In Part 2 of Royal Examiner’s look into details of the March 26 EDA civil suit, another prominent Front Royal-Warren County Economic Development project resulting in a significant, if not multi-million dollar financial loss will be explored. That project was the Workforce Housing apartment complex plan designed to provide affordable housing for entry-level workers in teaching, law enforcement and emergency services professions.
It was a project that immediately attracted Royal Examiner and one public officials’ attention due to unanswered questions about costs, legality and eventually, changing circumstances.
Councilwoman Bébhinn Egger first publicly began asking hard questions about the price listed on a “gift”; and then EDA-requested town building code exemptions to reduce costs that would likely not be granted to a private-sector developer. Later County Supervisors Archie Fox and Tom Sayre joined in the questioning as the foundation of the project continued altering in a fluid and ever-changing manner.
In case you forgot, that manner was:
– In the fall of 2014 a 3.5-acre parcel at the end of Royal Lane in Front Royal is presented to the EDA Board of Directors as a gift for public use;
– It is a gift assessed at $305,000 with an inflated $445,000 price tag attached to it;
– It is a gift from relatives of EDA Executive Director Jennifer McDonald, Mr. and Mrs. Walter Campbell, who are in the real estate business;
– As of April 2017 it is no longer a gift;
– It is revealed there was an undisclosed developmental deadline tied to the original owners’ receiving federal tax credits for the gift of the property for public use that was not met;
– The 3.5-acre property must be returned to the owners or purchased by the EDA at the inflated $445,000 price attached to the deed of gift;
– On April 28, 2017 the EDA Board of Directors agrees to purchase the property for $445,000 because it is indicated by EDA Executive Director McDonald and then-board Chair Patty Wines that the EDA has already invested nearly a half million dollars in preparatory work, including site planning, engineering, town and state DEQ permitting fees, though not a shovel of dirt had been turned on the parcel at the end of dead-end Royal Lane;
– Following the May 19, 2017 release of a 383-page summary of the project following a request for information by Councilwoman Egger, the EDA’s executive director verifies to this reporter that only $10,500 of unrecoverable money had been invested in the property at the time of the EDA board decision to purchase;
See related story.
– It is revealed by the EDA that a private sector development group, the Aikens Group, has been involved secretly from the 2014 advent of the project and that Aikens had agreed to purchase the property from the original owners for the $445,000 price attached to the property transfer;
– The forensic audit of EDA finances launched in the wake of the Town of Front Royal’s mid-2018 discovery of nearly a decade of debt service overpayments to the EDA totaling over $291,000 begins in mid-September 2018; and continues to this day at a cost of over three-quarters of a million dollars.
– On November 28, 2018, the EDA sells the Workforce Housing property to Cornerstone LLC for $10 (ten dollars).
– On March 26, 2019, “The Workforce Housing – Royal Lane Property Embezzlements” are listed as a $651,690 loss in a civil suit filed on behalf of the EDA as a result of the aforementioned forensic audit.
– Contacted in April after Royal Examiner received the Royal Lane Deed of Sale, EDA Board Chairman Gray Blanton, who was appointed chairman in September 2018, said he only saw the final page of the deed of sale, which was the signature page. Due to Dan Whitten’s recusal for potential conflict of interest as both EDA and County Attorney, local real estate attorney Joe Silek Jr. represented the EDA in the transaction. Also contacted regarding the transaction, Silek said that no price was on the deed of sale when it was forwarded from the EDA to the Winchester law firm of McCarthy-Akers for completion. Asked why the EDA would agree to take a $444,990 loss (that appears to have grown to a $577,501.77 or even $651,690) on the property, Silek said, “I don’t think they did,” and referred us to attorney Doug McCarthy of McCarthy-Akers for further information. At publication of this story Royal Examiner had yet to get a response from a May 3 message left for McCarthy at the company phone number seeking information about the transaction.
EDA civil complaint
How does the EDA civil action view this project history in seeking the return of $651,690 of lost EDA money? Of the late November sale, it says this:
“When interviewed on December 6, 2018, Defendant McDonald continued to maintain that the Aikens Group would refund the Warren EDA the full cost of the Royal Lane Property and any improvements, when she knew said property had been conveyed by the Warren EDA on November 28, 2018 to Cornerstone for consideration of $10.”
What the complaint doesn’t state is why the EDA board or its legal representation would agree to sell a property under heavy scrutiny by the forensic audit at a loss in the range of $450,000 to $650,000.
That transaction came as scrutiny of the executive director was intensifying as the forensic audit progressed. Following several hours of closed session discussion of the forensic audit findings and her job performance on December 14, 2018, McDonald had her contract, check-writing and administrative authority over EDA bank accounts stripped by the EDA board. Facing a second closed session on the same topics a week later, McDonald submitted her resignation and according to the EDA lawsuit attempted to cap her financial liability at $2.7 million dollars.
