At its regular monthly meeting of January, the Front Royal-Warren County Economic Development Authority revisited discussion at a special meeting a week earlier about the authority’s ongoing ownership of the old Stokes Mart building now housing the Main Street Market.
At the January 30 regular board meeting, Main Street Market owner Ginny Lesser was present to explain her perspective on normal maintenance costs she is responsible for versus major structural repairs to the building she hopes the EDA will foot the bill for.
As EDA Secretary Missy Henry reported on January 23, Lesser is willing to pay for heating and air-conditioning (HVAC) maintenance in an attempt to reduce what has been an average $1500-plus monthly utility bill over the past two billing cycles, if the EDA will cover a minimally-estimated $51,000 roof repair expense. The HVAC repair has been estimated at around $14,000. The $51,000 roof repair is for a shingled roof, compared to a $144,000 estimate for a metal roof replacement, EDA staff explained.
Board member Ed Daley suggested that with potential contractor inspections and bids anticipated in that price range on the roof work in coming weeks that the EDA should have a structural engineer involved to represent its interests in getting the best deal possible. Interim Executive Director John Anzivino agreed, observing that the EDA should have a substantial overview of what it is taking on in costs and maintenance responsibilities for the building – “It is an EDA-owned building, we have a responsibility to fix it,” he told the board.
Lesser told the EDA Board of Directors the office portion of the building has been closed off but the heating-related utility bills remain what she called “shockingly high”.
Board member Ron Llewellyn, who took the point on January 23 in wondering if the EDA should consider a sale of what he observed has become a money pit for the authority, pointed at a lack of insulation in the building that once housed Stokes Mart.
“There is no insulation in the building – I worked there about 40 years ago when I was in high school,” Llewellyn told his colleagues of what is apparently not a new issue of structural maintenance.
EDA Attorney Dan Whitten pointed out that like the previous tenant, B&G Goods that went out of business within two years, Lesser has a lease with an option to buy on the property.
Asked what the purchase price of her option to buy was, Lesser replied the remaining principal on the EDA’s purchase loan. Whitten verified that lease-to-buy price in Lesser’s contract.
The Main Street Market owner also said it was her understanding that her monthly rental covered the EDA’s mortgage payment. EDA Secretary Henry pointed to a recent rise in that payment, noting Lesser’s rental payment still came close but no longer entirely covered the EDA’s mortgage payment.
Llewellyn has cited a $440,000 number in questioning what he has termed a “too-high” EDA investment in the property at the intersection of East Main and Water Streets in downtown Front Royal, with an additional $50,000 or more expense looming. He has questioned the authority’s ability to recoup its investment through a sale.
The 2014 Deed of Transfer to the EDA/IDA (Industrial Development Authority) cites a purchase price of $398,218.85 and an assessment of $477,000. Whitten said the deed of purchase indicates the $398,000-and-change price covers both the Stokes Mart building and the residential rental building at the corner of East Main and Water Streets.
“I’m concerned where we’re going to end up – we should be cautious,” Daley told his colleagues of coming expenses to maintain the property as either a viable source of rental income or an attractive purchase option.
“We should explore interest in a sale,” Llewellyn reiterated of the point he made a week earlier. And on the topic of sales, Llewellyn told the board he had explored the EDA purchase of the building and discovered that despite the in-town location the town government had not been a catalyst in pushing the EDA toward that purchase.
“That is correct,” Town Manager Joe Waltz said of his exploration of the Town role, if any, at the time the building was purchased from former county supervisor Bernie Stokes’ trust in 2014. Stokes owned and operated the downtown business for decades before his retirement due to age and failing health.
Interim Executive Director John Anzivino was given direction to explore coming maintenance bids and oversee that the EDA interest in repairs at a reasonable price is maintained in conjunction with Lesser’s interest in her business on the site.
“I think we’ve given John enough on this,” board Chairman Blanton observed.
That discussion segued into Anzivino’s report on recent conversations regarding setting up electrical service at the EDA office complex through solar panels installed in the roof of the of the old American Viscose Admin building.
“I met with Green Technologies yesterday,” Anzivino reported. He explained that software was still being installed to allow the power to be shifted to the building’s internal systems to facilitate individual EDA and tenant controls of their electricity through the solar panel system.
Contacted about the potential of a solar power aspect to repairs at the Main Street Market while roof and HVAC repairs are being explored, EDA Attorney Whitten said there was no plan to install solar panels in the old Stokes Mart building as a potential alternative energy source.
All County supervisors now have attorneys and motions dates set
Three Warren County Supervisors who had not yet retained legal counsel during an initial September 27 court appearance of County and EDA officials charged with misdemeanor misfeasance and nonfeasance regarding an absence of due diligent oversight of former EDA Executive Director Jennifer McDonald were back in court Monday morning, October 21.
Those supervisors, Tony Carter, Linda Glavis and Archie Fox appeared either with counsel or with letters to the court from their attorney. The 9 a.m. Warren County Circuit Court docket of Judge William Sharp was adjourned at 10 a.m. to allow Judge Bruce Albertson to record the trio of supervisors’ legal representation and set motions hearings dates. Albertson appeared by video hookup from his Harrisonburg Courtroom. Sharpe has recused himself from hearing all EDA related matters.
Glavis and Fox were slated for the Monday, October 28, 9 a.m. docket when a preponderance of the 14 County and EDA board members motions to quash the three misdemeanor charges against them will be heard, along with Discovery Motions should the effort to have the charges dropped fail.
