We asked Front Royal-Warren County Economic Development Director Jennifer McDonald about Councilwoman Bébhinn Egger’s original line of questioning about ITFederal at the October 24, 2016 Council meeting; and the subsequent public portrayal of company CEO “Curt” Tran’s reaction to Egger’s line of questioning. Egger alleged a “Perfect Storm of Silence” surrounding ITFederal as delays in final approval of the negotiated deal with the EDA drug on for over a year. She also raised questions about the reliability of companies funded through the EB-5 visa program. Then you had Councilman Bret Hrbek voice not only concerns Tran was re-considering his investment at Royal Phoenix, but suspicions of intentional delays orchestrated by the Office of Democratic Governor Terry McAuliffe in State DEQ permitting.
QUESTION: So Jennifer, what is going on with ITFederal and the process to bring, and keep it here?!!?
Jennifer McDonald: The EDA applied for the DEQ permit November 25th 2014, we received the permit November 16th, 2015. Nothing Mr. Tran did caused this delay; this was simply a year-long process to get a stormwater permit from DEQ. (writer’s note: ITFederal did not enter the Royal Phoenix equation until June 2015, and a contract with the EDA for the 30-acre Lot 6 parcel was not agreed upon until September 2015. So DEQ permitting came within two months of the deal being announced, and exactly three weeks after ITFederal’s ceremonial groundbreaking.)
Blair Mitchell, Counsel for the EDA at the time, sent a letter to EPA requesting the partial satisfaction. That letter was sent September 15th, 2015. The EDA received the signed letter back from EPA September 23rd, 2016. Not a single thing that Mr. Tran did to cause this delay in receiving this letter.
During the time period that Mr. Tran was putting his site plan together he had met with Town staff several times to discuss the layout and design of West Main Street extended because his development was based upon the design and features of that road and if VDOT was going to participate in the funding of the road. If VDOT would not fund their portion ITFederal would have to put their entrance off Kendrick Lane rather than West Main Street extended. – Again, nothing that Mr. Tran could control.
QUESTION: We asked McDonald about her effort to get a response to Councilwoman Egger’s request that Sixth District Congressman Bob Goodlatte, whom McDonald has credited with bringing the company to the EDA as an “Economic Development Opportunity”, for an official endorsement of ITFederal’s business model.
J McD: I did send Mr. Goodlatte’s office a request for a letter supporting the legitimacy of ITFederal on November 15th after Ms. Egger’s request. I did not hear anything back from the office and sent another email asking if they had seen my request and received an email that staff had been in D.C. at a meeting. He replied that he would get back to me with the Congressman’s answer. We have not received a reply.
Q – Are there precedents for the type of up-front economic incentive done for ITFederal, in this case a one-dollar sale on a parcel valued at $2-million? Also, were there difficulties in marketing a Superfund site that played into the decision to give away the first commercial lot?
J McD: There absolutely is a precedent for this type of economic development incentive. Back in the early 90’s when the County was trying to jumpstart the economic growth they offered free land to Toray for jobs investment and tax investment. Toray has been in the community since 1995, so it seems that this type of incentive works and turns out to be a great investment for the community. Also, PenTab was offered land at a very reduced rate to attract their company. Now the community has a taxable piece of property and a building that remains occupied. This is economic development 101 and happens across the Country during hard economic times or with difficult sites to develop.
It is not as easy as everyone thinks marketing a Superfund site to potential users. The word Superfund alone scares investors away. We were lucky that Mr. Tran was willing to be the first to take a chance on development. Once others see there is no danger in putting a business on a completely re-mediated site, then it will be much easier to recruit and develop.
It was the belief of the EDA, EPA, and FMC that taking a loss on the sale of the first 30 acres of the site in order to start the redevelopment efforts was worth the risk. These three agencies are the ones taking the loss upfront, not the Town of Front Royal and we were willing to do so to generate the investment and would most likely make that decision again if we had to.
Q – Also, can you explain a little about jobs ITFederal will create versus other businesses he may market to – you/EDA talked about a “Campus” on the Lot 6 parcel, I think there is confusion about how much space he and his business interests will occupy versus other business he will market to as clients, retail or whatever they may be.