However as noted above, it was not McDonald’s signature on that $10 deed of sale, nor was she the EDA’s legal representative in that transaction that is simply one chapter in what has been a twisting and seemingly inexplicable, nearly five-year saga surrounding the attempted transfer of the Campbells’ 3.5-acre Royal Lane parcel to a public use.
As previously reported, in an initial defense motion filing McDonald attorney Lee Berlik claimed his client is being vilified and scapegoated for past bad decisions of the EDA Board of Directors. “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.”
However, the EDA civil action alleges a lengthy pattern of gaps, conflicting or misinformation from McDonald to the EDA board regarding what is termed the “Royal Lane Property Embezzlements”.
“The Warren EDA Board minutes during the time of these discussions do not reflect that Defendant McDonald ever timely disclosed the true ownership of the property, or her own active real estate agent business relationship to the owners, thus depriving the Warren EDA Board of knowledge that Defendant McDonald had an interest in the transaction,” paragraph 21 of the complaint states about the advent of the project.
That “active real estate agent business relationship” circa 2014-15 at the project’s inception is described in the previous paragraph of the complaint as McDonald’s role as “a real estate agent” in the Campbells’ “Century 21 – Campbell Realty” business.
Whatever the EDA board’s knowledge of the situation was, the complaint asserts further issues around the EDA workforce housing purchase, including an inflated sales price based on a sales contract it alleges McDonald forged.
“Notwithstanding that the Warren EDA authorized only up to $445,000 to purchase the Royal Lane Property, Defendant McDonald in fact directed the Warren EDA to pay $577,511.50 (emphasis added) for the Royal Lane Property which included property settlement costs of $2,511.50,” graph 29 of the EDA complaint states.
The complaint continues with graph 31’s assertion, “The original sales contract contemplated a purchase price of $445,000. See attached Exhibit 2. Defendant McDonald’s forged contract with the altered purchase price information reflecting a purchase price of $575,000 included a payment of $125,000. See attached Exhibit 3. The unusual payment of $125,000 occurred on March 15, 2016 prior to and outside of property settlement to a third party.
“Thus at closing, the sellers of the Royal Lane Property, the aunt and uncle of Defendant McDonald, and/or Defendant McDonald, were enriched by an additional $130,000 to the detriment of the EDA …When confronted with this discrepancy , Defendant McDonald falsely stated that $575,000 was the Warren EDA authorized purchase price and that the Aikens Group, a company that Defendant McDonald represented intended to develop the Royal Lane property, had repaid $125,000 of the purchase price to the Warren EDA,” graphs 32 and 33 of the complaint assert.
OKAY, wait, what?!? – “McDonald in fact directed the Warren EDA to pay” an additional $132,511.50 (and they agreed to that?); then the inflated-price contract was “forged”; then the Aikens Group appears out of a hat again?!?
Whoever was puppeteer whomever, however, the complaint continues that in order to support her assertion the Aikens Group had repaid the added $125,000, McDonald “provided a redacted loan statement from Ocwen Loan Servicing LLC that omitted the property address and name and address of the Borrower.
“Later investigation revealed, however, that $125,000 had not been repaid to the Warren EDA. Instead, records show that a check payable to ‘Owen Loan Servicing LLC’ had been written from a Warren EDA bank account in the amount of $125,000,” graph 34 and 35 of the complaint states, leading to the conclusion the payment was made “to the benefit of Defendant McDonald and/or her family.”
However, unlike ITFederal CEO Truc “Curt” Tran, Earth Right Energy principals Donnie Poe and Justin Appleton, and former Sheriff Daniel McEathron, the latter as a partner in McDonald’s real estate companies, who were all listed as co-defendants with McDonald in the March 26 civil filing, despite the involvement of their property in this magical mystery tour real estate transaction the Campbells were not named as defendants in the March 26 civil suit seeking recovery of the above-cited EDA funds.
I don’t know about you, but this one made me dizzy.
McDonald criminal plea hearing postponed
The entry of pleas to the 12 felony criminal charges of embezzlement or fraudulent misdirection of EDA assets by former Front Royal-Warren County Economic Development Authority Executive Director Jennifer McDonald has been put off to a yet-to-be determined date. McDonald’s plea hearing was scheduled as part of the 9 a.m. docket on the July Grand Jury-Term Day on Monday, July 15.
However newly-seated Circuit Court Judge William W. Sharpe, who is moving from Domestic Relations Court to replace Judge Clifford L. Athey Jr. who is taking a seat on the Virginia Appeals Court on September 1, entered a written recusal from EDA-related cases on Friday, July 12. In the wake of that recusal notice neither McDonald nor her criminal attorney Peter Greenspun were in court Monday. McDonald was transferred from RSW Regional Jail to the Fairfax Adult Detention Center on June 11. Greenspun’s office is in Fairfax.
