Defendant attorneys cite vagaries, legal conflicts in EDA civil suit

With EDA civil litigation filed and a special grand jury empanelled to look into potential criminal actions related to EDA finances, the Warren County Courthouse is a center of community attention these days. Royal Examiner File Photos/Roger Bianchini

Attorneys for defendants in the civil litigation filed on behalf of the Front Royal-Warren County Economic Development Authority on March 26 have filed a series of motions seeking delays, additional information and even dismissal regarding the charges against their clients.

A common thread among a number of the defense motions filed April 15 and 16 is that despite the 199-point compliant contained in over 30 pages, the civil filing is vague as to individual responsibilities in seeking recovery of a minimum total of $17.6 million in allegedly misdirected or embezzled EDA assets.

Served as liable parties in addition to former EDA Executive Director Jennifer McDonald and two real estate companies in her name, were Warren County Sheriff Daniel McEathron a partner in McDonald’s companies Da Boyz and MoveOn8; Earth Right Energy LLC and its two principals Donnie Poe and Justin Appleton; and the first commercial client at the former Avtex Superfund site’s planned Royal Phoenix Business Park, ITFederal and its CEO Truc “Curt” Tran.

Attorneys for Appleton, Poe and Earth Right Energy seek dismissal of the complaints against their clients based on an absence of specified allegations regarding them, as well as possible Limited Liability Company (LLC) exemptions on personal liability for company business.

“The nearly 200 paragraph lawsuit names nine defendants, however focuses mainly on the actions of Defendant Jennifer R. McDonald, as in individual perpetrating an alleged fraud or scheme in her capacity as Executive Director of the EDA. Despite this contention, the Plaintiff fails to articulate a sufficient basis in fact or law of said scheme or fraud, and most certainly fails to plead a case against the named co-Defendants, and in particular, Donald F. Poe,” attorney William D. Ashwell writes on behalf of his client.

Ashwell, as do other defense counsel, contends the EDA as plaintiff appears to be transferring responsibility for its own past mistakes or inadequate oversight upon the defendants. “The instant action centers around revelations regarding a systemic dysfunction of the entity and organization… known as the Economic Development Authority (EDA), and to a greater degree the municipality and board of supervisors for Warren County,” Ashwell writes in prefacing his call for dismissal of the claim against Poe.

The faces have been changing on the EDA Board of Directors over the past year or so. And with two seats remaining unfilled by the county supervisors in the wake of Greg Drescher and Ron Llewellyn’s resignations submitted at this March 22 meeting, it is a shorthanded board that is facing the future under the shadow of the past.

It is a thought echoed by McDonald attorney Lee Berlik.

“The Warren EDA, Plaintiff in this action, is engaged in an attempt to smear Ms. McDonald by blaming her for every bad decision made by the Warren EDA board over the last several years and turning business deals the Warren EDA now regrets into implausible conspiracies. Plaintiff suggests every statement by every counterparty it now regrets crediting was a false statement by Ms. McDonald… instead of a false statement to Ms. McDonald,” Berlik writes (emphasis in context) in his Demurrer and Motion for a Bill of Particulars on behalf of McDonald.

Berlik, who is also representing McDonald in her dueling civil defamation lawsuits with Warren County Supervisor Tom Sayre, R-Shenandoah, cites what he references as the EDA civil action’s one complaint against McDonald real estate company MoveOn8, to illustrate what he sees as flaws in the litigation and case against what he terms “the McDonald Defendants”.

“Other than being identified, Defendant MoveOn8, LLC is alleged to have taken action in one of the 160 factual allegation paragraphs. See Complaint at graph 146. That allegation alleges that MoveOn8, LLC received a conveyance of one single property (which it still holds in constructive trust for the EDA) worth approximately $1 million dollars. Yet, despite this single reference to MoveOn8, LLC, the only fair reading of the complaint is that Plaintiff claims MoveOn8, LLC committed fraud, converted property, engaged in conspiracy, was unjustly enriched and participated in an ultra vires (improper) transaction – and damaged the Warren EDA in an indeterminate amount in excess of $17,640,446.16,”

The amount cited in EDA civil suit paragraphs 146 through 148 in the above-referenced transaction is $1,007,672.84. And like that total, there are specific amounts referenced in most every civil suit paragraph regarding specific projects cited in alleged misuse of EDA assets.

And while some of those actions were authorized by the EDA board, like the $10-million loan to ITFederal; payments on Afton Inn renovation work; the purchase of the Royal Lane Workforce Housing property; or solar project contracts, it is asserted in the EDA civil filing by the Sands-Anderson law firm that such authorized movements were based on inaccurate or false information provided by McDonald.

At issue for all the EDA civil case defendants will be countering the plaintiff contention that there was knowing involvement or profiteering from either unauthorized movement of EDA assets or complicity in the alleged misrepresentation of the factual basis for authorized movement of EDA funds or contractual work.

In filing a motion to stay the EDA civil case and issue a protective order against a response to plaintiff Discovery motions involving his client Sheriff McEathron, attorney Edward MacMahon, Jr. notes the empanelling of a special grand jury the day after the EDA civil litigation was filed.

“Considering the complexity of the issues raised in this matter and obvious overlap of the allegations in the Complaint and the matters now within the jurisdiction of the special grand jury, this case should be stayed until such time as the Special Grand Jury concludes its investigation of this matter. That stay would allow Mr. McEathron to defend himself in this case without fear of self-incrimination,” MacMahon wrote.

Judge Clifford L. Athey Jr. gave the special grand jury to September 30 to complete its investigation into potential criminal activity related to the EDA civil action.

Thus far three attorneys of the Holland & Knight LLP firm located in Tyson, Virginia, Brandon Elledge, Terry Elling and Kevin D’Olivo, have only filed notice of their representation of ITFederal and its CEO Truc “Curt” Tran. The $10-million loan to ITFederal facilitated by the EDA in which the 147-acre Royal Phoenix Business Park property was used as collateral to achieve the bank loan, is a significant portion of the $17.6 million being sought for recovery in the EDA civil suit.

Under the watchful eye – that does not look like a $10-million construction project not far from the EDA office in the old American Viscose Admin building at right.