As Royal Examiner reported on September 11, that day Shenandoah District Supervisor Tom Sayre was awarded $20,000 of $25,000 in damages he was seeking in a General District Court defamation civil suit against former Front Royal-Warren County Economic Development Authority Executive Director Jennifer McDonald.
While an overview of the case and Judge Ian Williams’ decision and damages ruling was presented in that linked story, there was quite a bit of courtroom drama that led up to that decision that went unreported due to time constraints. We will endeavor to fill in some of that detail now. And with neither side in the case requesting a court reporter for day two of the trial, this is the best you’re going to get.
As Sayre took the stand to open day two of his defamation lawsuit against McDonald there soon were tears from the plaintiff upon recalling the moment he discovered he had been implicated in a series of alleged criminal incidents targeting McDonald and the EDA headquarters.
Sayre based his $25,000 General District Court claim of defamation of character upon the presence of his office cell phone number and the instruction “Do not call Tom during business hours” on a crumpled note McDonald pointed out to Warren County Sheriff’s Office responders to her June 15, 2017 report of an act of vandalism at her home.
Sayre contended that the typed note, as well as the alleged criminal incidents to which it appeared linked, was fabricated either by McDonald or at her direction as a means to deflect attention from her activities as the EDA’s chief executive that led to her December 2018 resignation and current civil and criminal legal problems. Those problems include being a primary defendant in civil suits brought by the EDA and Town of Front Royal seeking recovery of as much as $20 million and $15 million, respectively; as well as 28 felony criminal indictments stemming from the EDA financial fraud investigation launched in September 2018.
Though you might think it would be the defendant crying in this circumstance, it was the plaintiff’s tears that began shortly into direct examination by his attorney Tim Bosson. Asked how he found out he had been implicated in criminal activity targeting McDonald and the EDA, Sayre began to recall an August 2017 phone call from former Royal Examiner Editor Norma Jean Shaw telling him he needed “to protect” himself due to the above-cited references in the vandalism scene note.
“I was in the kitchen,” Sayre began haltingly, as he glanced over his shoulder from the witness chair toward his wife seated behind press row. Sayre’s testimony halted for several minutes as he tried to regain control of his emotions, sobbing gently at times.
Those tears eventually evolved into sometimes confrontational cross examination exchanges with McDonald attorney Lee Berlik that led to admonitions from the bench to Sayre not to critique Berlik’s questions to him: “These are yes and no answers – you were doing real well there for about eight seconds,” Judge Williams told Sayre at one point during the plaintiff’s nearly two-and-a-half hours on the stand.
The eight seconds of court-approved exchange between Berlik and Sayre referenced by Williams was Sayre’s reply to the question, “Did you ever tell the police that Mr. Bianchini (yes, this one) was suspected of cutting the brake wires on your car?”
After a slight pause Sayre replied, “I’m going to answer no,” elaborating that he had three suspects to what he testified was discovered to be sliced brake wires causing warning lights to come on and the vehicle not to start as his wife attempted to leave their property in their Chevy Traverse several years ago.
It would not be the only reference to your humble reporter during the day’s testimony and closing arguments. That is due to Bianchini’s (I hate referring to myself in the third person) day one testimony that McDonald told him details of the vandalism the afternoon of June 15, 2017, during a lengthy meeting at her office. It turned out that conversation came five to six hours before McDonald reported the stone-throwing vandalism of her home at 9:02 p.m. that evening. Also drawing attention to this reporter were the plaintiff’s day one introduction of a series of texts and emails between him and McDonald regarding the vandalism event at her home and her private investigator’s research into the incident.
They were messages largely concerning a potential suspect supposedly connected to Sayre as a past criminal client, who was approached about wearing a wire to draw an admission from Sayre to his involvement. McDonald’s Private Investigator Ken Pullen testified there was neither an ID’ed suspect nor any plan for wiring a suspect during his day one testimony on August 2.
Asked by Berlik during cross examination if he had feared for his safety or that he might be murdered, Sayre explained that he feared McDonald or associates might kill him for crossing the then EDA executive director concerning the Workforce Housing Project. During a June 2017 county board-EDA work session Sayre and fellow county supervisor Archie Fox had questioned McDonald and EDA board Chairman Greg Drescher about the process of that project.