In his recusal Sharpe writes, “It is necessary for this judge to recuse from all cases that may relate to the Warren County Economic Development Authority and Jennifer McDonald, in order to ensure that all parties can be confident the judge has no association with any persons who might be involved in a particular case, either as parties or a witness.”
Sharpe prefaces that statement by pointing out that, “a number of persons who are named as defendants in the pending EDA civil action against Jennifer McDonald and other parties, as well as members of the EDA Board and persons who it appears may be material witnesses in the civil action filed by the EDA, as well as other related civil actions or filed and possible criminal proceedings arising out of the same transactions, are personal friends or former clients or persons with whom the judge has otherwise had regular associations.”
In fact this reporter ran into Judge Athey outside the courthouse on Friday, July 12. During a brief conversation about the coming week’s EDA-related hearings Athey explained that he would be fazed out of the EDA hearings equation during the coming week to accommodate both his pending move to the state appeals court and the transfer of judicial authority over the EDA civil and criminal cases to other 26th Judicial District judges.
Athey was aware of Sharpe’s recusal and even commented that had he not been moving off the Warren County bench as the EDA cases progressed toward evidentiary hearings and trial he likely would also have recused for similar reasons to those stated by Sharpe, personal or professional familiarity with involved parties. He said he felt it acceptable to hear early motions prior to evidentiary testimony becoming involved in order to keep the cases moving forward in their early stages.
Athey’s primary rulings thus far have been to deny McDonald bond as a flight risk in her criminal cases and an order that EDA civil counsel produce the evidentiary basis for what is a currently a nine-defendant civil suit seeking recovery of a total of over $21-million dollars. That order led to the release into court files of public accounting firm Cherry Bekaert’s “working papers” from its contracted investigation of indicators of financial fraud in EDA operations.
On Monday Assistant Commonwealth’s Attorney Bryan Layton said it was unclear how the coming judicial appointments might impact other scheduled EDA hearings this week. Motions in the EDA civil action are scheduled for the 9 a.m. docket Wednesday, July 17 and former EDA Administrative Assistant Michelle “Missy” Henry’s already once-delayed bond hearing is scheduled on the 9 a.m. docket Friday, July 19.
Henry was arrested by VSP on sealed special grand jury indictments on June 24. Retired substitute Judge Thomas Horne deferred a decision on bond for Henry on June 25, citing his unfamiliarity with the case. It now remains unclear if the ongoing judicial juggling may again delay a bond decision for Henry this week.
The Warren County Special Grand Jury empanelled to investigate potential criminality connected to the EDA civil case is also scheduled to meet through the latter part of the week.
In a not directly-related criminal case, former Front Royal Mayor Hollis Tharpe has a motions hearing scheduled Monday afternoon at 2:30 p.m. on his solicitation of prostitution misdemeanor case.
Ranking presiding 26th Judicial District Judge Bruce D. Albertson will be responsible for appointing judges to hear EDA-related cases that Sharpe has recused himself from. According to the Virginia Judicial website, active 26th District judges besides Sharpe and the soon-to-be-departed Athey, include Clark A. Ritchie, Kevin C. Black, Alexander R. Iden and Thomas J. Wilson.
However, it is possible Judge Albertson could appoint another substitute judge, including retired court officers who still help the district fill its judicial requirements when shortages and recusals occur.
EDA Investigation Series Parts 9 – Bianchini 2nd interview
In the second of two Front Royal Police interviews with yours truly, Royal Examiner reporter and editorial consultant Roger Bianchini on June 16, 2017, investigators Landin Waller and Crystal Cline revisit information given them in his initial interview around 10:45 a.m. that morning.
In the interim between the two interviews FRPD investigators have learned from the Warren County Sheriff’s Office that the rock-throwing vandalism Bianchini reported being told about by Jennifer McDonald the previous afternoon, had been reported by McDonald as occurring around 9 p.m. the previous evening. That was some five to six hours after Bianchini said the EDA executive director described the front-door vandalism of her home to him, leading him to believe the incident had occurred over the course of the previous week.
In interview two, Episode 9 of Royal Examiner’s series of FRPD investigative interview videos Bianchini returns around 3 p.m. to confirm the information given to investigators that Friday morning.
Perhaps ironically, McDonald’s lengthy FRPD interview concerning the EDA office break in, separated into three parts in this series, occurred Thursday afternoon, June 15, 2017, between 1:15 p.m. and 2:56 p.m., just prior to the meeting in her office Bianchini would to describe to FRPD the following morning.
Reference FRPD’s June 16, 2017, interview with EDA Marketing Director Marla Jones (Episode 7) in which Jones corroborates Bianchini’s story that he had a lengthy, closed door meeting with McDonald mid-afternoon, Thursday, June 15, and was not at the EDA office the morning of Friday, June 16, to be informed of the vandalism as McDonald attorney David Crump asserted he was during McDonald’s misdemeanor Filing a False Police Report trial of October 31, 2018. Jones’ interview was conducted around 1 p.m., between the two Bianchini interviews of June 16, 2017.
