This story has been updated. Here is the complete release. Page 2 of the release was missed and left out of the original post.

Warren County released the following press release on Friday, September 25, 2020:

The press conference held on September 23, 2020, announcing that the Town of Front Royal has secured permanent financing for the Front Royal Police Department building is great news for the citizens of our community! It closes a chapter on one aspect of the lawsuit the Town of Front Royal filed against the Front Royal-Warren County Economic Development Authority (EDA) and ends months of dispute between the EDA, the Town, and the County. It should be viewed as a path forward to a working relationship between the Town of Front Royal, Warren County, and the EDA.

As Warren County citizens, we were brokenhearted by the EDA scandal. The breach by those who were entrusted with our tax dollars and economic development is one that will take years to restore. Efforts taken by the Warren County Board of Supervisors to restore faith and oversight of the new EDA Board of Directors are well documented. Both the Board of Supervisors and the EDA Board of Directors have worked diligently to clean up the mess and recover the stolen assets for taxpayers.

The portrayal by some Town leadership that the County was unwilling to work with the Town to resolve the EDA issues could not be farther from the truth. The County has had every incentive to work with the Town to resolve the Police Station debt owed by the Town and has repeatedly approached the Town to work together on economic development issues critical to the success of our community.

Town and County residents expect us to resolve our differences and focus on big issues affecting our community. Rampant drug overdoses and deaths in our community, families on the margins suffering from the economic effects of the COVID-19 pandemic, teachers struggling to educate our children remotely, first responders working double overtimes…these are the type of issues we should be working together to resolve.

Our government needs to DO BETTER. We need to stop blaming one another and start focusing on what will better the lives of our citizens. The residents of our community deserve leaders who spend their tax dollars wisely. That includes streamlining our efforts to reduce duplication of the same services and waste of resources. THE CITIZENS of the Town/County are footing the bill for these lawsuits that are equivalent to suing ourselves. And in the case of Town residents, they are paying for lawyers and court costs on both sides.

The citizens of this community want their leaders to find ways to work together. They deserve it. We encourage the Town leadership to work with the County and the EDA to secure a better community!

The Front Royal-Warren County Economic Development Authority civil litigation now seeking about $26 million in asset recovery against 24 defendants including its former executive director was dealt a harsh blow the day before scheduled motions hearings Friday morning, September 25. That blow was a notice of former EDA Executive Director Jennifer McDonald’s Chapter 7 bankruptcy filing Thursday afternoon, September 24.

As noted in the filing and as discussed in Warren County Circuit Courtroom “A” Friday, the bankruptcy filing essentially removes McDonald from the civil litigation process. McDonald’s bankruptcy filing included one of her two real estate companies, MoveOn8 LLC.

“As a result of the institution of the bankruptcy proceeding, all actions to collect a debt from Jennifer McDonald, or to recover property from the bankruptcy estate of Jennifer McDonald, have been stayed by reason of the applicability of Section 362(a) of the United States Bankruptcy Code (11 U.S.C. 362(A)),” McDonald attorney Peter Greenspun wrote in the filing received in the Warren County Circuit Court Clerk’s Office Thursday afternoon. The same holds true as to a stay on asset recovery in the MoveOn8 LLC filing.

With EDA lead attorney Cullen Seltzer acknowledging the stay on civil action against McDonald involving her now bankruptcy-trustee seized assets, a scheduled 9 a.m. motions hearing seeking financial sanctions against her for attempting to move a piece of property frozen by the court near the outset of the April 2019 EDA civil litigation filing was removed from the docket. Judge Bruce D. Albertson adjourned the 9 a.m. proceedings 10 minutes after they began.

