One day after the Warren County-Front Royal COVID-19 Coronavirus Emergency Management team held its first briefing available to the public live only by remote video link-up, the Town-County Economic Development Authority followed suit at its monthly meeting of Friday, March 27.
However, the EDA took additional steps on the pandemic response social distancing frontier and the enabling of live remote participation and viewing. Only EDA Executive Director Doug Parsons and Administrative Assistant Gretchen Henderson were at the EDA Kendrick Lane office where board meetings are normally held. The six EDA Board of Directors members, as well as media, public and county board representatives were all linked in remotely by home or office audio-video computer hook up.
Or as the meeting notice colorfully stated, “Due to the state and local state of emergency declarations, this meeting will be conducted virtually, as will all EDA board meetings until further notice during the emergency. The EDA sincerely welcomes public access to this unprecedented event. The EDA will be using the web conferencing platform Zoom”.
Access was also available by telephone link-up.
A tally of those connected virtually included two members of the public (Linda Allen, James Wolfe), one county board member (Oates), two media (Royal Examiner, NVD), three attorneys (Pandak, Seltzer, Seigel), the six EDA board members and two EDA staff – may be only a couple supervisors short of normal 8 a.m. in-house attendance.
After virtual meeting moderator and EDA Board Vice-Chairman Jeff Browne helped participants through their connections, the board adjourned to closed session to discuss four primary topics:
1 – legal advice on the “disposition of … 2 East Main Street/Afton Inn”;
2 – a prospective business or industry client at the 426 Baugh Drive warehouse;
3 – legal consultation on the Town of Front Royal’s civil litigation against the EDA and the EDA’s civil litigation against its former Executive Director Jennifer McDonald et al; and
4 – auditor contracts with Yount, Hyde & Barbour P.C. and RFO auditor services regarding small business loan debt collection.
As noted above, three attorneys were involved in the meeting’s virtual hook up, the EDA’s contracted attorney Sharon Pandak and Sands Anderson attorneys Cullen Seltzer and Dan Siegel, the latter two who have been involved from the March 26, 2019 filing in the EDA’s now $21.3 million civil actions against McDonald and 14 co-defendants alleging embezzlement, fraud, and misdirection of EDA assets. Hired as independent EDA counsel in the wake of Dan Whitten’s resignation as County and EDA attorney, Pandak has been the EDA’s legal adviser in response to the Town’s now-amended $20-million-plus litigation against the EDA.
With that full plate of closed session business, the estimate of an hour behind virtual closed doors coming shortly after 8 a.m. fell about two hours short.
And while there were no announcements or motions regarding the two civil litigations or the now apparently disputed by the Town of Front Royal status of Afton Inn ownership, a series of resolutions and motions were approved by 6-0 votes prior to the meeting’s 11:10 a.m. adjournment.
However, as to the status of the Afton Inn, in the written monthly Asset Committee Report it is noted that “There is no public report on the Afton Inn status other than the Town of Front Royal has listed the Inn in their revised complaint in the Town of Front Royal vs. FR-WC EDA. This simply provides a new dynamic that we have to deal with in our continuing efforts to re-position this property. We continue to discuss the dynamics of this with 2 East Main (LLC, the proposed redeveloper of the property under contract with the EDA as current owner).”
As for the series of approved motions and resolutions, they included:
1 – a resolution to return the $5,000 deposit of William Huck after the failure to close a contract with the EDA on the old Stokes Mart building at 506 East Main Street;
2 – a resolution to approve a contract on a backup offer to sell the 506 East Main building to an alternate buyer at a price of $190,000;
3 – a resolution to amend EDA bylaws to facilitate the electronic meetings during the COVID-19 Coronavirus state of emergency declarations;
4 – an amendment extending the deadline on the removal of the solar panels from the EDA Kendrick Lane Office Complex from the original April 30 date. The new deadline will be 30 days after the Governor of Virginia lifts the COVID-19 state of Emergency.
That contract with Sunshine Properties LLC will pay the EDA $40,500 for the two-building solar panel array originally installed during McDonald’s executive directorship in an arrangement with Earth Right Energy. McDonald, ERE and ERE principal Donnie Poe were all named as defendants in the EDA’s March 2019 civil litigation. Consequently, the plan for the provision of solar power to the EDA office complex went south with the filing of that litigation and other technical complications;
5 – a motion authorizing the reacquisition of the 3.5-acre Royal Lane parcel from the Cornerstone LLC branch of the Aikens Group at cost of $26,776.54. The difference in the EDA’s sale price of ten dollars to Cornerstone LLC reflects pre-construction work and planning services done by the Aikens Group for work it will not now be able to achieve after resolving the situation on the somewhat inexplicable late November 2018 EDA transfer of a property it paid $440,000 for. That price was agreed upon by the McDonald-led EDA board Chaired by Patty Wines after an initial $10 gift by McDonald’s relatives was negated by a missed tax rebate deadline.
