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EDA in Focus

EDA completes audits for 2018 and 2019; 2020 audit is next

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The Board of Directors of the Front Royal and Warren County Economic Development Authority accepted its audited financial statements for fiscal years 2018 and 2019, today, October 5, 2021. The audit of the financial statements was conducted by the firm of Brown Edwards, CPAs of Harrisonburg, VA.

“We have received the final outside audits conducted for 2018 and 2019,” said EDA Board Chairman Jeff Browne.  “This was a huge effort on the part of Brown Edwards, and they have done very good work in challenging circumstances. Getting these two financial audits completed is a major step forward in putting the EDA’s past difficulties behind us. Now we can better focus on economic development issues to benefit the community.”

“The auditors’ letter points to three areas for improvement of internal controls,” Browne said. “It was important to make each improvement recommended by the CPAs, and we have done just that. The Warren County staff now administer the check-writing duties, collection of rents, and have layers of approvals for expenses within EDA and the County administration that were not there three years ago.”

The audited financial statements show that, at the end of the fiscal year 2019, the EDA’s total net assets were $38,036,737, and its net liabilities were $44,575,435, resulting in a deficit net position of $6,538,698. The EDA will work with Warren County’s auditors starting with the fiscal year 2020, which audit can now be undertaken.


Final Financial Statement 10-5-21

Final Letter to governance

 The EDA Board of Directors will have their next regular monthly board meeting via Zoom on Friday, October 29, 2021, at 9 a.m.

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Front Royal Virginia

EDA in Focus

Jennifer McDonald’s case deemed ‘complex’, criminal trial pushed back to May 2023

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Former Front Royal-Warren County Economic Development Authority Executive Director Jennifer Rae McDonald’s criminal trial will not commence on Oct. 11, as previously scheduled.
A U.S. District Court in the Western District of Virginia judge has put off Jennifer R. McDonald’s trial on fraud, money laundering, and identity theft charges until May 2023.
McDonald is accused of embezzling money from the Front Royal-Warren County Economic Development Authority while serving as its executive director and using the money to buy real estate and conduct other personal business.

Jennifer McDonald’s criminal case has been declared “complex”, meaning it can be pushed back without violating speedy trial laws. The case, slated to be held this fall, has been rescheduled for May 2023.

The federal trial was scheduled to begin October 11, which had been pushed from an earlier date after McDonald’s defense attorney, Assistant Federal Public Defender Andrea Harris, requested more time given the voluminous amount of evidence she received from the prosecutor’s office as well as the additional electronic discovery that includes forensic examinations of multiple key electronic devices.

A June 23 motion filed in federal court by Harris stated that the “additional discovery is contained on a hard drive and takes up 356 gigabytes of space. One of the devices alone contains more than 45,000 emails and almost 10,000 documents.


“These particular electronic devices are likely to be critically important to further investigation of this case, and there will likely be the need for additional independent forensic analysis of one or more of these devices.”

Harris and U.S. Attorney Christopher Cavanaugh on June 21 filed a joint motion asking the court to designate the case as complex, to exclude time from the speedy trial requirements, and the defendant’s unopposed motion to put off the trial date. U.S. District Judge Elizabeth K. Dillon granted the motions on Monday, June 27.

Dillon rescheduled the trial to begin in mid-May 2023 and designated the case as complex under federal rules and ordered that the court exclude the time period of June 21, 2022-May 15, 2023, from the Speedy Trial Act deadline calculation.

Per law, a defendant’s trial date must begin within 70 days of the indictment filing date or the defendant’s initial court appearance. A judge can set a new date without violating a person’s rights under the act if failing to grant such a request would deny either party time needed to prepare their cases.

On August 25, 2021, a Grand Jury returned an indictment charging McDonald with 34 counts of bank fraud, wire fraud, money laundering, and aggravated identity theft, with some allegations dating back to 2014.

The indictment came following a complex and lengthy state and federal investigation conducted by a state special grand jury and the Federal Bureau of Investigations. (FBI) The investigation began in 2018, continued through Ms. McDonald’s indictment almost three years later, and continues today.

The motion states that the Federal Defender’s Office currently has two attorneys, an investigator, and two paralegals working on the case due to the volume of discovery and number of witnesses.
McDonald made her first appearance in the court on Aug. 31, 2021, with private counsel. The court then appointed a federal defender to represent McDonald. She was arraigned on September 3 and initially scheduled a one-day trial for November 3.