Due to a scheduling conflict of Carter’s attorney Caleb Kershner, the Happy Creek Supervisors Motions Hearing date was scheduled for November 21, at 4 p.m. It was noted that another attorney scheduling conflict had Supervisor Tom Sayre’s Motions Hearing date set for November 19, though that date did not work for Carter’s Leesburg-based attorney either.
Fox is represented by John Swerling, out of Alexandria, and Glavis by Bruce Blanchard of Reston.
Next Monday will be a busy and crucial day for EDA related hearings. In addition to motions to quash the criminal misdemeanor charges against the bulk of the 14 current or past public officials charged with failing to provide adequate oversight of Jennifer McDonald’s actions as EDA chief executive, the first hearing date on the Removal Petition of all five County supervisors filed on Friday is also slated for that day’s morning docket. That petition is seeking to immediately suspend the supervisors “from performing their duties in office until the Show Cause hearing is held”.
Removal Petition attorney Timothy Johnson said that while technically the Show Cause (as to why the supervisors should not be removed) Hearing could be held on that initial court date, experience says that additional Respondent motions may push the hearing date out.
Should that happen and were the judge predisposed to grant the motion to immediately suspend the supervisors from their duties pending the Show Cause hearing it remains to be seen how the County government would function as to any necessary board votes on appropriations or budgetary matters, etc. Johnson said the court could appoint people to fill the roles of supervisors, though the more likely path would be that the motion for immediate suspension would not be granted to allow the uninterrupted function of County government to continue.
County Supervisors removal petition filed with 941 signatures
On Friday, October 18, the attorney for the organizers of a citizens group seeking removal of all five Warren County Supervisors filed the Petition for that removal with a total of 941 signatures attached, broken down by County Voting Districts.
The filing required a minimum of 10% of the number of registered county voters who voted in the last election. That number is cited as 6,958, requiring a total of 696 countywide. However self-identified “primary organizer” of the petition drive, Bonnie Gabbert, noted in an affidavit filed with the petition that she had rounded each voting district’s total up, raising that minimum required signature total to 699.
So while the petition total of about one-seventh of the county’s most recent voting population does not indicate majority support for the recall, it does meet the State requirement for such a matter to be brought before a Circuit Court judge. And it appears on information from petition attorney Timothy Johnson that for the same reasons of personal or professional familiarity with defendants leading to recusals in EDA cases, that Warren Circuit Court Judge William Sharp will recuse himself from the recall hearing as well.
Johnson told Royal Examiner he believes Chief 26th Judicial District Judge Bruce D. Albertson, who has been presiding at EDA civil and criminal case hearings will preside at the scheduled October 28 Show Cause removal petition hearing. Albertson was already scheduled to be here that day to hear a number of defense motions to quash the very charges the main thrust of the removal is based on.
The removal petition cites the board members’ September 20th misdemeanor criminal indictments related to an absence of due diligent oversight of the actions of former Warren County Economic Development Executive Director Jennifer McDonald in the final four months of 2018 as a primary legal basis of the removal.
“Pursuant to Va. Code § 24.2-233(1), a Circuit Court may remove from office any elected officer residing within the jurisdiction of the Court for neglect of duty, misuse of office, or incompetence in the performance of duties when that neglect of duty, misuse of office, or incompetence in the performance of duties has a material adverse effect upon the conduct of the office.
“On September 20, 2019, Supervisors Daniel J. Murray of the North River District, Thomas H. Sayre of the Shenandoah District, Tony F. Carter of the Happy Creek District, Archie A. Fox of the Fork District, and Linda Glavis of the South River District were indicted for violating the English Common Law, and specifically, each were charged on three misdemeanor counts …” of misfeasance and nonfeasance in the conduct of their office as previously reported (see below linked story).
The petition acknowledges the coming November 5 election in which two supervisors, Chairman and North River Supervisor Dan Murray and South River Supervisor Linda Glavis are not seeking reelection; and Shenandoah District Supervisor Tom Sayre is in a race with Walter Mabe. It also notes that Fork District Supervisor Archie Fox and Happy Creek Supervisor Tony Carter are not up for reelection until November 2021.
Regardless of those electoral variables, the petition asks the court “to suspend the Respondent-Supervisors from performing their duties in office until the Show Cause hearing is held”. There are no Board of Supervisors meetings scheduled prior to that October 28 Show Cause hearing that will revolve around the defendants’ arguments as to why they should not be removed.
And one might make an educated legal guess that at least part of those defense arguments will revolve around the same Sovereign Immunity issue the EDA has raised in the Town of Front Royal’s civil action against it.
“Sovereign Immunity is ‘a rule of social policy, which protects the state from burdensome interference with the performance of its governmental functions … Most importantly, the doctrine of Sovereign Immunity provides for ‘smooth operations of government’ and prevents ‘citizens from improperly influencing the conduct of governmental affairs through the threat or use of vexatious litigation,’ ” a motions filing in the Front Royal vs. EDA civil suit reads.
In addition to its primary Show Cause allegations regarding the misdemeanor indictments cited lack of due diligent oversight of the former EDA executive director late in 2018 the recall petition also alleges a number of other board failings since that time.