For some reason the prosecution did not call Jones to corroborate their main witness Bianchini’s story, though she was present to be called that Halloween Day and her FRPD interview was available to the prosecution. Also uncalled to testify at that trial that saw McDonald acquitted without having to present a defense were the FRPD officers who developed the false police report case.
As noted in the preface to Bianchini’s morning interview (Episode 8) video, in the coming year and a half the EDA executive director would come under increasing scrutiny by multiple levels of law enforcement, as well as by the Town of Front Royal, and eventually the County and her own EDA Board of Directors, culminating with her December 20, 2018 resignation; as well as apparent written acceptance of responsibility for the return of $2.7 million in misdirected EDA assets McDonald remains jailed without bond as a flight risk in the Fairfax Adult Detention Center, where she was transferred from RSW Regional Jail on June 11. She was arrested by Virginia State Police on four felony counts of fraud or embezzlement of EDA assets on May 24, 2019. She will be in court Monday, July 15, to enter pleas on those initial charges, and possibly on eight related financial felony counts she was served with on June 21.
2017 EDA Investigation Part 8: FRPD questions Royal Examiner Reporter Roger Bianchini
FRONT ROYAL – Following the May 18, 2017 reported break-in at the Front Royal-Warren County EDA office located at 400-D Kendrick Lane, the Front Royal Police Department’s investigative division immediately began scrambling for clues, working to learn who would be angry enough to leave behind the scene that responding officers found in EDA Executive Director Jennifer McDonald’s office suite.
There were photographs of McDonald with the face scratched out on the board meeting room table, another photo of McDonald’s face with a knife stuck through the forehead in the seat she normally occupied during board meetings, as well as some defaced family photos, also on the meeting room table. One photo even had a racial epithet scrawled across the face of one of McDonald’s relatives.
According to the Front Royal Police Department investigative file, obtained through a Royal Examiner Freedom of Information Act (FOIA) request, McDonald also told police that May 18th morning, that a week earlier, on May 11, 2017, she arrived at work to find a knife lying in her desk chair. There was no signed of forced entry, nor was a call made to police.
Police said there was also no sign of forced or unauthorized entry a week later on May 18, nothing was initially reported missing, and the case remains unsolved.
McDonald told investigators that she wanted to keep news about the incident “quiet”. The FRPD did not issue a press release regarding the alleged break-in and began working the case.
Around 10:30 a.m. the morning of Friday, June 16, 2017, Royal Examiner Reporter Roger Bianchini was asked to come to the Criminal Investigation Division (CID) of the Front Royal Police Department, to discuss his knowledge of the alleged break-in at the EDA and McDonald, someone he had long covered as a local reporter.
As the interview opens, Bianchini explains how through online research Royal Examiner Editor Norma Jean Shaw and he first began to suspect that Truc “Curt” Tran was tied to the proposed regional justice academy and was likely the benefactor who had offered up a no-strings-attached $6 million gift to build the facility in Warren County.
Over the course of the interview, he would clue Investigators Landin Waller and Crystal Cline into the fact that McDonald had informed him, sometimes through texts, of a series of alleged trespass events at her home, including a stone-throwing vandalism through a front door glass window reported to him during a closed-door discussion the previous afternoon in her EDA office between 3 p.m. and 4 p.m., Thursday, June 15.
In Part 2 of this interview, investigators invite Bianchini back around 3 p.m. that afternoon to confirm information he provided in the first interview after a stunning call from the Warren County Sheriff’s Office. That call notified FRPD investigators that the sheriff’s office had responded to the vandalism described by Bianchini shortly after 9 p.m. the previous evening when it was reported by McDonald as occurring some five hours after the reporter said he was told about it.
Through a series of events that would take over a year to unravel, the EDA executive director would come under increasing scrutiny by multiple levels of law enforcement, as well as by the Town of Front Royal, and eventually the County and her own EDA Board of Directors, culminating with her December 20, 2018 resignation, as well as apparent written acceptance of responsibility for the return of $2.7 million in misdirected EDA assets.
Next in the series:
Investigators invite Bianchini back in to confirm information he provided in the first interview after a stunning call from the Warren County Sheriff’s Department.
EDA moves to improve financial accountability, communications & legality
On the job for under two months himself, Executive Director Doug Parsons greeted Greg Harold and Jeff Browne to their first meeting as members of the Front Royal-Warren County Economic Development Authority Board of Directors shortly after 8 a.m., Friday morning, June 28.
And it didn’t take long for the new members to get their feet wet as the newly-tooled EDA – Executive Director Parsons (on the job since May 8; his Administrative Assistant Gretchen Henderson (May 6); Harold and Browne (appointments announced June 18) – attempts to right itself in the wake of a $21 million financial scandal that has seen criminal charges brought against both former Executive Director Jennifer McDonald and her Administrative Assistant Missy Henry, both of whom remain jailed without bond.