Motions hearings on the remaining defendants’ cases commenced shortly after 10 a.m. as scheduled. Two defense attorneys connected by remote audio hookup told the court they were likely to file similar “interlocutory appeals” motions to the one April Petty and Jesse Poe attorney William Shmidheiser informed the court in person he would be filing. Those petitions will seek to have defendants removed from the single “mass trial” the plaintiff is seeking in alleging a wide-ranging conspiracy of McDonald and associates to profit from the alleged McDonald-directed embezzlements and misdirection of EDA assets.

Before making his case that his clients should be removed from the single trial of all defendants, as the 10 a.m. hearing began Shmidheiser called McDonald’s bankruptcy “the elephant in the room” that should be discussed with all involved defense attorneys linked in. That led EDA attorney Seltzer to repeat his acknowledgment that the case against primary defendant McDonald was stayed from further action due to the bankruptcy process.

Several times during subsequent discussion McDonald was referred to as “the hub” of the conspiracy “wheel” the plaintiff is alleging existed between the former EDA executive director and those believed to have benefitted financially one way or another from her alleged misdirection and embezzlement of EDA assets.

Former EDA and McDonald Administrative Assistant Michelle Henry’s attorney John Cook told the court the McDonald bankruptcy filing made his client’s case problematic, in that Henry has filed to force McDonald to pay for her legal fees in the civil case.

Also on the table Friday was McDonald’s ability or willingness to testify as a witness as the civil cases proceed in the wake of her bankruptcy filing. That she could be deposed as a witness in other cases seemed agreed upon. But whether she would quickly choose to invoke her 5^th Amendment right not to self-incriminate, with the refiling of criminal charges also still a possibility, remained at issue.

Judge Albertson took defense counsel concerns about the bankruptcy filing’s impact on the other defendant’s cases under advisement, observing, “I think we can proceed with (setting) dates in the event I rule the stay is not warranted.”

EDA attorney Seltzer noted the large number of witnesses to be deposed, over 50 he acknowledged; as well as the limited days per month, three, available for those depositions, depositions he predicted would at a minimum take a full day due to the number of defendants and their counsel involved. Due to those factors, coupled with lingering pandemic limitations on court processes, Seltzer raised an eyebrow or two predicting the civil trial wouldn’t happen before July of 2022.

That prediction led to an added sense of urgency by Petty and Jesse Poe’s attorney. Responding to a question, Shmidheiser told the court he probably would file his interlocutory appeal by the end of the week, as he sought a November date for a hearing on the appeal. Judge Albertson set November 23, at 3:30 p.m., for what is anticipated to be a 30 to 40 minute or so hearing.

Shmidheiser also told Judge Albertson that one of his primary hopes for the day’s hearing was that specific dates would be set for the lengthy deposition process of witnesses, as opposed to the vague “three days a month” tag currently on the table. Agreeing that pinning down dates for depositions was a preferred course of action, Albertson set about finding dates all attorneys could be available for.

Due to varying attorney’s schedules, preferences and other court variables, Tuesdays-Wednesdays-and-Thursdays were set between January and May 2021 to get the deposition ball rolling. Deposition dates agreed to were January 13-14-15; February 16-17-18; March 30, 31, April 1; and May 11-12-13.

Acknowledging the process would likely continue through the remainder of the year, Albertson set a pre-trial motions date of February 19, with a 24-day trial scheduled 4-1/2 months later from July 5 to 29, 2022.

Seltzer did acknowledge it was possible some defendants’ motions to be removed to individual trials could be successful, leading to earlier trials for those defendants.

As for the bankruptcy situation, one attorney present familiar with bankruptcy cases, later explained to the media that the EDA could file to have certain McDonald assets separated from the bankruptcy sale process to accommodate creditors, citing her alleged embezzlements. However, without a conviction in support of those allegations that filing might be hard to get approved by a bankruptcy trustee, Shmidheiser said. He added that the bankruptcy transfers McDonald’s liability from the EDA civil case now in Warren County Circuit Court to a judge-overseen trial in a Harrisonburg U.S. Western District of Virginia Bankruptcy Court.