Those include failing to take corrective action to prevent a recurrence of the past absence of economic development oversight and use of public money; failing to “review critical financial information” related to a recent bond consultant initiative to refinance some existing capital improvement bonds that could save the County several million dollars; and allowing the EDA purchase of what is described as the “Westrock LLC warehouse purchase” (aka 426 Baugh Drive warehouse) at a price of $5.3 million.
While the removal petition allegations surrounding the misdemeanor indictments and other past absences of EDA oversight appear to have a solid footing for legal arguments, some of the peripheral allegations may have a less substantial foundation.
Unlike some other EDA owned properties, the Braugh Drive warehouse has been cited by current EDA officials as “just the type of property” an EDA should purchase for marketing/sale to a job creating company.
The alleged failure to launch corrective measures and lack of bond refinancing scrutiny seem to ignore several board initiatives and consultant processes. Those include the supervisors’ participation in an EDA Reform Committee and joint County-Town-EDA meetings held to discuss just such corrective measures, many already in the process of being implemented by the EDA and County, including the County’s assumption of the role of the EDA’s financial agent with check-writing authority.
The alleged lapse of due diligence regarding bond refinancing seems to ignore the County’s long-time use of bond consultant Davenport & Associates to perform that very bond reissue due diligence in recommending actions to the supervisors.
And the allegation of wrong doing in the tabling a decision on whether the County will fund the legal defense of the supervisors on their misdemeanor charges to December ignores the explanation that a decision be deferred until the motions to quash the indictments have been heard. That could be a factor in a decision as a compromise solution of the County using taxpayer money for the supervisors defense counsel only if the charges are dropped or the supervisors are acquitted at trial was broached during October 1 meeting discussion.
Those defense motions to quash the misdemeanor misfeasance and nonfeasance indictments against County and EDA officials, as well as Discovery motions if necessary, are slated for hearing on October 28, the same day as the Show Cause hearing on the recall is on the court docket.
Among other EDA McDonald-related oversight lapses cited in the recall petition are the “red flag” of McDonald’s public story of “substantial gambling winnings” to account for her use of cash in her real estate businesses; as well as the sale of the 30-acre ITFederal parcel at the Royal Phoenix/Avtex site “for substantially below fair market value”.
One might say “substantially below” in that the publicly discussed $2 million 30-acre parcel was gifted to ITFederal LLC for one dollar in an effort to “jump start” further development at the 147-acre planned Royal Phoenix Business Park site. Four years later that plan is floundering and ITFederal and its CEO Truc “Curt” Tran are defendants in the EDA’s $21.3 million civil suit. In its first month of existence Royal Examiner broke the story of that one dollar sale being the reason for a one-year delay in U.S. Justice Department approval of the sale (see below linked story).
The EDA is seeking recovery of the balance of its $10 million First Bank & Trust loan to ITFederal on the grounds it was obtained “under false pretenses”. Despite that EDA civil suit contention, Tran and his Congressional sponsor Robert Goodlatte, who helped and/or stood silently by as McDonald pushed those alleged “false pretenses” into the municipal and public consciousness, have thus far remained off the EDA Special Grand Jury criminal indictment radar.
Indicted in addition to the five supervisors on September 20 by the EDA Special Grand Jury were County Administrator Doug Stanley, former EDA/County Attorney Dan Whitten, former EDA Board members Ron Llewellyn, Bruce Drummond, Greg Drescher, William “Billy” Biggs and current EDA Board members Mark Baker, Tom Patteson, Gray Blanton. Each faced three identical charges, two counts of Misfeasance and one count of Nonfeasance in the conduct of their public offices.
October 28 should be a long and interesting day in Warren County Circuit Court.
Interested in reading the petition? See below.
CIRCUIT COURT OF THE COMMONWEALTH OF VIRGINIA,
COUNTY OF WARREN
|In re Joint Petition for Removal of Daniel J. Murray, Thomas H. Sayre, Tony F. Carter, Archie A. Fox, and Linda Glavis
BONNIE GABBERT, as representative petitioner for North River District, KRISTINA C. NELSON, as representative Petitioner for Shenandoah District, MAUREEN SCHOFIELD, as representative petitioner for Happy Creek District, MARK HAJDUK, as representative petitioner for Fork District, JEAN M. STANLEY as representative petitioner for South River District, and all other signatories to this Joint Petition from their respective magisterial districts, Petitioners,
DANIEL J. MURRAY, THOMAS H. SAYRE, TONY F. CARTER, ARCHIE A. FOX, and LINDA GLAVIS,
PETITION FOR REMOVAL OF ELECTED OFFICIALS
Named Petitioners as representatives for Warren County’s magisterial districts, and the attached signatories to this Petition for Removal of Elected Officials who are registered voters who reside within the jurisdiction of the respective officer being petitioned for removal and who have signed this petition under penalty of perjury seek the removal from elected office of Respondent-Supervisors DANIEL J. MURRAY, THOMAS H. SAYRE, TONY F. CARTER, ARCHIE A. FOX, and LINDA GLAVIS, state as follows:
- Pursuant to Va. Code § 24.2-233(1), a Circuit Court may remove from office any elected officer residing within the jurisdiction of the Court for neglect of duty, misuse of office, or incompetence in the performance of duties when that neglect of duty, misuse of office, or incompetence in the performance of duties has a material adverse effect upon the conduct of the office.