J McD: The complex will include approximately 37,000 square feet of office spaces for ITF, a 10,000 square foot cloud data center facility and approximately 20,000 s.f. of space that ITF will rent out to retail and commercial customers (10,000 s.f. on first floor of phase 1A and 10,000 s.f. on phase 2B)
As for job creation you can see from the table below what the anticipated ITF jobs will be salary wise and a total of jobs for the entire ITF operation based on year. Year 1 was based on a start date of Fall 2015, so the numbers are a little lower because of the time of year. All of these jobs are strictly ITF jobs and not related to the retail component.
|Year 1||Year 2||Year 3||Year 4||Year 5|
|NRC Contract Staff||$2,249,724||$5,155,900||$6,233,850||$7,480,550||$8,228,500|
|Other Contracts Staff||$889,000||$1,778,000||$2,667,000||$4,000,500||$6,000,750|
|NRC Subcontractors Staff||$642,779||$1,187,400||$1,781,100||$2,137,300||$2,351,000|
|Other Subcontractors Staff||$254,000||$508,000||$762,000||$1,143,000||$1,714,500|
|Other Government Staff||$0||$225,000||$337,500||$675,000||$1,012,500|
|Commercial Business Staff||$67,500||$525,000||$1,050,000||$2,100,000||$4,200,000|
Below is a chart that depicts first year jobs including direct and indirect jobs. This is the chart that shows construction jobs and retail jobs that are not included in ITF job count that was given to the EDA for consideration.
|Direct Empl||Indirect Empl||Induced Empl||Total Empl|
|Facility Engineering, Maintenance||51.4||5.5||12.0||68.9|
|Computer/Com. Design, Maintenance||12.8||8.9||11.8||33.5|
So we based our job count on the 705 jobs for IT operation, Facility engineering, computer/communications design and cloud services.
As the EDA views this, any developer that is interested in developing this parcel to be for their own use or to lease out for commercial use it is still a win for the Town of Front Royal because of the tax investment in real estate and personal property. Back in 2006 the EDA considered selling the entire parcel to Lerner for development because of the tax investment involved. At that time everyone thought that was a great idea, but unfortunately Lerner became nervous because it was a Superfund site.
Q – How big was the Commonwealth Transportation Board Main Street extension okay you mentioned at the December EDA Board meeting – how much will the state contribute? Could you also explain the $150,000 Tran offered the Town to that road project in lieu of the bridge loan interest in months two and three?
J McD: The Town applied for a matching grant for the first phase of West Main Street extended. I believe they applied for a $650,000 grant, ($500,000 unmatched, $150,000 matched). Mr. Tran agreed that in lieu of interest for months 2 & 3 of the bridge loan that has been paid in full, he would donate $150,000 towards the road construction. The Town agreed to that arrangement.
Q – Can you comment on Hrbek’s politicizing the delays & suggesting maybe the Democratic Governor’s Office purposefully used DEQ to delay construction because “he was mad Goodlatte got credit for bringing them here” even though as Hrbek phrased it, he (the governor) offered more in the way of economic incentives.
J McD: DEQ is a State organization that has control over the stormwater, so I’m not sure McAuliffe had anything to do with that delay.
Q – And finally, Mr. Tran’s readiness to proceed from last year as originally hoped; his willingness to take on 30 acres at a former Superfund site, and other things he may be involved in, at Millennium Lotus or wherever – tell us exactly what someone willing to invest in THIS community, even relocate here, can mean economically – and the impact of the negativity or questions that have arisen during the year-plus of delays he did not create?
J McD: The EDA’s goal when recruiting a large industry or company tries to also recruit the President or head of the company to locate their family to the community.
That way they become involved in the community and have a vested interest. We now have one of the best school systems we’ve had in years and our healthcare system continues to improve, so marketing the community to not only the company, but to the owner of the company seems pretty easy from our point of view. This time it worked, Mr. Tran loves this Town and wanted to be a part of it not only as a businessman, but as a resident. So we considered that a success, not a scam.
Q – Would Mr. Tran really consider taking his $40-million ball and going home — or to Shenandoah County, as Mr. Hrbek suggested was the case on Nov. 14?