According to the McDonald Bankruptcy Docket posted by the U.S. Western District of Virginia Court:

The First Meeting of Creditors is scheduled for 9 a.m. on Friday, November 13, 2020 (by telephone);

Deadline for filing Proofs of Claims has not yet been set, because McDonald filed her case as a “No Asset Case”;

Deadline for filing Complaints for Exception to Bankruptcy Discharge is Tuesday, January 12, 2021. The Warren EDA will have to file a Complaint for Exception to Discharge case by the deadline, or its claim will be discharged in bankruptcy, we were told;

McDonald ‘s Bankruptcy Schedules are due to be filed by October 8, 2020 – but if time extensions are requested, they are generally liberally granted.

The Trustee is listed as Bob Stevens of Charlottesville, along with the Office of the U.S. Trustee, with a Roanoke address.

The EDA Board of Directors met for their regular monthly board meeting. Following a 1-hour Closed Meeting session the Board heard from Committee Chairs and Interim County Administrator Ed Daley.

Executive Committee Strategic Plan
Jeff Browne reminded the Board that the initial work on the EDA’s strategic plan will start October 9-10. Led by new EDA Board member, Jim Wolfe, community leaders are being asked to participate in the October 9th session and share their vision for our community. The session on October 10th will include a series of exercises to help Board members articulate goals and plans.

Finance Committee  – Financial Audits

Chair Jorie Martin’s Finance Committee report noted that the auditors from Brown Edwards are finishing up their examination. The committee is expecting the draft audit for 2018 by the end of October at the latest. The Finance Committee will meet and review the draft audit and present to the board if all goes well at the November meeting to finalize.

Bonds:
Bond payments are up to date: Royal Arms Housing bond fees are due every February. The payment for 2020 was paid. $20,500. Christendom College bond fees are due annually in September.

The 2019 fee was paid and the 2020 was just billed in the amount of $6,567.67. The calculation for payment is 1/8 of 1% of the loan balance.

Asset Management Committee:
Royal Lane Property/Workforce Housing Apartments
Committee Chair Greg Harold reported that there has been considerable interest from developers and investors in this property. Executive Director Doug Parsons has been fielding calls from interested parties as well. The RFDP is available in the EDA office. Please contact Doug at 540-635-2182.

Afton Inn
Harold updated the Board with news that the purchasers, 2 East Main, LLC, will not be closing on a loan in September. It is anticipated that closing will now take place by December.

EDA Office Building 400 Kendrick Lane
The staff has undertaken a clean out of the West Basement area. Warren County General Services department is handling the cleanup. All working tools and maintenance equipment were donated to their department and remaining items will be disposed of. We will be clearing out the effects and disposing of them in the proper fashion.

Kendrick Lane CDL Lot
The EDA has partnered with LFCC to provide the parking lot across the street from the EDA Office Building for their CDL Training program. In return, LFCC designed signs will be displayed in the area. There were two sign mock-ups to review by board members for the Workforce Development CDL Lot.

Executive Director
Doug Parsons reported to the board that the new EDA website development is proceeding and a promotional video of the EDA-owned property at 426 Baugh Drive is now available at https://youtu.be/W1EbBQ4avNs.

Many thanks to Brian Kelly of Randolph Macon Academy for his work in the drone footage and producing the video.

The Town of Front Royal Planning & Zoning Commission held a public hearing and then voted to approve the EDA to rezone two parcels in the Happy Creek Industrial Park to Industrial-2. The request will now be sent to the full Town Council for their approval.

The EDA Board of Directors will have their regular monthly board meeting via Zoom on Friday, October 23, 2020, at 8 a.m.

After discussion of a change to Town policy on the vacating of streets and alleyways to accommodate past adjustments and high costs associated with assessments by real estate assessors for the government-owned property; and a review of evolving Fiscal Year 2021 revenue streams from taxes and utility/enterprise and general funds, the Front Royal Town Council focused on a lingering sore point.

