitted by Sands Anderson attorneys on the EDA’s behalf. He called Petty a victim of primary defendant Jennifer McDonald’s attempts to conceal another embezzlement scheme she is alleged to have been involved in.

According to the Amended EDA Complaint that other transaction was the EDA purchase of the Workforce Housing, Royal Lane parcel owned by McDonald’s aunt and uncle, Walter and Jeannette Campbell, owners of the Century 21 Real Estate Company McDonald was acting as an agent for in the Petty home sale.

Petty is one of several new defendants accused of having received illegally misdirected EDA assets from McDonald in order to purchase or pay mortgages on homes. However Shmidheiser asserted that McDonald had forged Petty’s name to the Sales Contract on her home. That sale involved Ocwen Loan Servicing LLC, which held the mortgage on Petty’s home.

Ocwen is also cited in the amended EDA litigation as a company used by McDonald to cover the addition of $125,000 to the EDA’s agreed upon $445,000 purchase price of the Campbell’s 3.5 acre workforce housing parcel.

“She is not a ‘financial associate’ of (Jennifer) McDonald – she lives in the same town and hired her as a real estate agent. She was embezzled from by Jennifer McDonald,” Shmidheiser told the court Tuesday, elaborating on his filed objection to Petty’s inclusion in the amended lawsuit. He offered to make Petty available for deposition to plaintiff counsel and expressed confidence that presented with her side of the story, plaintiff attorneys would agree that a mistake had been made in adding her to the case.

In his motion to stay his client’s inclusion Shmidheiser cites conflicting numbers presented to his client by McDonald and financial records indicating Petty herself may have been defrauded in the sale of her home.

According to her attorney Petty was told the couple purchasing her home would pay the full asking price of $329,900, but that they wanted to put down a $125,000 deposit. He then points to HUD-1 records indicating a loan to the buyer of $211,105 on a purchase price of $210,000, minus a $5,000 “Sellers Credit”. Shmidheiser goes on to contend that McDonald got the buyer’s to put up a $50,000 cash deposit that she kept.

“Then, Jennifer McDonald must have kept Mr. and Mrs. Leary’s $50,000 case ‘Deposit’ for herself, and in order to cover her embezzlement from her brokerage clients, she had the IDA issue a check to pay down April Petty’s mortgage at Ocwen by $125,000. That way Mrs. Petty wouldn’t be questioning why she wasn’t getting her full asking price … And Mr. and Mrs. Leary wouldn’t question where their Deposit went – as far as they knew, it was reflected in the final sale price at Closing. That is the only way this makes sense,” Petty’s attorney concludes of the convoluted nature of the Petty house sale.

Shmidheiser asked for the voluntary deposition of his client by the EDA attorneys “before she is plunged into the maelstrom of this case” – a case he noted was one of, if not the largest embezzlement case in Virginia’s history.

Petty’s attorney then reiterated the argument at the base of his Objection to Petty’s inclusion in the amended EDA civil complaint, which states, “If April Petty is joined in this proposed First Amended Complaint, even though April Petty is innocent, defending herself will cost April Petty thousands and thousands of dollars – and in the meantime her reputation is dragged through the mud and the public news media … Internet and television. That has already started to happen. If April Petty actually did what your lawsuit accuses her of – fine, it’s what she deserves.

“But the court must consider: What if the allegations are wrong? The Plaintiff – and this Court – will have ruined April Petty financially, and ruined her reputation for no good end for the Plaintiff and with no way for April Petty to recover any of her losses.”

In addition to the offered deposition, Petty’s attorney asked the court to subpoena records of Citizens Bank, N.A. and the purchasers of her home; and to find out from those purchasers “whether they paid any money to Jennifer McDonald separate from, outside of, the JUD-1 Settlement Statement for their purchase of April Petty’s house.”

“A lot of defendants think they are not liable,” Sands Anderson attorney Cullen Seltzer countered. He argued that $125,000 had moved through the cited real estate transaction to Petty’s benefit at what he called her “mortgage debt” surrounding the sales transaction. “A $125,000 of my client’s money went to the benefit of Ms. Petty; she was unjustly enriched by it – she can’t keep it.”

Seltzer told the court that the time to argue details of where all the money went was during the development of the civil litigation toward and at trial.

Petty’s attorney replied to the Plaintiff argument by noting that his client alone, from what he estimated at 14 or 15 people questioned by the EDA Special Grand Jury about their financial involvement with McDonald, had not been indicted.

Judge Albertson asked Shmidheiser if he was arguing that plaintiff counsel should take the initiative in establishing his client’s innocence. Petty’s counsel replied, no, he was just offering them the opportunity to get additional related information that could alter their perception of her involvement in the movement of any EDA assets as intentional or part of a conspiracy to defraud the EDA.

In taking the arguments under advisement and promising a decision within 14 to 21 days, Judge Albertson observed that if they were so predisposed, the two sides did have an opportunity to discuss their cross motions and Petty’s offer of cooperation with plaintiff counsel.

Albertson then granted the plaintiff motion to amend the complaint regarding the other defendants without argument. He set a schedule for additional filings beginning with defense motions by November 7; plaintiff reply by November 25; additional defense responses by December 6, pointing toward a scheduled motions hearing date of December 12.

UPDATE: McDonald family members, business associates added as defendants in EDA civil suit