- On September 20, 2019, Supervisors Daniel J. Murray of the North River District, Thomas H. Sayre of the Shenandoah District, Tony F. Carter of the Happy Creek District, Archie A. Fox of the Fork District, and Linda Glavis of the South River District were indicted for violating the English Common Law, and specifically, each were charged on three misdemeanor counts as stated as follows:
(a) On or about September 1, 2018 through December 31, 2018, in the County of Warren, [respective supervisor’s name], did unlawfully commit nonfeasance by failing to act to limit or restrict the powers, responsibility, and access to the public financial resources of Jennifer Rae McDonald in her position as Executive Director of Front Royal Warren County Virginia Economic Development Authority resulting in financial loss to Warren County, in violation of Section 1-200 and 19.2-8 of the Code of Virginia, 1950, as amended.
(b) On or about September 1, 2018 through September 25, 2018, in the County of Warren, [respective supervisor’s name], did unlawfully and negligently commit misfeasance by not properly exercising his/her powers of appointment, oversight, and removal, of Jennifer Rae McDonald in her position as Executive Director of Front Royal Warren County Virginia Economic Development Authority resulting in the unlawful diversion of more than $300,000 in public funds, in violation of Section 1-200 and 19.2-8 of the Code of Virginia, 1950, as amended.
(c) On or about October 20, 2018 through November 30, 2018, in the County of Warren, [respective supervisor’s name], did unlawfully and negligently commit misfeasance by not properly exercising his/her powers of appointment, oversight, and removal, of Jennifer Rae McDonald in her position as Executive Director of Front Royal Warren County Virginia Economic Development Authority resulting in the unlawful diversion of more than $9,000 in public funds, in violation of Section 1-200 and 19.2-8 of the Code of Virginia, 1950, as amended.
- These criminal charges stem from the Respondents’ failures to perform their duly elected duties, and ensure proper use of and safekeeping of Warren County’s taxpayers’ monies. Aside from the criminal charges as stated, the Petitioners further allege that the Respondent-Supervisors neglected their duties or otherwise were incompetent to perform their duties by:
(a) Failing to establish policies and procedures that would have ensured a proper accounting oversight of the Warren County Economic Development Authority, including its Executive Director, in contravention of its duty to establish appropriate oversight policies pursuant to Va. Code § 15.2-403(A);
(b) Failing to require and actually review regular, sufficiently descriptive financial and other activity reporting from the Warren County Economic Development Authority, including its Executive Director, and any other financial monitoring department such as the from the Commissioner of Revenues, and/or the Warren County Treasurer, and/or the Finance & Purchasing Department pursuant to Va. Code § 15.2-403(B);
(c) Failing to inquire into official conduct of the Warren County Economic Development Authority’s Executive Director when ‘red flags’ were presented such as her alleged substantial “gambling winnings,” the ‘data center project’ land being sold for substantially below fair market value, and when the Executive Director acknowledged falsifying invoices pursuant to Va. Code § 15.2-403(C);
(d) Failing to account for the “Westrock LLC” warehouse purchase for more than $5.3 million, which served no apparent benefit to the citizens of Warren County and no apparent plan for said warehouse;
(e) Failing to take appropriate corrective actions to ensure that such gross errors in accountability cannot happen again as no proposed solutions have been presented to the public or to the Board of Supervisors to establish proper policies and procedures, or otherwise improve financial oversight; and
(f) As recently as October 1, 2019 at the most recent Board of Supervisors meeting, admittedly failing to review critical financial information concerning revenues and County bond information that would be used to fund Warren County services, and for refusing to decide an agenda item concerning whether the taxpayers of Warren County were to pay for the criminal defense costs associated with the Supervisors’ criminal indictments stemming from the charges related to their misfeasance and nonfeasance in office and postponed such a decision until December 2019.
- The above-stated actions have caused irreparable injury to the interests of the Warren County Government and the citizens whom it is supposed to serve. Millions of dollars of taxpayer monies have been embezzled or otherwise misplaced; trust in local government officials and the departments they work for has been broken; and the reputation of Warren County is forever tarnished. The Respondent-Supervisors have allowed these injuries to occur, and have taken inadequate actions to remedy the errors.
- Two Supervisors (Mr. Murray and Ms. Glavis) are not seeking re-election, and one Supervisor (Mr. Sayre) is running for re-election next month. The other two Supervisors (Mr. Carter and Mr. Fox) are not subject to an election until November 2021.
- As the criminal charges are pending, the citizens of Warren County believe that the Respondent-Supervisors are not in a position where they can capably perform their duties while also addressing such criminal allegations. Aside from the criminal charges, the Respondent-Supervisors have failed to present any cognizable plan of addressing the lack of accountability and oversight, and have demonstrated that they cannot perform their duties competently.
- The Petitioners request that the Court suspend the Respondent-Supervisors from performing their duties in office until the Rule to Show Cause hearing is held pursuant to Va. Code § 24.2-236.
- This Petition has been signed by the requisite number of registered voters who seek to remove their respective Supervisor from office. From the last election for that respective Supervisor’s election, the following number of registered voters voted in the respectively stated districts were as follows:
|Magisterial District||Number of Voters in Last Election Cycle|
|North River District||1,084|
|Happy Creek District||1,811|
|South River District||1,107|
Pursuant to Va. Code § 24.2-233, this Petition is accompanied by signatures of registered voters who reside within the jurisdiction of the respective Supervisor totaling at least ten percent (10%) of total number of votes cast at the last election for the office that the officer holds.