That point is the County’s reluctance to take the town governmental apparatus at its word on assuming financial liability for any distribution of Coronavirus Aid, Relief, and Economic Security (CARES) Act approved funding found to not meet federal and state standards for that distribution. As previously reported, as the recipient of that federal, state-distributed money received in two $3.5 million dollar phases, about $1.2 million of which was allotted to the Town for in-Town distribution, the County is liable to reimburse the state and federal sources of that money for any portions found to not have met the federally implemented standards for qualifying business, non-profits or individual recipients.

“I don’t know what their issue is – we justified it under the CARES Act; we laid it out very specifically where in the CARES Act it’s been spent,” Interim Town Manager Matt Tederick told council citing two specific areas the County is apparently concerned about qualifying. “So, we’ll just continue to play the game and see what happens.”

“I’m concerned about getting the $970,000,” Vice-Mayor Bill Sealock told his colleagues of the money the Town has fronted out of its own General Fund budget toward what it believes to be qualifying businesses in town. That thus-far Town-absorbed expenditure is what the Town is hoping for in first-round CARES distribution reimbursement from the County.

“I can certainly appreciate that they want some checks and balances … but if we’re completely liable which we’ve signed agreements on, saying that if any of the CARES Act is spent inappropriately the Town will fund or refund,” Councilman Jacob Meza said when Tederick interrupted him.

“Let me correct you on that, Mr. Meza, we never, we haven’t signed that,” Tederick interjected, leading several councilmen including Meza to add, “But we’ve offered to do it.” Meza added, “I’d like to reoffer that and move on.”

“We’ve offered that, and they want us to take the liability, and they want to approve the spending plan, and they want us to spend the money out of our reserves, and they want us to submit the reports, and they’ll tell us whether they’re going to reimburse us. So, it’s just very convoluted. I’ve done everything I can do to get this through,” Tederick told council.

Absent from the discussion was the likely lack of County trust of Town financial “promises” in the wake of a year-and-a-half impasse on the Town accepting financial liability to pay for its $9-million dollar police station financed through what is now a solely-County supported Town-County Economic Development Authority.

However, further discussion indicated that several involved county officials had indicated a first reimbursement check from the County was anticipated early this week that had not yet been received as of Monday night.

“Well, it is Monday,” Councilwoman Lori Cockrell observed, acknowledging that Tuesday was also “early in the week”.

See Council’s full discussion on its CARES Act reimbursement concerns, as well as the street and alley vacating adjustments and FY-21 revenue numbers in this Royal Examiner video of council’s 20-minute open session work session.

Council then adjourned to closed session to discuss its permanent town manager search, the now dueling civil litigations with the EDA, and the disposition of undisclosed public property. And the following day the Town announced a full town council press conference to address the EDA litigation to be held Wednesday at 7 p.m. at the Warren County Government Center.

That announcement stated that the press conference “will cover major developments regarding the Town of Front Royal\EDA lawsuit. Statements will be given by each Council member”.

Stay tuned for that exciting development as it unfolds Wednesday …

In a press release issued at 3:15 p.m., Friday afternoon, from the office of Town of Front Royal Information Technology and Communications Director Todd Jones, Interim Town Manager Matt Tederick responds with astonishment, and some astonishing news, in reaction to the EDA filing of a lawsuit Thursday to recover the nearly $9 million cost of the new FRPD headquarters.

That news is that the Town was in the process of acquiring bank financing to pay the principal amount, if not interest, on the new town police headquarters this week.

As previously reported, at Monday’s Front Royal Town Council meeting Councilman and mayoral candidate Chris Holloway read a three-page prepared statement into the record on the Town’s stance on its lack of obligation “legal, moral or otherwise … to repay these unlawful debts” to cover what was termed “a fraudulent, unauthorized loan” acquired by the EDA to finance the FRPD headquarters construction project for the Town.