In fact legal consultation regarding the EDA’s nine-defendant civil litigation and Front Royal’s recently-filed lawsuit seeking recovery of an estimated $3 million in Town assets from the EDA, as well as ongoing accounting, loan and debt service issues were two of four topics of a closed session that lasted just short of four hours.
And while there were no announcements about EDA litigation following the closed session’s re-adjournment to open session at 12:42 p.m. there were a series of Resolutions and motions approved designed to increase financial accountability and oversight and to begin marketing some EDA properties seen as financial Albatrosses. Those properties include the vacant warehouse at 426 Baugh Drive, a property at 404 Fairgrounds Road and the former Stokes Mart property now housing the Main Street Market at 506 East Main Street and a currently damaged and un-occupiable three-unit residential apartment building.
In fact the legal tightrope the EDA is walking regarding State Codes that prohibit EDA’s from running businesses or acting as residential landlords was a topic of discussion during the initial open session that began at 8 a.m. Following Parsons’ Executive Report reference to the EDA’s payment of temporary motel housing for the three displaced tenants of the residential apartments in the wake of a tenant vehicle accident resulting in a crash into the building, board member Ed Daley noted the State Code prohibition on certain activities that would place EDA’s in direct competition with the private sector.
Daley worried that the EDA’s initial funding of those three tenants temporary housing gave the appearance the EDA was the residential landlord of the Main Street Market apartment building. However EDA Attorney Dan Whitten explained that the Main Street Market owners, Jeff and Ginny Lesser, were actually the residential building landlords. The EDA leases the entire property to the Lessers with an option to buy, and the Lessers’ lease includes their control of the residential building at the corner of the property. However it was also noted that the Lessers pay the EDA that collected rent, further muddying an already murky business arrangement.
Parsons also said the insurance company of the tenant whose brakes failed causing the crash into the building had agreed to reimburse the EDA for the temporary housing costs at the nearby Quality Inn. Those costs are $1100 dollars per month.
Responding to a board question, Parsons said that while he did not have a signed agreement to that effect, he did have an email from Progressive expressing its intention to cover those temporary housing costs. It was suggested a signed agreement might firm up that commitment legally.
Also during the afternoon portion of the open meeting the EDA board minus absent Mark Baker, by a 6-0 vote approved Daley’s motion to schedule a special EDA board meeting to prepare for a joint meeting with the Warren County Board of Supervisors and Front Royal Town Council. A date for the three-way joint meeting has yet to be set.
See the above-cited discussions and your new-look EDA at work on a variety of fronts in the linked Royal Examiner video:
McDonald draft statement goes public – another side of the EDA story
A draft of comments former EDA Executive Director Jennifer McDonald planned to deliver at a municipal meeting, likely the Warren County Board of Supervisors, outlines her side of the story regarding multiple allegations at the base of the EDA civil litigation filed March 26. McDonald is the pivotal figure in the nine-defendant lawsuit seeking recovery of what has climbed to over $21 million dollars in allegedly misdirected EDA assets.
McDonald’s May 24 arrest by Virginia State Police on four felony financial fraud and embezzlement charges aborted that planned public defense in front of one of the boards now being criticized for a lack of oversight of EDA operations and McDonald’s role in those operations.
The McDonald draft statement was published June 20th on Kristie Atwood’s “One Mad Mother” Facebook page. For some time Atwood has been publishing materials on her Facebook page that would seem most likely to have been leaked to her from McDonald. Atwood would appear to have a common cause with McDonald – to make the Warren County Administration and Board of Supervisors look bad – if for differing reasons: Atwood has threatened a multi-million dollar lawsuit against the County over building permitting issues with her home, while McDonald asserts many of her actions now cited as fraudulent in nature were, in fact, approved and/or known to EDA and County officials and allowed to proceed.
McDonald’s draft comments were also hand delivered to this reporter “off the record” by McDonald during a meeting at Samuels Public Library the month prior to her arrest. However, with Atwood’s social media publication of the identical draft statement, though my copy had a sexually-tinged paragraph posted by Atwood crossed out for deletion, Royal Examiner sees an “on the record” opportunity to explore portions the former EDA executive director’s explanation of some of her actions cited as fraudulent by her former employer based on the Cherry Bekaert “working papers” report on indicators of fraud in EDA finances and related real estate transactions.
This initial look will summarize an overview of the five-page statement and then focus on its ITFederal references.
The Blame Game
The gist of McDonald’s draft statement echoes with some specificity her civil attorney Lee Berlik’s written response to the Complaint against his client in the EDA civil litigation:
“The Warren EDA … 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,” Berlik wrote.
While McDonald does not directly address the $52,000 or more in credit card payments made under the auspices of Afton Inn contractual work that appears to have initially landed her in jail, she does comment on social media references to related allegations in the EDA civil litigation.