WHEREFORE, Petitioners respectfully request that this honorable Court award the following relief:
- Issue a Rule to Show Cause to the Respondent-Supervisors requiring that the Respondents appear before this Court and show cause why they should not be removed from office, and that such hearing be held no less than five but not more than ten days from the filing of this Petition;
- As part of issuing the Rule to Show Cause, issue an Order suspending the Respondents from their elected official positions on the Warren County Board of Supervisors until such Rule to Show Cause Hearing is heard;
- Upon hearing sufficient evidence proven by a preponderance of the evidence, remove the Respondents from their positions in office; and
- Grant other and further relief as the Court deems just, proper, and equitable.
Dated: October 3, 2019 Respectfully submitted,
Timothy R. Johnson (VSB No. 87673)
The Law Offices of Timothy R. Johnson, PLC
20-B East Main Street
Berryville, Virginia 22611
P: (540) 352-4672
F: (540) 595-3500
Counsel for Petitioners
VERIFICATION BY REPRESENTATIVE PETITIONERS
- I, Bonnie Gabbert, a resident of the North River District within Warren County, have reviewed the allegations in the Petition for Removal of Elected Officials, and affirm under penalty of perjury that such allegations are true and accurate to the best of my knowledge.
- I, Kristina C. Nelson, a resident of the Shenandoah District within Warren County, have reviewed the allegations in the Petition for Removal of Elected Officials, and affirm under penalty of perjury that such allegations are true and accurate to the best of my knowledge.
- I, Mark Hajduk, a resident of the Fork District within Warren County, have reviewed the allegations in the Petition for Removal of Elected Officials, and affirm under penalty of perjury that such allegations are true and accurate to the best of my knowledge.
- I, Maureen Schofield, a resident of the Happy Creek District within Warren County, have reviewed the allegations in the Petition for Removal of Elected Officials, and affirm under penalty of perjury that such allegations are true and accurate to the best of my knowledge.
- I, Jean M. Stanley, a resident of the South River District within Warren County, have reviewed the allegations in the Petition for Removal of Elected Officials, and affirm under penalty of perjury that such allegations are true and accurate to the best of my knowledge.
Facing civil contempt and jail McDonald moves on without counsel
Attorneys for five people cited as defendants in the Warren County Economic Development Authority (EDA) civil litigation and four associated Limited Liability Companies, were in Warren County Circuit Court at 9 a.m. Thursday morning, October 17, for motions hearings. Those defendants represented included Jennifer McDonald, Donald Poe and April Petty, who were present with counsel; and Poe’s Earth Right Energy LLC partner Justin Appleton and ITFederal principal Truc “Curt” Tran, the latter two represented by counsel.
Motions arguments began with Petty’s request to be excluded from the amended complaint (see related story). Motions regarding general amended litigation issues were quickly addressed by Poe, Appleton and Tran’s attorneys without discussion.
Other than Petty’s motion to be withdrawn from the amended lawsuit, the only disputed legal arguments heard by presiding Judge Bruce D. Albertson involved primary EDA civil case defendant, former EDA Executive Director Jennifer McDonald and her civil attorneys from the Berlik Law Firm.
Berlik Law filed a motion of its intention to withdraw as McDonald’s civil case counsel on October 9. However there would be another hour and 20 minutes of legal arguments on behalf of their client before the motion to withdraw was before, and granted without objection from McDonald, by the court.
Prior to that court granting of her counsel’s motion to withdraw from her civil case defense, as Berlik Law attorney Jay McDannell argued Fifth Amendment Discovery issues, a show cause contempt filing against McDonald, and a disputed payment to the law firm, McDonald was seated in the spectator section of the courtroom next to attorney Lee Berlik.
During arguments on the plaintiff’s show cause motion on contempt against McDonald, McDannell told the court that McDonald had attempted to move a court-ordered frozen property in her name through her sister while incarcerated in order to help pay legal fees. He called the movement of a property enjoined by the court not to be moved a “mistake” rather than an intentional defiance of the earlier court order by Judge Clifford Athey Jr. Athey froze properties in McDonald’s name alone for potential asset recovery by the plaintiff. Properties held with others were left unencumbered in that initial court ruling.
McDonald’s attorney noted that the property enjoinment order had been verbal, not written and McDonald had been confused as to which properties were frozen. “There is nothing indicating that the Pinehill Road property was acquired wrongfully,” McDannell told the court.
“She is under enormous financial distress,” McDannell said of his client’s situation despite being at the center of a $21.3 million embezzlement case. He noted that Athey did not freeze all his client’s real estate holdings because she has a right to raise money to defend herself against the charges, civil and criminal, leveled at her.
When the attorney withdrawal motion was reached at 10:50 a.m. McDonald joined McDannell at the defense table while Berlik remained in the spectator seating. After McDonald told the court she did not object to the Berlik Law firm’s withdrawal, Judge Albertson briefed her on moving forward without legal representation.
“I can’t help you – you have to understand the rules of evidence. If you ask me a procedural question I’ll stare back at you,” Albertson told McDonald.
Noting his setting of December 12 for a hearing on the EDA’s show cause motion for contempt of civil court regarding her attempt to move the frozen real estate asset, Judge Albertson told McDonald that she faced the possibility of going back to jail at that time.
“On that day all the powers of contempt are at my disposal,” he informed McDonald.