Serving as EDA attorney on that sale in the wake of then EDA-attorney Dan Whitten’s recusal, Joe Silek Jr. said the deed of sale was sent to Cornerstone attorneys without a price on it. Then EDA Board Chairman Gray Blanton, who signed the deed of sale, said he only saw the signature page. At the time the sale situation became public in early 2019, the Winchester-based Cornerstone attorneys’ group never responded to three messages left seeking information on how the $10 purchase price was established.
While the Royal Lane parcel was intended for the development of a workforce housing apartment complex under EDA direction, Parsons told Royal Examiner after the Friday’s meeting adjournment that the EDA will likely seek to sell the parcel to the private sector for residential development, which as he has previously noted, is not a normal undertaking for EDA’s.
6 – a motion to amend the loan agreement with First Bank on a $3.59 million note covering several older projects to illustrate the County’s support of the EDA on the issue as it grapples with the aftermath of the financial scandal the above-referenced civil litigations revolve around;
7 – a motion on a monthly payment agreement on a rural business enterprise loan with Ontiveros;
And 8 – Due to the governor’s COVID-19 emergency declaration closing “non-essential” businesses, the EDA will offer rent/loan payment forbearance “to all clients in good standing”. The plan is to temporarily waive April payments and then offer quarter payments on a monthly basis until there is some resolution to the emergency declaration allowing businesses to reopen.
And so it goes on the Front Royal, Warren County Economic Development front as the retooled EDA Board of Directors, staff and County officials try to navigate the turbulent waters, increasingly stirred to a boiling point by the Town of Front Royal’s hostile litigious stance, amidst the COVID-19 pandemic emergency declarations wreaking havoc with small businesses across the town, county, commonwealth, and nation.
County Supervisors change November meeting date – stay mum on Closed Session EDA litigation discussion
The only open session action taking by the Warren County Board of Supervisors at a Special Meeting of Tuesday, October 26, was authorization to change the date of a November Supervisors meeting from the 16th to the 18th. That item was a late addition to the agenda made and acted on prior to a scheduled closed session.
The bulk of the 5 p.m. meeting, about an hour-and-a-quarter, was taken up by a Closed/Executive Session to discuss Economic Development Authority litigation. As Royal Examiner readers know, that is an oft-behind closed doors topic over the last two-plus years in the wake of the $26-million to $62 million FR-WC EDA financial scandal that began unravelling in mid-2018. No announcement or action regarding that litigation was offered during the brief open session to adjournment shortly after 6:20 p.m.
As has been previously reported, the EDA financial scandal involves civil and criminal cases, the latter now handled at the federal level by the U.S. Attorney’s Office in the Western District of Virginia headquartered in Harrisonburg. Before criminal indictments were dropped by the Special Prosecutor at the state level due to speedy trial concerns surrounding the mountain of documented evidence, estimated at over a million pages, there were as many as 23 co-defendants alleged as co-conspirators of former EDA Executive Director Jennifer McDonald. The federal prosecutor launched action on August 31, filing a 34-count indictment against McDonald, including 16 counts of money laundering, 10 for bank fraud, 7 for wire fraud, and 1 count of aggravated identity theft regarding someone identified as “T.T.” (ITFederal principal Truc Tran perhaps?)
In related civil litigation, McDonald and the EDA reached an agreement in which $9-million-dollars of assets were ruled out of McDonald’s bankruptcy court filing as owed to the EDA, though without any admission of fault by McDonald. As part of that agreement the EDA recently announced assumption of ownership of McDonald Real Estate LLC MoveOn8’s undeveloped 41-acre Happy Creek parcel valued at over a million dollars.
The EDA and Town of Front Royal are also engaged in dueling civil countersuits initiated by the Town, claiming disputed lost assets related to the financial scandal. During the tenure of Interim Town Manager Matt Tederick, other than then-Mayor Eugene Tewalt, the town council chose to ignore EDA offers to sit down in a non-litigious, good faith effort to determine exactly what was owed to the Town related to the alleged misdirected EDA assets involved in Town and County capital improvement and economic development projects financed through the EDA. The Town has since initiated an effort to create its own unilateral Front Royal EDA (FREDA) operating independently of the over half-century-old Town-County EDA, which technically the Town is still a legal, if now silent, partner in.
That independent EDA effort has become a political hot potato in the coming Town Special Election to fill resigned member Jacob Meza’s seat. In recent years the County had fully funded EDA operational costs, with each municipality covering its own debt service related to EDA financing of projects. Independent conservative council candidate Bruce Rappaport has made the unilateral Front Royal EDA a major target of his campaign, citing it as a waste of town taxpayer money and destructive wrench in the cog of Town-County relations.
‘Ghosts of EDA Loans Past’ come back to haunt county supervisors
The most interesting part of Tuesday evening’s Warren County Board of Supervisors meeting was likely behind closed doors after the board adjourned to Closed/Executive Session for a legal-based answer to North River Supervisor Delores Oates question as to what benefit to the County and its taxpayers there was in approval of a Resolution admitting a “moral obligation” to continue to pay the debt service on bank loans made by the EDA during its developing financial scandal, circa 2016 or so. There was one of three loans at issue of particular interest – the $10-million-dollar loan to Truc “Curt” Tran’s ITFederal company poised to jumpstart commercial redevelopment at the 149-acre portion of the former Avtex Superfund site known as the Royal Phoenix Business Park.
Of particular interest, because the “moral obligation” for that loan was initially believed covered by the Town of Front Royal, whose elected officials agreed to provide a $10-million-dollar “bridge loan” requested by then EDA Executive Director Jennifer McDonald to indicate to First Bank and Trust that “the community” stood behind the loan and proposed project it supported. That request for and Town show of financial support for the ITFed project came despite the fact the company showed virtually no assets other than the three acres at the Royal Phoenix/Avtex site valued at slightly over $2-million-dollars that was “gifted” to the company by the EDA behind closed doors for one dollar.
A clue to what the county supervisors heard over about 15 minutes in Closed Session may have been offered by the board’s action out of it. After some hesitancy in response to the Chair’s call for a motion on the Resolution, Oates’ motion for approval of the “EDA First Bank and Trust Support Agreement”, seconded by Walt Mabe, passed by a unanimous roll call vote. The vote commits the County to continue to absorb those “moral obligation” payments through the Fiscal Year 2021-22 at an estimated cost of $214,000.
In open session, responding to questions about the Resolution in support of the “EDA First Bank and Trust Support Agreement”, County Administrator Ed Daley mentioned consolidation of three loans, including the above-mentioned ITFederal loan (at $9,551,500), as well as a First Bank and Trust Line of Credit ($8,691,600), and a First Bank of Strasburg loan ($3,450,000). Contacted later, Daley cited one condition that would bring the EDA’s payments to the bank on the ITFederal loan in line with what ITFederal pays the EDA monthly at about $42,000. Before the EDA payments fluctuated to more or less than the ITFed payments, sometimes as much as $7,000 a month more.
Despite the commitment to an estimated $214,000 in payments through this fiscal year, the board’s unanimous vote in support of its moral obligation payments likely reflects negative consequences were the County to bail on covering an EDA debt mid-fiscal year. But again, the agreement is only to the end of the current fiscal year, June 30, 2022. What might the future of “moral obligations” related to the “Ghost of EDA Loans Past” bring in FY-2022-23? – Stay tuned for another seasonal episode of “A Front Royal-Warren County EDA Carol”.
Thermal Shelter bathrooms
County Administrator Daley was also prominent in responding to another matter raised by three speakers during Public Comments about things, not on the meeting agenda. That was the elimination of two bathrooms in the Health and Human Services Complex at the old 15th Street middle school utilized by the County and involved churches and civic organizations to house the community’s homeless indoors at night during the winter. Opening that discussion was First Baptist Church Pastor Christy McMillin-Goodwin, followed by Aneita Bryant and Jim Bunce.
That trio said an alternate plan for mobile outdoor restrooms was unadvisable due to security and additional personnel to monitor out-of-building night trips, as well as potential severe weather issues. Noting a replacement plan that would not have new indoor facilities in place in time for this winter’s thermal shelter setup, these speakers wondered how the removal plan had been initiated without notice to those involved in helping the County operate the thermal shelter. Bryant suggested allowing access to the next closest indoor facilities.
In responding, Daley said he had been at point for the County in initiating the bathroom removal due to failing pipes that caused toilet backup issues. He said he had envisioned a much quicker turnaround in replacing the removed indoor facilities in that section of the building than ended up being the case. He promised to work proactively with those involved to see that an adequate alternate overnight option was available when the thermal shelter opens as winter arrives.
Also Tuesday following public hearings, the board unanimously approved three Conditional Use Permit applications, two for short-term tourist rentals and one for a private use campground. Following application summaries by Planning Department Deputy Director Matt Wendling the first two CUP applications, Charles and Lou Ann Dotson’s for the Private Use Campground on their property on Burma Road in the Man-Da-Lay Subdivision; and Jacob W. Lott Jr. and Sandra J. Kiepfer for a short-term tourist rental on their 1.6-acre lot on Little Indian Road in the Blue Mountain Subdivision in Linden went to a vote with no public hearing speakers. Wendling did note that a letter from the chairman of the Blue Mountain Property Owners Association had been received, expressing “no problem” with Lott and Kiepfer’s short-term tourist rental application.
Up last were Nicole and Sean McMinn with a short-term tourist rental permit application for their 2.42-acre property on Sagar Drive in the Highland Estates Subdivision in the Fork District. Again, there were no public speakers after the applicants responded to the board chair’s offer to summarize their request. The D.C.-based couple told the board they had run into little opposition from neighbors, and what opposition there had been from neighbors was not from those closest, but with property over a thousand feet from theirs.
And while there were no public speakers, the McMinns noted a number of letters to the board from supporters of their short-term tourist rental CUP application, which they asked to be read into the meeting record. Board Clerk Emily Ciarrocchi then read nine letters of support, including one with “25 to 30” signatures. Several of the letters, including one from the owner of the Downriver Canoe Company, noted positive impacts on tourism-related businesses from short-term renters. One letter noted, “They come; they spend; they leave”.
The board then made its final unanimous vote of approval on a motion by Archie Fox in whose district the applicant’s property lies, seconded by Walt Mabe.
Following that vote, Happy Creek Supervisor Tony Carter noted a “Bless you” included in one of the letters read by the clerk that was well-timed to a sneeze by someone present in the government center meeting room.
In fact, facing a future out of the public eye politically – Carter did not file to be on the ballot for reelection to his Happy Creek seat in November – Carter appeared at times Tuesday to be auditioning for Comedy Club spots during his member report and at various other times during the meeting. In fact, his coming local election, Halloween costume advice during his member report led three of his four colleagues to decline to try and “follow that act”.
See all the fun, business, and other public perspectives, including opening Public Comments speaker Michael Williams question as to whether a recent church-sponsored candidates forum in which the moderator was shown prior to the forum to have contributed to one church-associated candidate’s campaign could threaten that church’s tax-exempt status on U.S. Constitutional separation of church and state guidelines, in the County video:
EDA gets McDonald company property as part of settlement agreement
On Wednesday, October 20, Warren County Economic Development Authority Board of Directors Chairman Jeff Browne verified the EDA’s acquisition of the 41-acre “Happy Creek Road” parcel owned by former EDA Executive Director Jennifer McDonald’s Moveon8 real estate LLC. Acquisition of the undeveloped property assessed at just over a million dollars according to county court records is part of the $9-million-dollar no-fault settlement agreement reached between the EDA, McDonald, and the Harrisonburg Bankruptcy Court handling McDonald’s 2020 bankruptcy filing. The EDA will now be able to market the property as a developable EDA asset. It is located near the intersection of Happy Creek Road and Leach Run Parkway.
Browne said that in addition to receiving full value on the Happy Creek parcel, the EDA was in line to receive a percentage of the sale price of other McDonald assets distributed through the bankruptcy court proceeding. Exactly how close those percentages might get the EDA to the $9-million-dollar settlement figure remains to be seen. It was not immediately clear as to whether the EDA will have an outright full value claim to any other McDonald-held properties or assets.
McDonald is the central figure in the EDA financial scandal that began unravelling in mid-to-late 2018. She resigned in December 2018 under mounting pressure from her board of directors. She has been accused in civil and criminal court of utilizing her EDA position to misdirect EDA assets to her and others personal benefit. Western District of Virginia federal authorities have taken over the criminal side of the EDA case after a state special prosecutor’s office in Harrisonburg dropped criminal charges against McDonald and as many as 23 co-defendants due to speedy trial concerns as it wrestled with the volume of evidentiary material – estimated at 800,000 to over a million pages at the time. With charges against some defendants originating with the county commonwealth attorney’s office that initially handled the criminal investigation during Brian Madden’s tenure heading the department, failure to meet speedy trial timelines could have led to defense motions for dismissal of criminal charges against the defendants.
On August 31, 2021, federal prosecutors made their initial move, handing down a 34-count indictment against McDonald. Of those 34 counts, 16 were for money laundering, 10 for bank fraud, 7 for wire fraud, and 1 count of aggravated identity theft regarding someone identified as “T.T.” – ITFederal principal Truc Tran perhaps?
EDA completes audits for 2018 and 2019; 2020 audit is next
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.
The EDA Board of Directors will have their next regular monthly board meeting via Zoom on Friday, October 29, 2021, at 9 a.m.
EDA reminds rental tenants, Small Business Loan Program clients to now send payments to WCGC
Starting October 1, 2021, the Warren County Finance Department will take over and manage payments made to the EDA for rents and the Small Business Loan Program (RBEL and IRP). The EDA will no longer be accepting payments at their office or office address.
Please continue to make your check or money order to the EDA. You must hand-carry or send your payments to:
Warren County Government
ATTN: Finance Department
220 N. Commerce Ave.
Front Royal, VA 22630
Any payments sent to the EDA will be returned. As a result, you may incur fees for late payment. We appreciate your cooperation. Thank you for your attention to this matter.
EDA briefed on structural and legal options in closed session; gets open session updates on committee work during transition phases
The EDA Board of Directors met Friday, September 24, for their regular monthly meeting. The Board went into closed session for approximately 90 minutes to discuss transition, personnel, 2018- 2019 draft audits, loan restructuring, and disposition of property. The Board returned to open session at approximately 10:20 a.m. Jeff Browne, EDA Chair, opened the session with an overview of the transition. Browne asked each board member to report on their assigned transition project.
Search Committee-Transition: Dr. Tom Patteson, reported the committee met and reviewed applications. Three applications were submitted to the county administrator. The county and EDA will work together in selecting replacements for the Administrative Assistant and Executive Director.
Finance Committee-Transition: Jim Wolfe reported the “numbers” on the 2108 and 2019 audits are final. Jim Wolfe stated the management letter will be revised and recommended a special meeting for next week to finalize and accept the audits for 2018 and 2019. The Board agreed and the date of the meeting will be announced. Mr. Wolfe will also be meeting with the finance personnel at the county in the next several weeks.
Marketing Committee-Transition: Scott Jenkins, Chair reported the 38-page PowerPoint presentation is complete. The marketing material can be tailored to specific clients. The marketing is targeted on the Core Industries: Advance Manufacturing, Transportation and Logistics, Information Technologies, and Food Processing. Scott reviewed documents and key data. The marketing material is organized and stored on the EDA network. The September Marketing Committee report included other updates and visions including Small Business opportunities, focus on the Strategic Plan, and marketing opportunities with VEDP, Site Selector Guild, and Trade shows in 2022.
Administration Committee-Transition: Jorie Martin reported Gretchen Henderson prepared an Operation Manual for future reference. The manual is detailed in all the operations of the office including resources to use. The new administrative assistant as well as the EDA Board are well prepared to transition smoothly. Mrs. Martin reported The EDA now has the capability to update portions of the website in-house. This week a meeting section was added so the public can go to the site and see upcoming meetings.
Asset Committee: Greg Harold reported the transition and updates on the assets of the EDA were complete. Doug Parsons worked closely to make sure all projects are up to date.
Greg Harold presented the Project Management – Stage-Gate: The Stage-Gate is a comprehensive document standardizing the process for disposition of property. The document will be reviewed and discussed at length at the October board meeting.
Motions coming out of Closed Session: The Board approved the technical revisions to the EDA By-Laws adopted at the August meeting. The Board approved the Board Chair, and Secretary to sign documents for the restructuring of the EDA debt with First Bank and Trust. All documents will be reviewed by legal counsel.
Other items that the Board of Directors addressed included an expression of gratitude for all the work done by Executive Director, Doug Parsons. Jeff Browne expressed and the boards’ appreciation for all the hard work and effort to bring the EDA where it is today. Through Doug’s efforts, the EDA has sold property, expanded business, and brought new business to the town and county.
The next monthly EDA Board Meeting is scheduled for October 22, 2021.