Holloway confirmed that the statement was prepared by the Town’s contracted Damiani & Damiani law firm that is handling its $20-million-plus lawsuit against the EDA, in response to his inquiry on the matter.

The statement also states that the Town “has explored other means of resolving the issue” and “is willing to make payments to the EDA for the Police Department Headquarters that are equal to the payments that Town Council authorized, which include the entire principal debt at the authorized interest rate.”

It would seem somewhere along the negotiating lines between the Town, County, and EDA, there has been a failure to communicate essential information.

Here is the Town press release and Tederick’s statement in its entirety:

The EDA Sues the Town of Front Royal on the Verge of Obtaining a Loan

24 Hours After the Town Receiving Bank Term Sheet, EDA Sues. Coincidence?

The Town of Front Royal filed a $20,226,153 lawsuit against the Warren County Economic Development Authority (EDA) in an effort to recover money fraudulently obtained by the ex-Executive Director, Jennifer McDonald, and perhaps others under the failed oversight of the Economic Development Board of Directors.

Interim Town Manager Matt Tederick commented, “This lawsuit is really bizarre, less than twenty-four hours after I received a formal Term Sheet from a lending institution to pay the principle balance which the County, the EDA, and the Town do not dispute, the EDA calls a Special Meeting, one day before it’s normal meeting date, and decides to file a Complaint and Writ of Mandamus against the Town, effectively preventing the Town from obtaining the very financing being demanded. Coincidence?

“Just yesterday I received a call from Ed Daley, Interim County Administrator, who asked me if the EDA’s Finance Director could meet with the Town’s Finance Director to reconcile Leach Run Parkway accounting. Of course, I eagerly and happily agreed. Then, 24 hours later, the EDA sues the Town. Coincidence?

“As much as I would personally like to litigate this matter in the court of public opinion, as the EDA has done, I will not. This much I will say, the EDA has caused great harm to the citizens of the Town of Front Royal, and yet, no one has been brought to justice and the EDA continually claims to be the victim. The EDA is responsible for the negative consequences flowing from the actions of its ex Executive Director. The Town is trying to assist in dealing with the economic fallout, but ultimate responsibility remains with the EDA. The Town intends to continue its efforts to finance the Police Department Headquarters.”

Following a 50-minute Special Meeting closed session on Thursday morning, September 17, the Front Royal-Warren County Economic Development Authority Board of Directors unanimously authorized attorney Rosalie Fessier of the Timberlake-Smith law firm to file suit against the Town of Front Royal to recover the current approximate $9-million cost of construction of the new Front Royal Police headquarters.

Fessier is Staunton-based Timberlake-Smith’s lead counsel representing the EDA in the Town of Front Royal’s $20-million-plus civil litigation against the half-century-old Town-County EDA.

The motion, made by Tom Pattison, seconded by Greg Harold, passed by a 6-0 vote with all board members virtually present. Chairman Ed Daley’s seat remains vacant in the wake of his appointment as Warren County’s interim county administrator. The plan is for him to return to his EDA board seat following the hiring of a permanent successor to Doug Stanley.

In Daley’s absence, Vice-Chairman Jeff Browne chaired the virtually conducted ZOOM meeting from the EDA’s Kendrick Lane headquarters. In the wake of the 8:55 a.m. adjournment of the special meeting this reporter met Browne at the EDA office complex about a half block from the police station.

When we arrived, Browne was still going over paperwork on the civil litigation with Fessier. Following her departure, Browne said the attorney was going to the Warren County Courthouse to file the lawsuit, after which copies would be made available to the media.

Browne explained that the suit is for principal and interest at the rate of the actual United Bank loan, initially 4% then adjusted to the current 3% rate, for a total of just under $9 million dollars. He elaborated that the suit is for money due to the EDA that is in no way impacted by the alleged embezzlements, misdirection of assets or other financial misdeeds attributed to former EDA Executive Director Jennifer McDonald.