And in an apparent reference to the earlier explanation of her attorney that the lack of a written court order had led to her confusion about which properties she could legally move, Albertson said that written order or not, “I’m telling you to be here that day,” for the Show Cause Contempt hearing.
While she still had legal representation at Tuesday’s hearing, arguments revolved around the above referenced plaintiff Discovery motions seeking information about a defense document McDannell produced at an earlier hearing. Former EDA and County Attorney Dan Whitten identified the document as a forgery. It indicated a closed session EDA board vote authorizing McDonald to purchase property through her real estate company for the EDA. Whitten said he was at the meeting and the vote, which would have violated FOIA (Freedom of Information Act) laws, never occurred.
A second believed forged document referenced by lead EDA attorney Cullen Seltzer were EDA meeting minutes believed to have been altered to show that McDonald informed the EDA board early on about her relatives’ involvement in the Workforce Housing land transfer to the EDA.
McDannell continued the defense stance that production of potentially incriminating evidence in the civil court process should not be allowed to proceed criminal case resolutions because of McDonald’s Fifth Amendment right not to self incriminate.
Another Discovery issue is the plaintiff’s request for information on a $10,000 wire transfer payment to Berlik Law made by McDonald under the heading Afton Inn Project legal expenses. The amended EDA civil complaint seeks recovery of that money as embezzled EDA assets. The Berlik Law firm is contesting the return of the money as reported in an earlier story on the filing of the amended EDA civil suit.
When Berlik Law’s motion to withdraw from the case was reached, EDA Attorney Seltzer told the court regarding the disputed payment, “I think they have to withdraw, they’re defendants now.”
Other than accepting the Berlik Law motion to withdraw from the case, Judge Albertson took the other matters under advisement.
Court takes Petty motion for removal from EDA civil suit under consideration
Chief 26th Judicial Circuit Judge Bruce D. Albertson took several Warren Economic Development Authority (EDA) civil case defense motions under advisement following legal arguments in Warren County Circuit Court Thursday morning, October 17.
Albertson also granted the EDA’s motion to amend its complaint, adding $3.7 million dollars to the original $17.6 million dollars being sought for recovery and adding six of the seven new defendants added to the amended litigation.
The status of that seventh new defendant, April D. Petty, was one of the matters taken under advisement for a ruling by the court. Albertson promised a decision on Petty counsel’s motion to remove her from the amended complaint within two to three weeks.
Petty attorney Bill Shmidheiser told the court he believes his client was wrongly included in the amended complaint submitted by Sands Anderson attorneys on the EDA’s behalf. He called Petty a victim of primary defendant Jennifer McDonald’s attempts to conceal another embezzlement scheme she is alleged to have been involved in.
According to the Amended EDA Complaint that other transaction was the EDA purchase of the Workforce Housing, Royal Lane parcel owned by McDonald’s aunt and uncle, Walter and Jeannette Campbell, owners of the Century 21 Real Estate Company McDonald was acting as an agent for in the Petty home sale.
Petty is one of several new defendants accused of having received illegally misdirected EDA assets from McDonald in order to purchase or pay mortgages on homes. However Shmidheiser asserted that McDonald had forged Petty’s name to the Sales Contract on her home. That sale involved Ocwen Loan Servicing LLC, which held the mortgage on Petty’s home.
Ocwen is also cited in the amended EDA litigation as a company used by McDonald to cover the addition of $125,000 to the EDA’s agreed upon $445,000 purchase price of the Campbell’s 3.5 acre workforce housing parcel.
“She is not a ‘financial associate’ of (Jennifer) McDonald – she lives in the same town and hired her as a real estate agent. She was embezzled from by Jennifer McDonald,” Shmidheiser told the court Tuesday, elaborating on his filed objection to Petty’s inclusion in the amended lawsuit. He offered to make Petty available for deposition to plaintiff counsel and expressed confidence that presented with her side of the story, plaintiff attorneys would agree that a mistake had been made in adding her to the case.
In his motion to stay his client’s inclusion Shmidheiser cites conflicting numbers presented to his client by McDonald and financial records indicating Petty herself may have been defrauded in the sale of her home.
According to her attorney Petty was told the couple purchasing her home would pay the full asking price of $329,900, but that they wanted to put down a $125,000 deposit. He then points to HUD-1 records indicating a loan to the buyer of $211,105 on a purchase price of $210,000, minus a $5,000 “Sellers Credit”. Shmidheiser goes on to contend that McDonald got the buyer’s to put up a $50,000 cash deposit that she kept.
“Then, Jennifer McDonald must have kept Mr. and Mrs. Leary’s $50,000 case ‘Deposit’ for herself, and in order to cover her embezzlement from her brokerage clients, she had the IDA issue a check to pay down April Petty’s mortgage at Ocwen by $125,000. That way Mrs. Petty wouldn’t be questioning why she wasn’t getting her full asking price … And Mr. and Mrs. Leary wouldn’t question where their Deposit went – as far as they knew, it was reflected in the final sale price at Closing. That is the only way this makes sense,” Petty’s attorney concludes of the convoluted nature of the Petty house sale.
Shmidheiser asked for the voluntary deposition of his client by the EDA attorneys “before she is plunged into the maelstrom of this case” – a case he noted was one of, if not the largest embezzlement case in Virginia’s history.