“Now I get to read the Facebook comments about how my house, credit cards, and essentially all my bills are paid off and that is simply not true. I still have a mortgage that I have held since 2004 when I built my house, I have a mortgage on rental properties, I have credit card bills, I have all of the bills a normal person has and then some,” McDonald wrote, adding of the social media frenzy she was initially exposed to in the wake of the EDA civil litigation filing of March 26, “This is all based on one-sided opinions, not facts. I continue to be harassed by the Internet crowd, threatened by folks in local stores, and stalked by the crazies and for what?”
From the perspective of an EDA board that continued to support her through November 2018, the “what” is an orchestrated, years-long conspiracy going on under their noses involving multiple projects they, at least in some cases like ITFederal and Workforce Housing, as a board approved the expenditure of EDA resources on.
McDonald calls some of these allegations against her, including but not limited to the ITFederal project and other Truc “Curt” Tran-related land moves and the Workforce Housing fiasco and its ever-fluid developmental and cost scenarios, a result of “selective amnesia” on the part of EDA board members and county officials. As noted above, from her perspective that amnesia revolves around the fact that many projects cited as evidence against her, were approved by the EDA Board of Directors with the support of the Warren County Board of Supervisors and/or Front Royal Town Council.
In its civil filing the EDA counters that many of its worst decisions were based on misinformation presented to it by McDonald. But no one from McDonald to her EDA Board of Directors to County or Town officials who gave the okay to various aspects of these projects, explains why virtually no one involved at the EDA or municipal levels did due diligence to get at the truth of what was being presented to them about various projects they were being asked to support with hundreds of thousands and even millions of dollars in investments – whoever it was that was doing that presenting.
McDonald civil cases attorney Lee Berlik wrote on the first page of a defense motions filing of April 16, emphasis in context, “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.”
Enter the Dragon
In the ITFederal case the lack of due diligence appears to be at least in part the source of origin bringing the company forward – Sixth District Congressman Robert Goodlatte – that absolved ALL involved, from McDonald to her EDA board, to the town council and county board of supervisors save one former councilwoman, from any semblance of due diligence before handing, not only the Royal Phoenix Business Park (the remaining 117 acres were used as collateral on the $10 million dollar EDA/ITFed loan from First Bank & Trust), but also the “farm” over to Tran essentially for one dollar, American, AND the Goodlatte-suggested $10 million dollars for ITFederal operational expenses.
“At the ceremony for the release of the Avtex site (September 2014), Goodlatte (then-U.S. Congressman, R-6th) mentioned to several of my Board members what a great opportunity ITFederal would be for the Avtex site,” McDonald wrote in her draft statement, adding, “We started work immediately to make sure we were doing everything in our power to get this business to Front Royal that we thought would create 600 jobs and a $40 million investment in this community. Everyone was ecstatic that we had finally landed what we thought to be the best project that had come our way in over 20 years,” McDonald writes in her draft statement.
And it was not McDonald, but rather the EDA Board of Directors that authorized a 30-year payback term for Tran to the EDA when the Town “Bridge Loan” was extended to Tran from September to November 2015; while the EDA has a seven-year balloon payback in full arrangement with First Bank & Trust achieved in December 2015. The latter is an arrangement, which as we have reported previously, EDA/County Attorney Dan Whitten explains the EDA hopes to refinance at the seven-year mark allowing it to have Tran continue to cover its bank payments over the life of its 30-year ITFederal loan – a loan McDonald attorneys have pointed out Tran remains current on and within reduced benchmarks approved by the EDA Board of Directors.
What McDonald continues to describe in her defense is a virtually blank check given the ITFederal CEO for every idea that might pop into his, or someone’s, head – like the above-referenced “farm”.
“In fact, the Board not only agreed to give Mr. Tran the land (reporter’s note: 30 acres publicly valued by the EDA at $2 million dollars) for $1 if he met certain milestones, but they agreed to help in the purchase of a farm for Mr. Tran, extend a $10 million loan to Mr. Tran, an incentive package to Mr. Tran, and breaks on utility tie ins. All of this in an effort to make sure the community kept the 600 jobs and the $40 million investment as promised,” McDonald wrote.
Now this is my favorite part of McDonald’s statement – her description of how certain reduced benchmarks on the ITFederal $10-million loan were agreed upon – kill the messenger, aka blame the media (they might be telling the truth):
“When Mr. Tran was being bashed in the local news he came to Mr. Drescher (EDA vice chair) and Mrs. Wines (EDA chair) with a letter in hand stating he was ready to move on to a different community because of the bashing UNLESS (EMPHASIS in context) the EDA considered reducing the scope of his obligation. Mr. Drescher and Mrs. Wines took his letter and concerns to the Board and they ALL agreed to reduce the scope of his project,” McDonald writes (why wasn’t I playing poker with these people back then?!?)