The defense filed a motion to continue on October 26, which the court granted; a six-week trial was scheduled to begin October 11, 2022.

A civil lawsuit filed in the Warren County Circuit Court by the Front Royal-Warren County Economic Development Authority claims defendants including McDonald participated in schemes using EDA money without permission to conduct real estate transactions and other personal business. McDonald and several co-defendants have since been dismissed as parties to the lawsuit through partial summary judgments.

The civil trials in the case are scheduled to begin in early July and will likely lead to further investigation Harris said and would involve overlapping issues and witnesses and are also relevant to effective preparation in McDonald’s criminal trial.

With over one million pages of discovery documents and the judge declaring the criminal case a complex one, it’s anyone’s guess when we’ll see McDonald in the courtroom.

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EDA in Focus

Summary of action items and board reports of FR-WC EDA meeting of June 24

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The Front Royal-Warren County EDA held the monthly meeting on Friday, June 24th at 8 AM. All Board members and the Executive Director were present.

Executive Director Joe Petty presented the request from the Town for a Utility Easement located on the Avtex site. The specific location is the parking lot area where the EDA and Laurel Ridge Community College (formerly Lord Fairfax) are in partnership where the school’s commercial truck driving class is located. The purpose of the easement is to correct storm-water management issues impacting 610-B and 612 W. 11th street. The board approved the immediate repair and replacement to the culvert and box to prevent further flooding of the 11th street area affected. The Board deferred approval of the of the proposed new 36-inch line until additional information on the easement is provided.

The Board also approved the release of Parcel 15 on Fairgrounds Road. The release was tabled at the May meeting because the Parcel 15 was not identified by address. The release is for 415 Fairgrounds Road which the EDA sold to Timberworks.

Jeff Browne, Chairperson, presented a request from Citi Bank to bundle the Royal Arms bond with other bonds to allow more funds available for affordable housing projects. After a thorough review by our attorney to insure there is no impact on the current bond agreement and a recommendation by the attorney to approve the board unanimously approved the request. The EDA board fully supports more funding for affordable housing.


Jorie Martin and Scott Jenkins presented the Avtex Committee report. The committee held two meetings in June to review past studies and recommendations. The committee decided to focus on the site in four parts. The first part is the Conservancy Side, second is the plant side, third side is the parking lot area adjacent to the police department and currently where the truck school is located, and the final piece is the West Bank across the river.

The Board discussed the committee report at length and and directed the committee to address questions raised and prepare a presentation at the July meeting. The board will be working with all stakeholders as the development moves forward. The full committee report is on the EDA website: www.wceda.com.

The board discussed integrating the EDA website with the county’s website. EDA Director Petty will be working with the county’s IT department and the EDA board on the project.

Joe Petty presented an update on the Small Business Loan Program. The accounts are in order and the EDA goal is to reestablish the Small Business Loan Committee and make the money available to small businesses in the town and county.

The board concluded with a closed session to discuss business opportunities and the pending litigations.

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EDA in Focus

Out of Friday Closed Session, EDA announces Settlement Agreement with Linda Hassenplug in financial scandal civil case claim

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Following a lengthy closed session to open its meeting of Friday, May 27th, the Warren County Economic Development Authority Board of Directors announced a civil case Settlement Agreement with Linda Hassenplug related to her former Little Rug Rats daycare center. Hassenplug, Jennifer McDonald’s mother, was one of the co-defendants named by the EDA in its civil litigation effort to recover as much as $21 million in assets the EDA believes to have been misdirected to the personal financial gain of herself and others by former EDA Executive Director Jennifer McDonald between 2014 and 2018.

That Settlement Agreement as described to Royal Examiner by EDA Board Chairman Jeff Browne, is for payment of $50,000 at a 6% interest rate at the time Hassenplug and her husband’s house is sold. As we understand the agreement there is no imposed timeframe on the Hassenplugs having to leave their home. But as with the “no-fault” $9-million civil case Settlement Agreement also involving real estate reached with McDonald earlier, resolution of EDA claims outside the courtroom reduces the time and resources put into legal actions related to asset recovery tied to the financial scandal. Settlements with four or five other civil case defendants have also been reached.

The WC EDA office off Kendrick Ln. where the May 27 meeting was held, and another financial scandal civil case Settlement Agreement was announced.

In other business the EDA board approved a change in its bylaws as it currently operates with two vacant board positions. That change reduces the number of members required to be present to create a meeting quorum from four to three. The four-person quorum was created for a full seven-person board. At two members down, the EDA board is currently at five.