J McD: As I mentioned to you, Mr. Tran is not mad that anyone questioned the validity of a company moving to the area, but he is very angry that someone made a personal attack on him and called him a money launderer and scam artist. The personal attack was unnecessary and frankly viewed by some as illegal. I don’t know if you remember when former Council members had lawsuits filed against them for similar comments.
Again, I remind everyone that the Town of Front Royal has not invested a single dollar in this company. They have not offered ITFederal any incentives, they have not been asked to offer any incentives; they have, however, been offered $150,000 towards the construction of their road and have been offered an investment on a Superfund site owned by the EDA that will generate tax revenue for the Town of Front Royal. Not sure where the downside is for the Town of Front Royal or its citizens. If it’s a risk that we get 400-600 jobs and $40 million worth of investment, it’s a risk the EDA Board of Directors was willing to take.
Workforce Housing Project
Q – While we had the EDA Executive Director’s ear, we decided to ask about the EDA Board decision to enter the apartment-management business related to the Workforce Housing Project. Some have questioned whether it is appropriate for the EDA to be involved in apartment management, even if it relates to the young, local professional workforce it is designed to serve – and keep in this community.
J McD: The EDA has worked diligently on the workforce housing project for 10 years trying to get developers to step up to the plate to do the development of non-subsidized, quality apartments for our workforce. Not a single developer stepped up to make it happen, so the EDA decided we would work on this on our own accord. Once we made the announcement a few developers stepped up and wanted to participate, but at that time we had already made a commitment to the grant that we would own the property and it was put in our Special Use Permit by the Town.
A comment was made at a recent Council meeting that they had never heard of an EDA getting involved in this type of activity and that is true, but at the same time we were the first EDA to offer small business loans to start-up or existing businesses and that program has been very successful in providing over $1.7million dollars to local businesses, 85% of which were Main Street businesses. We are one of very few EDA’s that gets involved with road and utility infrastructure projects like the Leach Run Parkway, Baugh Drive Extension, West Main Street extended, and corridor utility extension. So, yes we are thinking outside of the box and the Board of Directors felt very confident that it is the right thing to do for the workforce of this community.
EDA presents budget proposal to Board of Supervisors; delinquent taxes from contractors
On Tuesday, February 11 at the evening work session of the Warren County Board of Supervisors, the EDA Board and staff presented its budget proposal to get through the final 3 1/2 months of this fiscal year and to continue into FY 2021.
Also included on the agenda was a discussion with Building official David Beahm and Commissioner of the Revenue Sherry Sours on the payment of delinquent taxes and business license fees by contractors prior to issuance of building permits.
County Administrator Doug Stanley discussed the Department of Environmental Quality Financial Assurance requirements. Also, Stanley, along with County Attorney Jason Ham, discussed the management and lease agreements of the Front Royal Golf Club.
See the presentations, including discussion of the Town’s $8 million-plus debt to the EDA on the new police station and the status of the Front Royal Golf Club in this exclusive Royal Examiner video:
EDA report to County – long-time annual auditor withdraws from lagging 2018 audit process
During one of six operational updates from entities with which it is either directly or indirectly involved at its Tuesday, February 4 meeting, the Warren County Board of Supervisors got what Front Royal-Warren County Economic Development Authority Executive Director Doug Parson called “bad” and “very disappointing” news.
That news was that long-time EDA auditor Yount-Hyde-Barbour had withdrawn from the EDA’s 2018 audit process. That process is running considerably behind as the EDA tries to get to the bottom of the final year of a number of years during which a contracted financial investigation by Cherry Bekaert, known for its forensic audit discoveries of criminal financial behavior, alleged a number of years of financial improprieties within EDA operations.
The Cherry Bekaert investigation conducted from mid-September 2018 into the spring of 2019 has resulted in a $21.3-million EDA civil litigation against what currently stands at 14 human and business entity defendants and multiple financial felony indictments by a special grand jury empaneled to investigate potential criminality tied to the EDA civil litigation. At the center of both the civil and criminal cases is former EDA Executive Director Jennifer McDonald.
It was Yount-Hyde-Barbour that was contracted by the EDA to conduct its annual audits during most, if not all of the years during which the EDA financial scandal is believed to have occurred. In recent months retired Warren County Finance Director Carolyn Stimmel and Heather Tweedie of the auditing firm Hottel-Willis have been pouring through the EDA’s 2018 financial records trying to ascertain what EDA assets went where, how, to what purpose and most importantly, were those purposes legitimate and authorized by the EDA Board of Directors.
Yount-Hyde-Barbour had been expected to take the result of Stimmel and Tweedie’s work to belatedly conduct their annual audit for 2018. Completion of that audit has been termed crucial to the
EDA’s future ability to function as it attempts to traverse the operational aftermath of the financial crimes alleged to have occurred under McDonald’s decade of executive leadership of the EDA.
One EDA civil case defendant’s attorney wondered aloud during a past motions hearing that if their client was a defendant for the financial actions alleged against them, why the EDA auditor that had rubber stamped the EDA’s finances annually through the years of alleged embezzlements and misdirection of assets, wasn’t also a defendant.
Could Yount-Hyde-Barbour’s withdrawal from the 2018 audit process be an indicator of potential legal issues between the auditor and the EDA? In response to media questions Sands Anderson attorney Dan Siegel, present with lead EDA civil case attorney Cullen Seltzer for a closed session discussion with County officials of the EDA’s civil case landscape, said only that EDA counsel continues to explore potential legal liability in many directions.
VDOT Revenue Sharing
In other business Tuesday, after a week’s delay to allow new supervisors to gather additional information, the county board unanimously approved the County’s contribution to the Virginia Department of Transportation (VDOT) Revenue Sharing Program. It was explained that the program that runs through multiple municipal fiscal year budgets allows involved municipalities to get a 50% revenue match from the State on needed and desired road improvements throughout the county.
Numbers presented projected the County’s contribution in the coming FY 2021 budget at $250,000. It was a number projected to remain constant in FY 2021 through FY 2024. Six total involved road project costs were cited at $2.9-million over a number of years, with a 25% County contribution total of $753,312.50 and a 25% contribution from involved Sanitary District and POA fees at $703,313.50.
Short-term rental permit
By a 3-2 margin, a divided board approved a short-term rental Conditional Use Permit (CUP) for Stephen J. Aron Jr. despite some objections from neighbors in the gated River Ridge Property Owners Association. Tony Carter and Archie Fox cast the two dissenting votes.
Carter cited neighbor concerns about security issues tied to the applicant’s efforts to recoup some of his residential property improvement costs in purchasing what he said at the earlier public hearing was the run-down home of what he described as the less than conscientious previous occupants. In explaining her vote for the CUP, Delores Oates noted that renters wouldn’t be given the code to the gate, but would utilize a locked key box key to activate entry to the gated community.
Carter replied that, that solution still allowed entry and access of strangers to a community that many residents may have located to for the additional security provided by locked access available only to residents and their guests.
During the January public hearing it was noted in favor of the request that many short-term rental operations do quite a bit of vetting of guests. The applicant indicated he intended to be conscientious about those allowed to stay at the residence he and his family plan to spend a great deal of time at themselves.
In addition to the EDA, other operational updates the county received were from VDOT, RSW Jail, the Virginia Cooperative Extension Service, Department of Social Services and the Town of Front Royal.
See a related story on the Town report; and see the full Warren County Board of Supervisors meeting – other than the 3-hour-plus closed session – in this Royal Examiner video:
Economic development proceeds amidst legal and Spotted Lanternfly threats
This reporter sat down with Front Royal-Warren County Economic Development Authority Board of Directors Vice-Chairman Jeff Browne and Executive Director Doug Parsons on Friday, January 31, to discuss the work they do amidst challenges they face in the aftermath of the financial scandal that developed during the executive leadership of Jennifer McDonald and a previous EDA board majority.
In what we hope is the first of at least monthly video interviews on EDA business and affairs, listen as Browne and Parsons describe how their time is budgeted as they continue the EDA’s work of business retention and recruitment in an environment of dueling civil litigations. They continue to offer an olive branch to the Front Royal Town Council to work together in good faith to determine exactly what the EDA owes the Town in allegedly misdirected EDA assets generated by Town taxpayers, as opposed to an increasingly expensive attorney-driven civil suit filed by the Town against its existing co-created EDA.
It is litigation, as is pointed out in the interview, in which town taxpayers face the unhappy task of funding both sides, as Town taxpayers for the plaintiff and as County taxpayers for the defendant.
And speaking of olive branches, Browne and Parsons conclude the interview by describing the economic threat presented by the expanding presence of the fruit-tree and grapevine feeding Spotted Lanternfly in Frederick County to our north; and how Warren County citizens and businesses can be on the alert to spot, report and mitigate early signs of the destructive bug’s presence in our county.
Watch the discussion in this exclusive Royal Examiner video:
Judge denies EDA civil suit defendants’ motions for removal from case
In a written ruling signed January 24 and filed in the Warren County Circuit Court Clerk’s Office on January 27, Judge Bruce D. Albertson denied a host of EDA civil litigation defense motions for removal from the case as alleged co-conspirators with central defendant, former EDA Executive Director Jennifer McDonald.
Among defendant attorneys involved in the December 12 motions hearing were those representing April Petty, Jesse Poe, Donald Poe and his Earth Right Energy (ERE) solar panel installation company, and ITFederal and its principal Truc “Curt” Tran.
The basis of those defense counsel arguments for dismissal of their clients from the civil case primarily revolved around the plaintiff’s notion of an overarching conspiracy that somehow links the various defendants to central figure and former EDA Executive Director McDonald; and that there are legally definable contractual breaches making those defendants individually liable for funds that came their way through McDonald.
At the December motions hearing christened “Groundhog Day” by one media rep present (guilty as charged) for the bulk of four-and-a-half-hours of repetitive legal arguments put forth by each defense attorney on essentially identical claims for removal of their clients from the civil case, lead plaintiff attorney Cullen Seltzer’s counter was briefer.
That was because Seltzer’s reply was essentially a one-response-fits-all argument. That response was 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 to the benefit of separate defendants in separate transactions. Seltzer scoffed at the idea of McDonald as “a rogue tornado” distributing EDA assets to various defendants without a general common knowledge that something illegal was transpiring to each defendant’s benefit.
“I deny each Demurrer and Plea in Bar for the reasons cited by the plaintiff,” Judge Albertson wrote in his brief, three paragraph ruling.
However, the judge also ruled that a plaintiff claim of “Breach of Fiduciary Duty” against all defendants, cited only McDonald and her former Administrative Assistant Michelle Henry for such action.
“Plaintiff alleges that this count applies to all defendants due to the conspiracy count. The manner in which this count is written, however, names only Ms. Henry and Ms. McDonald as parties that have breached this duty. I find that his count does not apply to the other defendants as written in the Amended Complaint,” the judge ruled.
The judge also continued a decision on Earth Right Energy’s “Plea in Bar and separate Motion for Sanctions” based on other arguments heard December 12. There was disagreement between ERE attorney Ryan Huttar and EDA counsel on the validity of contracts between the EDA and ERE in amounts over $10,000, which is most, if not all involved contracts.
EDA counsel noted that any EDA transaction or contract over $10,000 had to be approved by the EDA Board of Directors, which EDA counsel stated did not happen in the Earth Right Energy cases. However, Earth Right attorney Huttar contended the company’s contracts, including a $27-million one with the Warren County Public School system negotiated while Greg Drescher was both an EDA board member and superintendent of schools, were legally binding.
It appears a decision on those arguments will require additional factual information to be brought to the court.
Economic Development Authority Board of Directors Meeting – January 24, 2019
The Economic Development Authority held their monthly Board of Directors meeting on January 24, 2020.
One of the topics was the sale of the Stokes Market (most recent the Main Street Market) to William Huck, owner of C&C Frozen Treats on Main Street in Front Royal. Huck has been trying to remodel the property he owns adjacent to C&C but because of costs higher than anticipated and issues with zoning and permitting, he has been exploring other options to open his newest business known as My Lagniappe – it’s a Louisiana expression that means ‘An extra or unexpected gift or benefit, such as that given to customers when they purchase something.’ If you know Huck, you know he always offers his customers a little lagniappe.
The solar panels on the roof of the EDA office building was also a point of discussions. The EDA is advertising for any party interested in purchasing the solar electric system currently stationed on top of the EDA Building at 400 Kendrick Lane, Front Royal.
The RSW Jail has said they are not interested in the solar panels. The cost of installation and unknown purchase price makes the project not cost effective.
Discussion also included workforce housing, the 2018 audit, Afton Inn renovations and the big one, running out of money by March.
Watch the EDA Board at work in this exclusive Royal Examiner video:
Town given okay to amend its civil suit against EDA, with some explanation
Following a conference call with involved attorneys at their respective offices at 8:45 a.m., Friday morning, January 24, Judge Bruce D. Albertson granted the Town of Front Royal leave to amend its current $15 million civil filing against the Front Royal-Warren County Economic Development Authority. The Town has 30 days to file an amended suit and the EDA will have the option of filing a demur to dismiss the amended suit as not factually supported legally.
The Town initially filed its suit seeking the return of $3 million of its assets believed to have been misappropriated as part of the EDA financial scandal, on June 21, 2019. That filing was described by Town Attorney Doug Napier at the time as largely precautionary to prevent any statute of limitations deadlines from being passed on yet-to-be-determined fraudulent EDA transactions utilizing Town assets.
Just over three weeks later on July 12, the suit was amended to $15 million, as previously reported, still without any elaboration on the sources of that number.
Of the January 24 judicial okay to again amend its suit, Town Attorney Napier said any coming amendment would “have to be legally cognizable” – or accompanied by legally supportable documentation. Napier said the Town had a scheduled meeting with its contracted auditor, Mitchell and Company, next week. That meeting may shed light on which direction, and how far in either, the Town’s amended civil suit against the EDA will next go.
The EDA’s civil litigation against what has grown to a total of 14 human and business entity defendants currently stands at $21.3 million. And despite his being dropped from the list of EDA civil case defendants in the wake of his death last spring from a possibly self-inflicted gunshot wound, electronic computer and phone records of former Sheriff Daniel McEathron have recently been subpoenaed from his estate in the EDA civil suit.
The initial amendment to the original Town claim against the EDA coincided with the Town’s pulling back from participation in the “EDA Reform Committee” and three-way EDA-Town-County joint meeting efforts geared toward fixing what had gone wrong to allow the alleged misappropriations and embezzlements circling the former EDA executive director, Jennifer McDonald, to happen over a number of years.
At the helm of the EDA for a decade prior to her December 20, 2018 resignation, McDonald has been the central figure in both the civil and criminal cases brought as a result of the Cherry Bekaert investigation of EDA finances begun in September 2018. She currently faces 34 financial felony charges brought by the special grand jury empaneled to investigate potential criminality tied to EDA finances in recent years.
Stated justification for one publicly voiced Town financial dispute with the EDA, the 4% bond interest rate the Town has been asked to cover on construction of the new Front Royal Police Department headquarters, has pointed heavily at “promises” made by McDonald. Those promises revolved around anticipation the FRPD project would qualify for the New Market Tax Credit Program offered municipalities for economic growth capital improvement projects.
However, as a non-job creating project the FRPD construction did not qualify for what would have been a 1.5% interest rate over the 30-year life of the bond issue with funding through the NMTC Program. As that dispute festers on the edge of Town-EDA litigation, the Town has refused to pay what appears to be an undisputed $8.4-million in principal payments bill the EDA has submitted to the Town on the FRPD project.
Written references in a Memorandum of Agreement and Resolutions of support of the NMTC funding cite “anticipation” of the program’s funding and support of that funding being pursued.
Despite late 2017, early 2018 recommendations of then Town Manager Joe Waltz, Finance Director B. J. Wilson and People Inc. NMTC Program Administrator Bryan Phipps that a guaranteed bank-offered 2.65%, 30-year interest rate would be preferable to competing with multiple municipalities for limited NMTC funds, a council majority chose to hold out for the NMTC financing the FRPD project ultimately did not qualify for.
However, some Town officials have pointed to verbal promises made by McDonald that the funding was in place, as a basis for the Town claim it should not pay more than 1.5% interest rate tied to those promises.
A “legally cognizable” argument on one Town claim against the EDA?
Time will tell.