“There isn’t any question about that,” Browne said flatly. “And I’ll say this, on anything that we’re asking the Town payment for, we would not ever include anything that was not a legitimate bill. We’re not trying to get them to pay for illegal activities we believe other people did, it’s not going to happen.”

We asked the acting EDA chairman what led to this decision.

“Well, I think the EDA and the County have paid on the Town’s obligation for over a year. And the goal there was to give the Town time to get the financing that it needed and to do the right thing. And they kept promising this in meetings that we had with them.

“So, in good faith we went ahead and did that even though there’s no obligations to pay anything on the police station. So, between just the lack of forward progress on the negotiations, and more recently what came out of town council this week suggested that the timing was something that we had to do to get them to focus on this,” Browne said.

His “this week” reference was to the Town’s EDA civil litigation contract attorney-prepared statement on the Town’s legal stance on the FRPD financial situation read into the record by Councilman and mayoral candidate Chris Holloway on Monday, September 14.

Light agenda or groundwork for a community legal-economic EXPLOSION?

As previously reported, as of November 1 debt service payments on the FRPD project go from interest only in the $21,000 range to principal and interest to around $50,000 monthly.

“And we’re not going to be paying October either, neither is the County,” Browne said of the FRPD debt service coming due in two weeks that the EDA is no longer in a position to cover financially. “The County informed us, we’ve informed the Town that we’re not going to be paying any more on the police station.”

Truth or dare?

As to a timeline other than the litigation being immediately filed at the courthouse, Browne said, “We waived a jury trial, jury trials are going to take a long time given the COVID circumstances.” As a note, the Town is seeking a civil jury trial in its suit against the EDA.

“It’s a very clean case, when you read it, it describes: here’s the facts; they’re all very well documented; and here’s our arguments about why we should get the money,” Browne said of what was on its way to the Warren County Courthouse as we spoke.

Browne elaborated that the EDA case documentation is based in real documents, signed by town officials among others, as opposed to revolving around alleged verbal promises of the former EDA executive director that contradicted known, verified facts about FRPD project financing options. It was a none-to-subtle poke at the foundation of the Town civil action against the EDA.

“And to call them verbal promises even, is perhaps too much,” Browne said of the Town litigation, litigation justified in the above-mentioned attorney-prepared three-page statement read into the Front Royal Town Council meeting record four days earlier by Councilman Holloway.

“When you say you anticipate one-and-a-half percent (interest), it’s like me going fishing and saying I anticipate I’ll catch fish – I sure hope to. But in this case the Town bet and lost. It thought it could get the one-and-a-half percent, was hoping it would get it but knew full well it wasn’t a guaranteed thing. And it turned out it wasn’t,” Browne commented of the underlying Town litigation logic.

Clean or not, the odds are short in “Vegas” that the EDA civil litigation against the Town will be heard within the next month when payments on the police station will stop being made if the Town does not pick them up.

And if they don’t, the Front Royal Town Council is perhaps staking an entire community’s ability to finance future projects on a new “gamble”. That gamble is that it will be judged legally and financially immune from the consequences of its own lack of due diligence, oversight or verification that the 30-year, 1.5% interest rate it hoped for based on verbal “promises” of a now-discredited EDA executive director was even available to it, much less a done deal.

It seems a steep gamble in that those verbal promises flew in the face of what Browne says are signed documents, as well as information from the New Market Tax Credit program administrator, and information and recommendations from its own administrative and financial staff at the time.

If you want to see the consequence of those kinds of gambles, I have been told an exploration of the experience of the Virginia community of Buena Vista, also known colloquially as “Una-Vista”, went some 10 years ago when it declined to meet a financial moral obligation debt service. Spoiler alert – they have not been able to acquire public or private financing for anything since.

Now officials in two municipalities here are left to ponder whether that is a gamble worth taking on the strength their relative civil legal filings, directly or indirectly through their half-century old joint EDA.