Also approved at the meeting was an annual housekeeping matter, reaffirmation of the Support Agreement with First Bank and Trust of Winchester on the EDA’s reworked loan package. As Browne explained, that renegotiated loan package accomplished several years ago saved the EDA several hundred thousand dollars over the life of the loan.

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Crime/Court

Update: April Petty awaits Judge’s decision on motion to dismiss EDA civil case seeking return of $125,000 received from Jennifer McDonald during 2016 home sale process

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(Author’s note: As of Saturday morning, May 28, at 11:15 a.m. this story has been updated with additional detail on the $125,000 check transferred from an EDA account by Jennifer McDonald to Ocwen Loan Servicing LLC during April Petty’s 2016 home sale process.)

Judge Bruce D. Albertson took dueling arguments on a defense motion to issue a summary judgment dismissing all civil claims regarding the FR-WC EDA’s action against defendant April Petty under advisement Tuesday afternoon, May 24. Cullen Seltzer represented the plaintiff EDA, now trading as the Warren County EDA in the wake of the Town of Front Royal pulling out of involvement as it litigates against the half-century-old joint Town-County EDA over disputed losses tied to the FR-WC EDA financial scandal. Petty was represented by defense counsel William Shmidheiser III.

Petty’s case, among a number of others alleged as beneficiaries and co-conspirators of former EDA Executive Director Jennifer McDonald are scheduled for civil court trials beginning in early July. Following taking the Petty motion under advisement the court dealt with jury selection issues with attorneys for a number of civil case defendants patched in by phone. Those included counsel for Truc “Curt” Tran and ITFederal, Donnie Poe and Earthlink Energy, Ms. Hassenplug, and Samuel North. With input from Circuit Court Clerk Angie Moore, it was decided a rather complex process involving a fairly large jury pool with begin Wednesday and Thursday June 29th and 30th.

The Petty dismissal motion filing dated April 21 targets all five aspects of the EDA’s civil case against Petty, scheduled for jury trial on July 5 and 6. All the civil liability aspects of the plaintiff EDA’s case against Petty revolve around receipt of a $125,000 EDA check from Jennifer McDonald that was applied to payment on a mortgage loan at Ocwen Loan Servicing on Petty’s home, during Petty’s 2016 effort to sell that home. That money is cited as part of the estimated $21 million in EDA assets that McDonald is alleged to have misdirected to unauthorized personal use and benefit of herself and others.


The five aspects of the plaintiff’s case against Petty are “Unjust Enrichment”, the receipt of benefit by one party from another without a reciprocal benefit to the other party (in this case the EDA); “Conversion” (unauthorized possession); application of the “ultra vires” standard of acting beyond one’s legal authority; “Conspiracy” in knowingly acting in concert with Jennifer McDonald in the receipt of misdirected EDA assets; and “Fraud” related to the “Conspiracy” allegation that Petty knew that $125,000 McDonald applied to her mortgage loan was money the EDA asserts was stolen.

Plaintiff EDA and civil case defendant April Petty are awaiting the court’s ruling on her motion for dismissal of case against her. Royal Examiner File Photos by Roger Bianchini

Petty’s attorney pointed out that when an earlier grand jury was handing out blanket criminal indictments against alleged McDonald co-conspirators including two full EDA oversight boards, April Petty was not one of those indicted by the grand jury. Pointing to what he believes is a lack of evidence against his client having any knowledge of the alleged embezzlement conspiracy, Shmidheiser asserted to the court that “all the charges” related to the plaintiff’s “conspiracy theory” involving her should be dismissed. Essentially that is the final four of the five above EDA claims against Petty.

“All they had, have today is the check,” Shmidheiser told the court of the $125,000 check drawn on an EDA account appearing to be co-signed by McDonald and then EDA Board of Directors Chair Patricia Wines made to Ocwen (misspelled as Owen) Loan Servicing LLC that was applied to Petty’s home sale price.

At this point Judge Albertson asked defense counsel if McDonald had, in fact, transferred that money to April Petty. “Yes, but April Petty did not know that it was embezzled money,” her attorney said walking a legal tight rope between knowledge and consequence.

“You’re asking me to skip over the trial part of this case,” Judge Albertson told Shmidheiser. “Yes, I am,” defense counsel replied moving toward his argument against the “Unjust Enrichment” aspect of the case against Petty.