The result of that EDA board-approved reduced project obligation is the thus far empty one-story, 10,000 square foot building standing in lieu of the promised three-building 50,000-plus s.f. complex promised to be the foundation of a $40 million dollar investment resulting in 600-plus high-paying tech industry jobs first promised in a press release from Congressman Goodlatte’s office; not to mention ITFederal principal Truc “Curt” Tran sitting on the bulk of a $10 million dollar loan he has about 27 years left to pay off, with only the apparent necessity he spend about $2 million of it here, and provide 10 jobs of indeterminate wage in the 10,000 s.f. building within the next year.
In her statement McDonald aggressively counters the EDA civil litigation inclusion of that $10 million at the financial center of fraud allegations revolving around her.
“Now here we stand several years later and the Board has changed, the project has not been completed, and everyone wants to point the fingers at yours truly. I have kept my mouth shut for many years now with all of the bashing, hatred, and down-right bullying that I have endured because of the decisions made, not by me, but by the EDA Board, Town Council and Board of Supervisors. My role as Director was to take the beating for everyone and the decisions that had been made and I did just that UNTIL the accusations of embezzlement, malfeasance, moral turpitude, etc started to role.”
Of the inclusion of that $10 million EDA loan to Tran being part of an alleged, far-reaching conspiracy to enrich herself and her family, McDonald writes, “Not a penny of that money came to me or anyone in my family. 100% of the money went to ITFederal at the closing. All documents were signed by Patty Wines (not Jennifer McDonald). The mere fact that anyone sitting on the EDA Board, Town Council, or Board of Supervisors would even suggest otherwise is pathetic and absurd.”
But again, what McDonald fails to explain, as has everyone else she lists as involved on the EDA, County and Town side (other than Bébhinn Egger), is whether ITFederal and its CEO were EVER in a position to achieve what was being promised, initially by the aforementioned and since-retired Sixth District Congressman Robert Goodlatte. For a small amount of online research, as done by this reporter and Norma Jean Shaw in 2016 would reveal a company, not with a $140-million dollar Defense Department contract ballyhooed by Goodlatte and McDonald, but rather a company struggling for at least five years to realize $35,000 to $50,000 in private sector contracts, among other issues.
Cherry Bekaert details what Royal Examiner’s news staff discovered in 2016**:
“Our research of ITFederal and other associated entities from the Business Plan (ITFederal’s for Royal Phoenix site) indicates the companies are very small (likely less than 10 employees). They maintained unsophisticated websites with little to no physical office locations and TRAN’s home residence appears to be the main headquarters of ITFederal and VDN (a second Tran company, VDN Systems). ITFederal, VDN and ACRC (a third Tran company, American Commonwealth Regional Center) appear to be shell companies with little to no invested capital and questionable customer base representations e.g. spouses and/or near relatives (“Katrina Tran” and “Tran CPA”) holding executive positions,” page 40 of the Cherry Bekaert summary states.
In fact, the EDA fraud investigator reports that “startup capital” for ACRC’s Virginia Information Technology Project, LLC – apparently the ITFederal Royal Phoenix project – was listed as $2,022,000, $2 million of which was the publicly-stated value of the 30 acres gifted to ITFederal behind closed doors by the EDA for one dollar.
“Hence, the startup capital represented by TRAN in the Business Plan appears to be little more than $2,000 cash and $20,000 in other current assets, both of which were unverified,” Cherry Bekaert reports.
And of that much-ballyhooed $140 million federal contract with the Nuclear Regulatory Commission that was to be the basis for ITFederal’s $40 million dollar, 600 high-paying tech jobs investment in this community, Cherry Bekaert observes, “… our research indicates ITFederal LLC and VDN Systems, Inc, both controlled by TRAN, were listed … with one award from the Nuclear Regulatory Commission for approximately $5,000 in 2014, not the $140,000,000 represented in the Business Plan.”
So while there may be plenty of blame to go around; and McDonald may have developed her own “selective amnesia” as to what unauthorized or self-serving financial or real estate moves ostensibly on behalf of the EDA she may have made, it is McDonald who until June 24 sat alone in jail without bond. And now that there has been a second arrest, it is one downward on the EDA/Municipal hierarchy, rather than up as McDonald seems to assert she believes the case should be.
“Based on suspicion and belief” from public comments at County and Town meetings in the wake of the March 26 filing of the EDA civil litigation, it is an opinion a significant number of people in this community share.
** FOOTNOTE: Evidence within the EDA financial investigative report notes that Goodlatte’s office called McDonald in an effort to silence the 2016 media “bashing” of ITFederal. It reports a consequent call from McDonald to WZRV owner Andrew Shearer about the matter, which perhaps coincidentally, almost immediately was followed by the termination of Norma Jean Shaw as station news director – Shaw was on the Goodlatte side of the WZRV news team exploration of ITFederal – and a terse email from Shearer shutting down this then-WZRV new team member’s inquiry to ITFederal officials about the company’s contract base. So the year after his sudden lockout from the paper he helped create, Bianchini was released from the WZRV news team about a month or so after Shaw.