Petty’s attorney then reiterated the argument at the base of his Objection to Petty’s inclusion in the amended EDA civil complaint, which states, “If April Petty is joined in this proposed First Amended Complaint, even though April Petty is innocent, defending herself will cost April Petty thousands and thousands of dollars – and in the meantime her reputation is dragged through the mud and the public news media … Internet and television. That has already started to happen. If April Petty actually did what your lawsuit accuses her of – fine, it’s what she deserves.
“But the court must consider: What if the allegations are wrong? The Plaintiff – and this Court – will have ruined April Petty financially, and ruined her reputation for no good end for the Plaintiff and with no way for April Petty to recover any of her losses.”
In addition to the offered deposition, Petty’s attorney asked the court to subpoena records of Citizens Bank, N.A. and the purchasers of her home; and to find out from those purchasers “whether they paid any money to Jennifer McDonald separate from, outside of, the JUD-1 Settlement Statement for their purchase of April Petty’s house.”
“A lot of defendants think they are not liable,” Sands Anderson attorney Cullen Seltzer countered. He argued that $125,000 had moved through the cited real estate transaction to Petty’s benefit at what he called her “mortgage debt” surrounding the sales transaction. “A $125,000 of my client’s money went to the benefit of Ms. Petty; she was unjustly enriched by it – she can’t keep it.”
Seltzer told the court that the time to argue details of where all the money went was during the development of the civil litigation toward and at trial.
Petty’s attorney replied to the Plaintiff argument by noting that his client alone, from what he estimated at 14 or 15 people questioned by the EDA Special Grand Jury about their financial involvement with McDonald, had not been indicted.
Judge Albertson asked Shmidheiser if he was arguing that plaintiff counsel should take the initiative in establishing his client’s innocence. Petty’s counsel replied, no, he was just offering them the opportunity to get additional related information that could alter their perception of her involvement in the movement of any EDA assets as intentional or part of a conspiracy to defraud the EDA.
In taking the arguments under advisement and promising a decision within 14 to 21 days, Judge Albertson observed that if they were so predisposed, the two sides did have an opportunity to discuss their cross motions and Petty’s offer of cooperation with plaintiff counsel.
Albertson then granted the plaintiff motion to amend the complaint regarding the other defendants without argument. He set a schedule for additional filings beginning with defense motions by November 7; plaintiff reply by November 25; additional defense responses by December 6, pointing toward a scheduled motions hearing date of December 12.
‘Hundreds of Thousands of Pages’ of EDA criminal case discovery at issue
Motions hearings for four EDA criminal defendants Tuesday afternoon revealed that the problem of sifting through prosecution material related to charges against them may be deeper, much deeper than anticipated.
The first hint of how deep came early in the 3 p.m. Warren County Circuit Court docket when Commonwealth’s Attorney Bryan Layton told the court that EDA civil attorneys from the Sands Anderson law firm hoped to have “hundreds of thousands of pages” of documents turned over and digitized into the Court Clerk’s computer system “by the end of the week”.
Layton explained that he had requested the presence of Acting Circuit Court Clerk Janice Shanks at the October 15 hearings for Jennifer McDonald, Samuel North, William Lambert and Donald Poe to help elaborate on the process of that digitization and its depth. Shanks told Judge Bruce D. Albertson that her liaison at the State Supreme Court told her that the EDA case documentation was “the largest amount of material he had ever seen” tied to a case.
Following adjournment of the hearings, for the most part continued to November 21, at 4 p.m., Shanks responded to a media question on the amount of material being referenced with an estimate of 700,000 pages. Asked about the source of that volume of evidentiary material, Shanks said she could not specify the source of what is currently for the most part sealed material.
“I hope we don’t have to review hundreds of thousands of pages of documents … we are looking for those from January and July 2014,” William Lambert’s attorney Phillip Griffin II told the court of the timeframe of charges against his client.
Earlier Donald Poe attorney William Ashwell said he believed a very specific Discovery Motion on his client’s behalf related to a perjury charge could be provided by the Commonwealth “by the end of the day – If not it goes to our argument that no crime has been committed,” Ashwell said of the perjury charge related to his client’s testimony to the Special Grand Jury empanelled to investigate potential criminality tied to the EDA civil litigation now seeking recovery of $21.3 million dollars.
Ashwell noted that his client was in a somewhat different situation to the other defendant present in that he has a trial date set. That date is December 6, causing more urgency in the Commonwealth’s producing Discovery and Bill of Particulars information to the defense.
Layton, who has been appointed special prosecutor for the EDA Special Grand Jury in the wake of Brian Madden’s departure for a judicial bench seat, told Judge Albertson that the particulars of the perjury and financial charges against Poe “interact with one another” somewhat complicating production of the perjury Discovery Ashwell was requesting.
Judge Albertson granted Ashwell’s motion for a Bill of Particulars in Poe’s perjury case and set a return date set of November 21, at 4 p.m. That is the same date set for continuance to ascertain the status of Commonwealth responses to the Discovery and Bill of Particular motions for all four defendants.
Albertson also gave the prosecution to October 30 to respond to Lambert’s attorney’s request for specific responses on the 2014 dates regarding the charges against the former B&G Goods principal owner.
Also discussed during Tuesday’s hearings was the status of Layton as special prosecutor for the EDA Special Grand Jury. Judge Albertson said it appeared likely that John Bell, who is running unopposed to succeed Madden as Warren County Commonwealth’s Attorney after garnering the Republican Committee nomination over Layton, would likely have to recuse himself from the Special Grand Jury probe due to past legal representations.