Noting his client’s belief McDonald was acting in her role as a real estate agent with Century 21 Real Estate in helping Petty accomplish the sale of her home, Shmidheiser asserted that his client was not by legal definition “unjustly enriched”. He elaborated that in exchange for the $125,000 check Petty believed was fronted to her mortgage loan to help facilitate her home sale, “plus another $210,000 Petty received at Closing on her home, she Deeded her house, which was listed for $330,000, to purchasers Mr. and Mrs. Leary,” Shmidheiser explained.

“She didn’t get money for nothing, she got money for her house,” the defense attorney later elaborated to this reporter on his courtroom arguments. During those arguments in support of his motion for a dismissal of the civil case against his client, Shmidheiser revealed how he prioritized his case for dismissal. And it appeared he felt the optimum legal path forward if a trial was required would be in dispelling the notion that April Petty was a conscious co-conspirator of Jennifer McDonald’s in her alleged embezzlement schemes.

“We’ll live with all but ‘Unjust Enrichment’,” Shmidheiser told the court of the prospect of a two-day trial in early July. “I’m confident we will win at trial,” Shmidheiser added of having to present the defense case to a jury on the conspiracy aspect of the EDA’s civil claims against his client.

Defense counsel also cited an established three-year statute of limitation standard he said the plaintiff had not met in charging his client for liability for funds she received in March 2016. The case of Belcher vs. Kirkwood was cited by Shmidheiser in support of the three-year statute of limitations having expired by the time his client was charged civilly. To not apply the three-year Statute of Limitations precedent would be tantamount to the court altering existing state legal precedent, which the defense attorney theorized would lead to a higher court reversal of denial of his motion for dismissal on the Unjust Enrichment aspect.

Counterpoint

In countering Shmidheiser’s arguments, EDA attorney Cullen Seltzer disputed defense assertions surrounding the applicability of the Belcher vs. Kirkwood case in an alleged financial fraud not discovered at the time it was occurring in 2016 when Ms. Petty is believed by the plaintiff to have been involved. He also argued that the defense points being made in support of a motion for dismissal were more appropriate for a jury to hear for a finding of guilt or innocence.

For dismissal to be granted the defense must show that “no facts are in dispute” Seltzer told the court. And from the plaintiff’s perspective that is not the case. Seltzer noted that Petty admits the $125,000 check went to pay on her mortgage loan during her sale process.

“She was very anxious to sell,” Seltzer told the court of Petty’s motivation to accept money he said she had expressed “suspicion” about when offered. Of his client’s initial “suspicions” about the money offered from an EDA account referenced by the EDA attorney during arguments, Shmidheiser noted that Petty had been assured by, not only McDonald, but others that it was “business as usual” on the economic development/real estate transaction front.

Of Petty’s close friend Robin Richardson, who was said to have brought McDonald to Petty during her attempt to sell her house, plaintiff counsel told the court of a second transfer of funds. Seltzer asserted that when Petty put “almost $42,000 in her pocket from her home sale, she had given Ms. Richardson $10,000. Is there evidence that was money previously owed by Petty to Richardson or was it comparable to a “finder’s fee” for bringing McDonald into the picture to help facilitate the home sale with the $125,000 loan payment on Petty’s behalf, Seltzer asked the court.

And now both plaintiff and defendant are awaiting the court’s ruling on all aspects of the defense motion for summary judgment on dismissal of the case against April Petty.

The EDA office on Kendrick Lane was ground zero as the alleged financial scandal unfolded between 2014 and 2018.

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EDA in Focus

WC EDA explores property sales, LFCC intern program, and meeting notification updates

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The Board of Directors of the Front Royal and Warren County Economic Development Authority held the monthly board meeting on April 22, 2022, in person at the Warren County Government Center. The Board held the open session first. Items on the open agenda were change in time for the monthly Board of Directors’ meeting, review of the EDA properties, update of list for individual notice for EDA meetings, and an intern program.

The Board reviewed the EDA properties and possible avenues for disposition of the parcels. Jeff Browne stated LFCC interns would be available in May for possible EDA projects. The interns would be working for credit. Jeff asked board members to get back to him by April 29th at the latest with any ideas. Potential projects include review and organization of past strategic plans for the EDA and community and making them available to all at the library.

Jorie Martin, secretary, stated all monthly meeting dates and special meetings of the EDA are posted on the website currently with the agenda. Jorie informed the board currently notice is sent to 32 individuals who requested to be individually notified of all meetings via email. The notification list has not been updated for over 18 months. Jorie Martin requested the board authorize her to notify current individuals on the list that all meetings are posted on the web and to verify they wish to continue with individual notice. The board agreed notice could be sent to persons currently on the list confirming their desire to continue to receive individual notice. In addition, anyone currently not on the list but would like to receive individual notice via email of all EDA meetings please send an email to mmartin@wceda.com.

Jeff Browne requested the EDA meetings return to 8 a.m. on the fourth Friday and the meeting location return to the EDA building. The board unanimously supported the changes. The changes will be posted on the website.


The Board went into closed session and no motions were made a result of closed session.

The next meeting is May 27th at 8 a.m. Please note time change. All meetings are posted on the website.

(A WC EDA Press Release)

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EDA in Focus

WC EDA takes no action out of Special Meeting Closed Session 

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The Front Royal-Warren County Economic Development Authority (EDA or WC EDA), now working without Town of Front Royal involvement in the midst of Town-initiated civil litigations regarding relative liabilities and losses from the 2014-18 EDA financial scandal, held a Special Meeting at 9 AM Friday morning, April 8, to convene a Closed or Executive Session to discuss five matters. Two of those were the now dueling civil litigations between the WC EDA and Town of Front Royal. The other three related to possible real estate transactions.

The agenda listed the real estate discussions as involving “Avtex Redevelopment”; the “426 Baugh Drive” property; and the “Happy Creek Industrial Park” and “legal advice” related to those three matters.

EDA Board Chairman Jeff Browne confirmed there were no announcements or actions taken out of the closed session. The now County overseen EDA met at the Warren County Government Center.

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Thank You to our Local Business Participants:

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Aire Serv Heating and Air Conditioning

Apple Dumpling Learning Center

Apple House

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Beaver Tree Services

Blake and Co. Hair Spa

Blue Ridge Arts Council

Blue Ridge Education

BNI Shenandoah Valley

C&C's Ice Cream Shop

Christine Binnix - McEnearney Associates

Code Ninjas Front Royal

Cool Techs Heating and Air

Down Home Comfort Bakery

Downtown Market

Dusty's Country Store

Edward Jones-Bret Hrbek

Explore Art & Clay

Family Preservation Services

First Baptist Church

Front Royal Women's Resource Center

Front Royal-Warren County Chamber of Commerce

G&M Auto Sales Inc

Garcia & Gavino Family Bakery

Gourmet Delights Gifts & Framing

Green to Ground Electrical

Groups Recover Together

House of Hope

I Want Candy

I'm Just Me Movement

Jen Avery, REALTOR & Jenspiration, LLC

Key Move Properties, LLC

KW Solutions

Legal Services Plans of Northern Shenendoah

Main Street Travel

Makeover Marketing Systems

Marlow Automotive Group

Mary Carnahan Graphic Design

Merchants on Main Street

Mountain Trails

National Media Services

No Doubt Accounting

Northwestern Community Services Board

Ole Timers Antiques

Penny Lane Hair Co.

Philip Vaught Real Estate Management

Phoenix Project

Reaching Out Now

Rotary Club of Warren County

Royal Blends Nutrition

Royal Cinemas

Royal Examiner

Royal Family Bowling Center

Royal Oak Bookshop

Royal Oak Computers

Royal Oak Bookshop

Royal Spice

Ruby Yoga

Salvation Army

Samuels Public Library

SaVida Health

Skyline Insurance

St. Luke Community Clinic

Studio Verde

The Institute for Association & Nonprofit Research

The Studio-A Place for Learning

The Valley Today - The River 95.3

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Valley Chorale

Vetbuilder.com

Warren Charge (Bennett's Chapel, Limeton, Asbury)

Warren Coalition

Warren County Democratic Committee

Warren County Department of Social Services

Warrior Psychotherapy Services, PLLC

WCPS Work-Based Learning

What Matters & Beth Medved Waller, Inc Real Estate

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Woodward House on Manor Grade

King Cartoons

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Upcoming Events

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11:30 am Declaration of Independence reading @ Warren Heritage Society
Declaration of Independence reading @ Warren Heritage Society
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On 2 July, at 11:30, the Colonel James Wood II Chapter of the Sons of the American Revolution will read the Declaration of Independence on the porch of the Archives at the Warren Heritage Society. [...]
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Fire Pit Fridays @ Shenandoah Valley Golf Club
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Fire Pit Fridays @ Shenandoah Valley Golf Club
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Great American Campout @ Sky Meadows State Park
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Front Royal Wednesday Night Bingo @ Front Royal Volunteer Fire Deptartment
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