The then out-of-work investigative news team was soon reunited at the newly created Royal Examiner online newspaper. As this reporter wrote in one of his first stories for Royal Examiner (October 27, 2016) revealing the one dollar giveaway of the 30-acre ITFederal parcel: “One of the best-kept secrets in Front Royal and Warren County seems to be the cause of a year-long delay in federal approval of the FIRST commercial property sale at the remediated Avtex Superfund site in Front Royal. In fact, we had to start a new online news source just to get that reason published and into the public conversation – just kidding, sort of …
Decision on former EDA Administrative Assistant bond deferred to mid-July
In a devastating decision for at least 12 family members and friends present for her first court appearance since being arrested the previous day on two felony charges related to the EDA financial scandal, a decision on bond for former EDA Administrative Assistant Michelle “Missy” Henry was deferred by retired substitute Judge Thomas Horne on Tuesday morning (June 25).
Consequently Henry could remain jailed until mid-July though Horne left open the option of expediting a bond hearing if Judge Clifford L. Athey Jr., who has thus far handled the other civil and criminal cases related to the EDA investigation, sees fit to.
A hearing date of July 19 was set to revisit Henry’s bond, with an option for a July 11 date possible. Circuit Court Deputy Clerk Janice Shanks told the court that Athey would “be in the building” on July 11, but that circuit court was not scheduled that day. However, it appears Athey could convene court July 11 if he thought Henry deserved an earlier consideration of her bond request.
Athey is in the midst of preparing for a move to the Virginia Appeals Court in September as Warren County prepares for a judicial juggling act. That juggling includes current Circuit Court Clerk Daryl Funk’s move to the bench in Juvenile and Domestic Relations Court and current J & D Court Judge William Sharpe’s move to the Circuit Court bench. However, it was noted during Tuesday’s hearing discussion that Sharpe would likely recuse himself from EDA cases because he knows involved people.
And speaking of involved people, Assistant Commonwealth’s Attorney Bryan Layton argued that like her former EDA boss Jennifer McDonald, Henry should be denied bond. Athey twice denied bond to McDonald, citing her as a possible flight risk were she to have access to even 10% of the allegedly misdirected EDA assets now cited at over $21 million.
Layton informed Judge Horne of the scope of the EDA civil litigation seeking recovery of those millions of dollars. He noted that among the 12 felony indictments McDonald has thus far been served, wire transfers were involved which he noted “Henry normally assisted in” though he did observe that Henry has not been charged related to those McDonald wire transfer-related indictments.
What she is charged with Layton told the court, is involvement in the handling of one property the EDA purchased and made a small business loan to in order to help finance a retail operation in. It is involvement Layton concluded was “a betrayal of the public trust” in prefacing his request that Henry continue to be held without bond on the two felony financial charges against her.
“The prosecution is trying to shoehorn her on to collateral charges against the other, main defendant,” attorney Ryan Nuzzo said in rebutting Layton’s portrayal of his client.
Nuzzo noted that the dates of the charges related to the B&G Goods transactions at the base of his client’s case were between October 1 and December 30, 2016 and September 1, 2014 to December 30, 2016.
“These are very old actions …If she was a flight risk she would have fled by now,” Nuzzo told the court.
Nuzzo pointed out that one family member not present for Henry’s Tuesday morning hearing was her husband Garnett. That absence was due to medical issues with his back in the wake of a backhoe accident from which he has recurring symptoms. His client, Nuzzo told the court, was instrumental in helping her husband through the “bad spells” he encounters as a consequence of that accident. Much of that assistance comes in the home Missy and Garnett Henry built and have lived in since 1990, Nuzzo pointed out of his client’s long-time ties to this community.
Her attorney also argued that being free on bond would allow Henry to better assist in preparation of her defense against the charges. Nuzzo told the court Henry has no previous criminal record and had been cooperative whenever she had been called before the Special Grand Jury looking into the EDA matter.
Ironically it is the same Special Grand Jury that handed down the two sealed, felony indictments against her.
RSW Jail Superintendent Russ Gilkison said that following her bond hearing Tuesday, Henry was transferred to the Prince William Adult Detention Center. The move, similar to McDonald’s June 11 transfer to the Fairfax County Adult Detention Center, is called a courtesy hold and does not cost the transferring facility any additional housing costs above what would be incurred if the inmate remained housed where they were booked.
As with McDonald the move is to allow a more normalized experience of incarceration for Henry. Due to the emotionally volatile and high-profile nature of the EDA case involving the alleged misuse of public funds for personal gain, McDonald had been held in protective custody isolation from the time of her May 24 arrest until her June 11 transfer from RSW. Responding to a question, Gilkison said the fact Henry and McDonald are co-defendants in that same high-profile case factored into the decision not to transfer them into the same facility.