The judge said it also likely that all attorneys in the new commonwealth’s attorney’s office would also be in the position of recusal for various past professional or other connections. Whether Layton’s tenure would be extended or an attorney or attorneys from another jurisdiction’s commonwealth’s attorney’s office would be appointed was still under consideration.
McDonald criminal attorney Peter Greenspun lamented the prosecutorial complications delaying the court’s ability to set “meaningful trial dates” for his client – “Ms. McDonald would like a more efficient process,” Greenspun told the court.
However all defendants agreed to waive their speedy trial rights as Harrisonburg-based Chief 26th Judicial District Judge Albertson navigates the tricky terrain surrounding the personal and professional intertwining tentacles generating into the community from the EDA financial fraud investigation and the civil and criminal case defendants thus far cited.
EDA meets, goes into closed session and tours properties
Following a 25 minute closed session discussion of legal matters including loans, accounting, debt service and matters involving First Bank & Trust the Front Royal-Warren County Economic Development Board of Directors made no announcements regarding any of those matters at a Special Meeting called for Friday morning, October 11.
The EDA Board met in closed session the previous day in what was termed an Emergency Finance Committee Meeting. A number of First Bank & Trust officials from Abington were present for the meeting. First Bank & Trust is the holder of the $10 million EDA loan to ITFederal that is part of the $21.3 million in assets the EDA is seeking recovery of in its civil litigation. As previously noted by Royal Examiner, including in yesterday’s Opinion piece “County, EDA officials cited for failed oversight – why not the Town?” EDA officials say the ITFederal loan was acquired “under false pretenses”.
While there were no announcements forthcoming from either closed session, in open session near the end of Friday’s meeting Tom Patteson did announce his resignation as Treasurer and member of the Finance Committee, effective at the end of October. Patteson noted he is not resigning from the EDA board.
Following Patteson’s announcement of his pull back on official duties the board convened an Asset Committee meeting during which EDA Administrative Assistant Gretchen Henderson did a power point presentation locating EDA properties, including some small ones along Leach Run Parkway she noted she had discovered by accident during a search of the County Global Imaging site <WarrenGIS.org>.
The global imaging presentation on the location of EDA properties served as a prelude to a tour of some of those properties by the board following adjournment of meeting. Properties visited included the 426 Baugh Drive warehouse, the 404 Fairgrounds Road office building, and vacant Happy Creek Technology Park properties off Shenandoah Shores Road.
During a brief open session at the outset of Friday’s special meeting the EDA board authorized closing of one of its bank accounts with First Bank of Strasburg. Henderson later explained the move as part of the EDA’s consolidation and transfer of financial assets over to Warren County, which has agreed to become fiscal agent for the EDA.
The transfer of financial responsibility to the County government is part of the EDA’s self-generated reform and move to transparency of operations as it deals with the repercussions of the contracted financial fraud investigation of public accounting firm Cherry Bekaert. Thus far the legal consequences of that investigation have centered on alleged actions of former EDA Executive Director Jennifer McDonald involving her real estate and certain other business dealings with family, friends and business associates.
One of those business dealings came into discussion during the first stage of the post-meeting tour of EDA properties. As staff explained an absence of electrical metering in one of the vacant spaces at the EDA’s Kendrick Lane Office complex, the issue of the Town’s sole authority to charge clients for power service in Town was broached.
While the Town opened a 15-acre solar field as part of its Energy Services Department in May 2017, the two roofs of the EDA office complex were not part of that solar field.
Director of Energy Services David Jenkins explained to this reporter that while the EDA would be able to provide power to its office and Kendrick Lane tenants from the rooftop solar array, that by Town Code the EDA would not be able to charge tenants for that power. So the EDA faces a decision to provide free power in the Kendrick Lane complex or abandon the solar power idea, at least as it applies to tenants there.
The contracting of solar panel installation by McDonald through her business associate Donnie Poe’s Earth Right Energy LLC (ERE) is one focus of the EDA’s $21.3 million dollar civil litigation. Of that amount, $945,037 is being sought from ERE for various projects EDA litigation states were never approved by the EDA Board of Directors or were approved under false pretenses.
Pages 31 and 32 of the amended EDA civil complaint indicate $536,037 of the ERE payments being sought for recovery were for “unapproved payments related to the solar installation at the Warren EDA’s offices on Kendrick Lane in Front Royal, Virginia.” The EDA contends McDonald told her board the Kendrick Lane solar installation would come at no cost to the EDA.
“She explained that the installation of equipment by Earth Right Energy would be absorbed by Earth Right Energy as part of a scheme whereby Earth Right Energy would either sell solar energy generated by equipment it installed and/or reimburse the Warren EDA through certain tax credits,” the EDA’s amended civil complaint states.
Be that as it may, the office spaces once occupied by Amerisist and the Selah Theater group in the east building were judged as very marketable as rentals, perhaps with some remodeling of the theater space to accommodate a new client’s business needs.
And then after one more quick Kendrick complex vacant space stop it was off to a tour of other major EDA properties around the town and county being marketed for sale.
In this first Royal Examiner video, watch the EDA meeting and tour presentation by EDA Administrative Assistant Gretchen Henderson:
In this second Royal Examiner video, go along on the tour of 426 Baugh Drive warehouse: