EDA to file second civil suit against 9 new real estate-involved defendants

Following a nearly two-hour closed session on Friday morning, the Front Royal-Warren County Economic Development Board of Directors approved a series of motions, including one authorizing new civil litigation against nine new defendants “to seek recovery of money and/or property wrongfully taken from the EDA”; and one authorizing a settlement agreement with local real estate attorney Joseph Silek, Jr.

The new civil action defendants include three local real estate or real estate settlement companies and settlement officials from those companies which facilitated real estate transactions cited in the Cherry Bekaert investigation of EDA finances commissioned by the EDA and Warren County in September 2018.

Defendants in the new EDA civil filing anticipated within a week are TLC Settlements, LLC, and settlement agent Tracy L. Bowers; Service Title of Front Royal, LLC and settlement coordinator and processor Victoria L. Williams; Century 21/Campbell Realty, Inc. and its principals Jeannette M. Campbell and Walter L. Campbell; as well as Rappawan, Inc. and William T. Vaught, Jr.

The Cherry Bekaert investigation of potentially fraudulent and/or criminal activity in the conduct of EDA financial affairs under the executive directorship of Jennifer McDonald has already resulted in a $21.3 million EDA civil suit against McDonald and 14 co-defendants; as well as 34 financial felony charges against McDonald and a lesser number of criminal charges against what was originally four McDonald personal and/or business associates, including her husband Samuel North, her former EDA Administrative Assistant Michelle Henry, former EDA small business loan recipient, and B&G Goods principal William Lambert, and Earth Right Energy principal Donald Poe.

Facing a January trial date less than two months after taking on the prosecution of EDA matters having generated an estimated million pages of documentation, Rockingham County-based Special Prosecutor Michael Parker dropped Poe’s charges, with the option to re-file them is determined to be warranted.

While we could not immediately find or verify what EDA transactions Service Title of Front Royal and its processor Williams were involved in, TLC Settlements name pops up repeatedly on page 62 of the Cherry Bekaert working papers report, including in the Buck Mountain Road transaction involving Rappawan and Vaught in which a sale-buy back within a month reflected a $600,000 loss on the McDonald/EDA side of the transaction.

“TLC Settlements … or its settlement agent” is also cited on page 16 of the Bekaert report regarding the 2016, $445,000 EDA purchase of the 3.5-acre Royal Lane “Workforce Housing” parcel from the Campbell’s, who are McDonald’s aunt and uncle. McDonald initially presented that property as a $10 gift to the EDA from the Campbells in return for tax credits. However, a later assertion that a tax credit deadline had been missed led to the necessity to either return the property or purchase it.

Between 2014/15 and 2020, the 3.5-acre Royal Lane parcel has been at the center of a dizzying sequence as a $10 gift, a perhaps over-priced $455k purchase, inadvertent $10 gift, and repurchase for $26k in expenses.

Ostensibly because of a half-million dollars in preparatory development or site work on the property having been paid for by the EDA, the $445,000 purchase was approved by the EDA board in 2016. McDonald later verified to Royal Examiner that about $16,000 for a VDOT traffic study was the only non-returnable money the EDA had invested in the Royal Lane property.

The eventual EDA sale of the Royal Lane parcel to Cornerstone LLC, believed to be a branch of the Aikens Group developers for $10 in late November 2018, is likely the reason for the $16,000 settlement agreement with real estate attorney Joe Silek Jr. Following the recusal of EDA/County Attorney Dan Whitten, Silek served as EDA counsel on the November 2018 Royal Lane parcel sales transaction.

Written off as a $600,000-plus loss by the EDA four months later when the EDA’s first civil litigation was filed on March 26, 2019, at the time Silek told Royal Examiner that the Royal Lane Deed of Sale was sent to Cornerstone’s Winchester’s attorneys’ group with no sales price on it. Then-EDA Board Chairman Gray Blanton said he only saw the deed’s signature page when asked to sign for the EDA.

In this September 2018 file photo, Gray Blanton chairs the EDA board, with Executive Director McDonald to his right and long-time EDA Treasurer Billy Biggs to his left. Also pictured are then-Board Vice-Chair Bruce Drummond across the table, and the back of former board chair Greg Drescher’s head.

Asked at the time by Royal Examiner how such a transaction occurred, particularly with a $10 sales price filled in on the back end, neither Silek, Blanton, nor the law firm representing Cornerstone responded. As previously reported, on March 27, 2020, the EDA board authorized the purchase of the Royal Lane parcel back from Cornerstone LLC for $26,776.54. That price was said to cover internal expenditures the Aikens Group spent on pre-developmental work following its November 2018 purchase.

Friday morning, on a motion by Blanton, seconded by Vice-Chairman Jeff Browne, the EDA was gracious in announcing the Silek settlement agreement, reading into the record, “The Warren EDA expresses its appreciation to Mr. Silek for his work and cooperation in achieving this agreement and for his service to the Warren County and Front Royal communities.”

The Silek settlement agreement was approved by a 4-0 vote, with Greg Harold dissenting and Jorie Martin abstaining due to past business dealings with Silek.

Asked about the agreement later, EDA Board Vice-Chair and Communications Committee Chairman Browne said, “Is it a perfect agreement; did everyone get everything they wanted? – Of course not. The point of it is, you can negotiate. It’s just a sum of money that we negotiated, and both sides got something they wanted out of it. If you can’t do that, you are looking at legal expenses to everyone’s detriment. Our perspective is to do what benefits the taxpayers most.”

Hmm, wonder if that observation was aimed at the Front Royal Town Council’s way?

Above, Front Royal’s Town Hall has become an increasingly isolated fortress as the town’s elected and appointed officials have chosen litigation over a discussion to determine who is liable for what over the past 4 to 5 years of EDA-Town business; below, Mayor Tewalt at December 2019 EDA board meeting where he personally expressed a desire to talk out, rather than litigate Town-EDA issues – an effort that ran him afoul of council’s litigious majority.

Of the decision to file the second civil litigation, rather than re-amend the initial civil suit upwards, Browne observed, “It is part and parcel of the same allegations of conspiracy and breach of fiduciary responsibility. It was just decided it worked to file separately.”

A third motion approved Friday authorized a Security Agreement with First Bank & Trust to work “in conjunction with the Forbearance/Extension agreement the EDA signed with First Bank & Trust on December 27, 2019.”

The EDA is scheduled to meet again on April 24. Anticipated topics will be the selection of a firm to complete the EDA’s 2018 and 2019 audits; and possibly a requested update on if, and how, COVID-19 related court delays are impacting the EDA litigation hearing schedules.

A Friday afternoon email from Town Attorney Doug Napier indicated a canceled April 9th hearing on the Town’s litigation against the EDA has tentatively been rescheduled for July 27th, at 2 p.m.