It was a project that bore questioning, as it evolved from a reported 2014 $10 “gift” from McDonald’s aunt and uncle for whom the EDA executive director maintained a real estate broker’s license and job, to a $445,000 “moral obligation” purchase of 3-1/2 acres by the EDA upon disclosure a previously unmentioned federal tax credit deadline had not been met in 2017. Of course Sayre and Fox weren’t the first to question that and other recent EDA projects. Councilwoman Bébhinn Egger and Royal Examiner had begun asking questions, particularly about Workforce Housing and the ITFederal project over the previous year.
“There are people who get knocked off if they know too much,” Sayre explained, referencing the 1983 murder of Front Royal Police Sgt. Dennis Smedley, and another apparently fatal incident involving a local physician he identified as “Doctor Lind”.
“She talked about killing me … that she missed an opportunity to ‘take me out’,” Sayre told Berlik, adding of the still unsolved Smedley murder, “There is a theory he knew too much about drugs in the community.”
The give and take between McDonald’s attorney and Sayre led to Berlik’s closing argument that because the plaintiff believed something in his mind did not mean it was true, or that his client had caused those beliefs to formulate.
Berlik argued that Sayre’s fears were stoked more by Shaw’s phrasing of her warning phone call to him, the recollection of which led to Sayre’ initial battle with his emotions on the stand, more so than the actual presence of his number and the instruction “don’t call Tom during business hours” on the typed note pointed out by McDonald to first responders at the home vandalism scene.
Berlik also questioned whether Sayre had suffered any actual damage from the note and its contents. While Sayre testified he had gone from full-time legal practice to part-time in the wake of the note’s discovery, Berlik elicited the information that his salary at job he took upon cutting back his legal practice, as Human Resources Director at Seton Home School, paid him $93,000 to $95,000 with subsequent Cost Of Living (COLA) increases. However Sayre insisted he had taken about a $10,000 loss of income hit due to his employment shift.
Berlik also referenced previous testimony from witnesses who all indicated they did not believe Sayre’s reputation had been impacted in the community by the alleged conspiracy note.
Sayre countered that he had run into a woman during his current campaign for re-election who said she would not vote for him because of a belief he had been involved in the alleged incidents targeting McDonald. Asked her name by Berlik, Sayre could say only that she lived “up on Freezeland Road”.
Sayre also testified that he had a perhaps unexpected opponent in his run for re-election to the Shenandoah District Supervisors seat. Berlik asked if that opponent, identified as Walter Mabe, was running against him because he believed Sayre had been involved in a criminal targeting of McDonald.
“Where is he? … Where is the woman on Freezeland Road?” Berlik asked during closing arguments. His point to the court was that if either could provide evidence of the plaintiff’s assertion of damage to his reputation, why hadn’t they been produced as plaintiff witnesses.
“I don’t believe it happened,” Berlik said of the Freezeland Road encounter.
Berlik also questioned Sayre’s claim of emotional damage. The plaintiff said he suffered a great deal of stress and anxiety about his personal, professional and political future in the wake of information about the note circulating in the community. Sayre said he had talked to a priest, among others, though not in professional clinical treatment settings.
Defense counsel also cited a number of examples involving personal disputes with a variety of people to illustrate that the plaintiff was exceptionally thin-skinned and might take offense where others wouldn’t. Berlik pointed out that others implicated in the note, including Shaw and Michael Graham, had not filed defamation actions as a result.
Sayre attorney Bosson countered by saying the defense “eggshell” ego argument didn’t matter – that if his client was negatively impacted, as he asserted the plaintiff had illustrated he was, that was the bottom line in a defamation case.
“She was trying to destroy me – I called the BAR about it,” Sayre told Bosson on direct examination about fears for his professional future.
Noting his client has never been proved to have been the author of the vandalism scene conspiracy note, defense counsel Berlik pointed to others in the community who might have motive to attempt to set Sayre up for criminal acts out of various personal or professional conflicts with him.
Wait, what – WHO?!?
“We’re not saying Mr. Bianchini threw the rock – but they have a negative history. He had as much motive as anyone,” Berlik told the judge of testimony of past conflicts between the reporter and plaintiff including Sayre’s brake wire cutting suspicion of Bianchini and Bianchini’s filing of a 2011 stalking report involving Sayre around the time of the multi-million dollar SolAVerde tortious interference in a business contract lawsuit against Sayre and then fellow councilmen Chris Holloway and Carson Lauder.
However in his closing argument Sayre attorney Bosson pointed to the past tensions between the reporter and his client brought out by the defense as a positive for the plaintiff’s case. “In a way Mr. Berlik is our best witness – he’s gone out of his way to show Mr. Bianchini doesn’t like Mr. Sayre; so his (Bianchini’s) bias is in the opposite direction.”
Defense counsel Berlik argued that it was Sayre himself, upon being informed of the note and its contents by Shaw in August 2017, who had done the most to spread the information he was implicated throughout the community.
However plaintiff counsel countered that McDonald had played Bianchini with the “off the record” information about the note and investigation in order to get the information spread into the community.
Sayre was asked on the stand about Bianchini’s testimony that he only told four “close associates”, three professional and his long-time girlfriend, in confidence about the information he had gotten from McDonald about her PI’s investigation into the vandalism situation.
“I think he may have forgotten how many people he told,” Sayre replied. (Why is everybody picking on my memory?!? – What were we writing about?)
In the end the case revolved around two primary arguments – who was a likely author or architect of the note and the reported crimes against McDonald and the EDA offices; and were there actual damages involved, or just Mr. Sayre’s perception of damage where none actually existed.
In closing Bosson said the plaintiff didn’t have to prove McDonald herself wrote the note or threw the rock through her front door window.
“She told Mr. Bianchini that afternoon – how does she know about a crime that hasn’t happened? We are not saying she threw the brick or that she wrote the note. What we are saying is Ms. McDonald knows who threw the brick; what we are saying is Ms. McDonald knows what was in the draft note – she was the one behind it …
“This was all a scam by her to deflect attention off of herself – she may have thought it was for kicks to implicate Tom Sayre in a crime,” Bosson told the court, referencing both the home vandalism and McDonald’s report in May 2017 of a break in at the EDA headquarters.
On the stand Sayre expressed distress at being tied to racial slurs on one of the photos of McDonald and family members discovered at the EDA office after McDonald reported a break-in there on May 17, 2017, about a month before the reported vandalism at her home. The vandalism scene note referenced “Norma Jean” and “the Examiner” waiting for information supposedly taken from the EDA office that day.
At the time Shaw was exploring the large amounts of cash McDonald was using in her real estate business transactions, as well as the presence of the Sheriff as an agent on one of McDonald’s two real estate companies.
“This is far from a simple case,” Judge Williams said after a 10 minute recess to formulate his ruling. He cited four elements of defamation: 1/ publication, or perhaps in this case dissemination; 2/ an actionable statement; 3/ recklessness; 4/ false and defamatory information.
Noting that both parties were public figures constantly under public scrutiny, the judge observed, “They must be thick skinned about such things – but they don’t need to be thick skinned about malice.”
Williams said the evidence must be viewed in its totality, rather than compartmentalized.
“The plaintiff has evidence that the defendant had compelling reasons to use the plaintiff as a dupe in this,” the judge said referencing EDA/County Attorney Dan Whitten’s testimony that “things were falling apart” at the time and that “the defendant had reason to keep a lid on it … She had a reckless disregard for truth” and “reason to shift attention from herself to another public figure,” Judge Williams observed.
Judge Williams then referenced the different outcome he was about to render to the not guilty verdict in McDonald’s criminal misdemeanor false police report case last October 31. Judge W. Dale Houff dismissed the case against McDonald regarding her reported vandalism of June 15, 2017, at her home. That case was initially developed by FRPD investigators based on information supplied by this reporter during a police interview the morning of June 16, 2017. After nearly a year the warrant was brought forward by the Virginia State Police on June 13, 2018.
Judge Williams said it was unfortunate the outcomes were conflicting, adding of a key witness in both trials, “Mr. Bianchini’s memory seem to have been rehabilitated.”
The reference was to McDonald criminal attorney David Crump’s October 31, 2018 cross examination question to this witness about a notation on EDA Administrative Assistant Missy Henry’s 2017 calendar about an alleged meeting Bianchini had scheduled with McDonald at 9:30 a.m. Friday morning, June 16. It was then that McDonald and her attorney asserted Bianchini was told about the vandalism of the previous evening at her home, rather than the previous afternoon as he claimed.
Like McDonald, Henry has since been indicted on criminal felony charges related to the EDA financial fraud investigation, though in Henry’s case only two indictments related to disbursement of EDA assets related to the EDA-financed B&G Goods operation in the old Stokes Mart building.
But as Bianchini testified in this defamation trial, if he admitted to an “imperfect memory” and expressed confusion on the stand last October, it was confusion about whether he had scheduled a meeting with McDonald for that Friday morning 16 months earlier, rather than confusion about the Thursday meeting.
And Judge Williams noted that two witnesses called in this defamation trial corroborated key aspects of Bianchini’s testimony. Those witnesses were former EDA Marketing Director Marla Jones and FRPD Investigator Landin Waller. Neither was called as a witness by the prosecution in McDonald’s 2018 false police report trial.
On August 2, 2019, Jones testified that Bianchini was in McDonald’s EDA office for an extended period of time behind closed doors on Thursday afternoon, June 15, 2017, around 3 p.m. She also testified that she did not see Bianchini in the office the following morning. It was that Friday morning that Jones told FRPD investigators that McDonald had told her about the vandalism; and that the two talked for much of the morning.
Also on day one of the defamation trial last month Investigator Waller confirmed that Bianchini had informed him and Captain Crystal Cline in an interview the morning of June 16, 2017, between 10:40 a.m. and 11:30 a.m. about receiving the information about the vandalism from McDonald the previous afternoon.
And as Bianchini testified on day one of this defamation trial, had he been told about the vandalism at a meeting with McDonald within an hour of arriving for his interview at FRPD’s investigative headquarters, he would not have forgotten that – “I probably would have had to go straight from the EDA office to police headquarters,” Bianchini observed on the stand during his August 2 testimony.
And as Bianchini told fellow reporter Josh Gully during a phone interview for his story on the defamation trial, “Anyone can write anything on a calendar at any time”; and that if a meeting had once been scheduled with McDonald for June 16, 2017, it had previously been cancelled.
But without the corroborating witness testimony and no redirect examination to explain his hesitancy in response to the June 16, 2017 morning meeting question posed by the McDonald defense on October 31, 2018, Judge Houff dismissed the criminal case against McDonald without the defense even having to present its case.
However 10-1/2 months later the civil litigation surrounding McDonald’s vandalism report would have a different outcome.
As previously reported, after hearing nearly 3-1/2 hours of testimony and arguments on day two of the trial, Judge Williams awarded Sayre $5,000 in damages, $15,000 in punitive damages, and $676 in court filing costs. McDonald has 10 days from the judgment to file an appeal to Circuit Court.
Settle down boys
In another ruling, Williams declined to impose sanctions on either attorney for their conduct in or out of court during this case.
“There has been some hostility in this case … at times moderate to heavy … about what a dog the opponent was,” Williams said of the attorneys, describing “braggadocio” from both sides on how tough they were going to be in seeking a successful resolution for their clients.
In fact as Bosson and Berlik argued a motions point during last Wednesday’s hearing, Judge Williams admonished them at one point, “Now both of you, sit down.”
Despite the theatrics and contentious nature of the case, Williams said, “I am not inclined to sanction either side in this case.”
Bosson argued for some sanction against Berlik for attempting to bury the plaintiff in motions filing in the case’s earlier days. In fact during a March hearing the number of motions filings and legal hours spent on the case led the judge to question how much money the two sides were spending in a case with a maximum recovery cap of $25,000.
“It’s very curious – but I’m giving you more time to arrange the deck chairs on the Titanic,” Williams famously observed of the hours and expense of the case on March 30 when he put a lid on further motions hearings.
In fact costs were a point of testimony during Sayre’s lengthy cross examination last week. Berlik asked the plaintiff if his legal costs had reached $77,000. Sayre replied, “No, they are much less than that,” estimating them at $6,000.
Following the trial’s adjournment outside the courthouse Bosson explained to the media that he had taken a flat up-front fee of $6,000, with a percentage of the award granted by the court. Typical percentage arrangements could add another $6,000 to Sayre’s legal fees.
While Bosson indicated he and his office had actually put $77,000 worth of legal time into the case, he said he had taken the reduced fee arrangement because he thought it was the right thing to do for his client in this particular legal circumstance.
EDA Litigation Update – that and other impacts on Economic Development
The morning of Friday, July 30, this reporter sat down for a “Town Talk” with Economic Development Authority (EDA) Board of Directors Chairman Jeff Browne. Well, maybe we should call it a “County Talk” since the Town of Front Royal continues to distance itself from what Browne pointed out is still legally the Front Royal-Warren County EDA, as unresolved civil litigation initiated by the Town regarding financial liability from the EDA financial scandal continues to swirl and the Front Royal Town Council continues its initiative to create a parallel, unilateral EDA.
Those moves have come despite the total realignment of the EDA staff and board of directors, and a repeated EDA offer to work out of court to determine who is owed what in the wake of alleged embezzlement and misdirection of EDA assets between at least 2015 and 2018 under the leadership of former EDA Executive Director Jennifer McDonald.
LITIGATION!!! – Now there’s a topic of conversation to begin our discussion by whatever name we choose to call it. Acknowledging that public interest, and discontent, is high concerning the slow pace at which both civil and criminal court proceedings have developed related to the EDA financial scandal, Browne agreed to open our conversation with an update on those legal developments.
Prominent among those are the recent Bankruptcy Court ruling forwarding a $9-million “non-dischargeable judgment” that central financial scandal figure McDonald, along with the EDA, has agreed to.
Watch the discussion progress through that litigation front among others, including what is known on the criminal side since it was handed over to federal officials in the Western District of Virginia, and how all this legal maneuvering impacts the EDA’s day-to-day operational goal of economic development, targeting business recruitment and retention. It is an operational environment also traversing Warren County’s extremely low statewide 37% COVID-19 pandemic vaccination rate, something that could be frowned upon by some potential economic development clients.
And after all that, we end on an upbeat, or beats:
First, that the new EDA board and staff are actively and jointly working to market Warren County in its entirety to the type of Technology, Manufacturing, and Logistics companies that would fit in well with what this community has to offer.
And second, the anticipation of an Open House to be hosted by a recently recruited drone manufacturer and operations manager, Silent Falcon at the County’s Front Royal Airport (FRR). While no date has yet been set as Silent Falcon continues development of its new home base, at least one kid, if a somewhat aging one, is anxiously anticipating coverage of that event. – And I think we’ll bring the video crew along for that one – Mark, Mike, who wants the drone assignment?
Town Talk is a series on the Royal Examiner where we will introduce you to local entrepreneurs, businesses, non-profit leaders, and political figures who influence Warren County. Topics will be varied, but hopefully interesting. If you have an idea, topic, or want to hear from someone in our community, let us know. Send your request to news@RoyalExaminer.com
Financial Scandal Era Audits near completion as EDA ponders Budget Adjustments
Friday evening, July 23rd, through the office of Administrative Assistant Gretchen Henderson, the Warren County Economic Development Authority (EDA) released a summary of action items on the agenda of the EDA Board of Directors regular monthly meeting held that morning. Prominent on that agenda were matters related to the completion of the contracted audits of the EDA’s Fiscal Year 2018 and 2019 budgets. Those were the final two full years of leadership under past board member and former Executive Director Jennifer McDonald.
The audits are expected to shed some light on how and under what rationales EDA assets were moved or committed to projects during the final two years of what related civil suits against McDonald and alleged co-conspirators assert was a conspiracy to defraud the EDA and move its assets to the personal benefit of McDonald and others. The EDA civil actions seeking recovery of those allegedly misappropriated assets cite activities believed to have been occurring at least between 2014 and 2018. Brown Edwards, the contracted auditing firm doing those audits, is not the same company that did the EDA audits annually during the alleged financial scandal. Discussion of potential liability of that previous auditor for not recognizing/alerting the EDA to unusual money movement has been broached, if not pursued at this point. The total amount of allegedly embezzled assets has fluctuated between $26 million and a recent jump to $62 million related to McDonald’s Chapter 7 Bankruptcy filing.
See related story on recent rulings in McDonald’s Bankruptcy Court filing and the EDA’s civil litigation against alleged embezzlement-misappropriation of EDA funds co-defendant ITFederal
UPDATE: EDA and McDonald agree to $9-million debt exemption to her bankruptcy claim
On Tuesday, July 20, U.S. Western District Harrisonburg Division Bankruptcy Court Judge Rebecca B. Connelly issued a “Non-Dischargeable Consent Order Judgement” in Jennifer McDonald’s bankruptcy filing. The judge’s order decrees that “The Warren EDA is granted judgment against and is entitled to recover from Debtor, the sum of $9,000,000; and this judgment shall survive discharge of the Debtor in this Chapter 7 bankruptcy …”
The preface to Judge Connelly’s ruling notes that “In the interest of resolving this matter and avoiding litigation uncertainty, risks, and costs, but without the Debtor admitting the Warren EDA’s allegations, the Warren EDA and the Debtor have engaged in arm’s length negotiations and agree that the Warren EDA’s non-dischargeable claim is in the amount of $9,000,000 …”
The bottom line appears to be that the EDA and its former executive director have agreed that $9 million is the amount of the EDA’s civil court claim against McDonald, without her agreeing that she actually did anything wrong to justify the claim. So, that amount will be subject to collection in the civil action claim by the EDA outside the bankruptcy court process. The bankruptcy court order notes that any amount the EDA was to recover in the bankruptcy action would apply to achieving its $9-million civil claim in Warren County Circuit Court.
A reading of an “Exhibit A1 – the Stipulation” explaining detail of the “Non-Dischargeable Consent Order Judgement” further elaborates that McDonald as “The Debtor waives any right to contest the validity, enforceability, extent, and scope of the terms of the Stipulated Non-Dischargeable Judgment … and waives any right to seek relief from this Stipulation on any grounds” based on any applicable law.
Remaining at issue between the parties appears to be how the EDA will collect that $9-million dollar judgement the parties have agreed to. A number of McDonald-owned properties were frozen by the court early in the civil process, while properties co-owned with other family members were not. Since that order several relatives were named as co-defendants. The “Stipulation” also notes that the EDA-McDonald agreement order “shall not release or discharge any entity other than the Debtor from any liability owed to the Warren EDA” under its Amended Complaint in civil court against all co-defendants.
No ‘Summary Judgement’ against ITFederal
Also, on the EDA vs. McDonald et al. civil action side, on July 14, Harrisonburg-based presiding Circuit Court Judge Bruce D. Albertson dismissed an EDA motion for a “Summary Judgement” ruling against Truc “Curt” Tran’s ITFederal LLC. Plaintiff and defense attorneys made oral arguments on the EDA motion before Albertson on June 10. The bottom line here appears to be that the court has ruled there is not enough substantive information in the plaintiff’s original complaint to rule ITFederal immediately liable for the claim against it.
ITFederal’s $10-million EDA loan to achieve the development of its 30-acre parcel (valued at about $2 million but gifted to ITFederal by the EDA for one dollar) at the Royal Phoenix Business Park/former Avtex Superfund site, with as much as another $2 million in developmental expenses, was the largest single claim in the initial EDA financial scandal civil action.
The EDA alleges that the ITFed loan was achieved under false pretenses as part of the over-arching embezzlement-misappropriation of funds conspiracy allegedly orchestrated by McDonald as EDA executive director after former federal Sixth Congressional District Representative Robert Goodlatte brought Tran here with much ballyhoo for a fall 2016 ITFederal ribbon cutting at the Avtex site. And now the EDA claim against ITFederal, which remains current on its EDA loan payments of about $40,000 a month with an estimated $2 million spent on site, will, unlike the EDA claim against McDonald, continue as a contested part of the EDA’s civil action.
See related EDA meeting, 2018-19 audit story – “Financial Scandal Era Audits near completion as EDA ponders Budget Adjustments”
EDA crunches operational budget numbers, moves scandal year audits forward
The Board of Directors met today for their regular monthly meeting. Following an approximately two-hour Closed Meeting, on a motion by Jim Wolfe and seconded by Scott Jenkins, the EDA Board unanimously agreed to add an additional $10,000 to the contract with Brown Edwards, who is completing the FY2018 and FY2019 audits, pending documentation of work completed and review by legal counsel.
Under New Business, the Board agreed to table action on updating the EDA Bylaws. The Board of Directors did pass three additional motions:
On a motion by Jorie Martin and seconded by Jim Wolfe, the EDA Board unanimously approved requesting to the Board of Supervisors an increase of three line items to the EDA’s FY2022 Operations budget:
Professional fees-Auditor $32,500: this increase is to account for a $10,000 amendment to the Brown Edwards contract for FY 2018 and FY2019, and $40,000 to conduct the FY2020 and FY2021 audits.
Marketing-$5,880: this increase is to account for updated plans to participate in economic development programs and site visits, as well as marketing materials.
Maintenance-$14,310: The EDA is reimbursing the commercial tenant at 1325 Progress Drive for HVAC replacement and repairs. Additionally, the HVAC at 400 Kendrick Lane-West and 426 Baugh Drive need extensive service.
On a motion by Jorie Martin and seconded by Jim Wolfe, the EDA Board unanimously approved a Request For Proposals (RFP) to advertise for auditing services for the fiscal year 2020 and 2021.
Finally, on a motion by Jorie Martin and seconded by Jim Wolfe, the EDA Board approved reimbursing Visionary Optics, the tenant at 1325 Progress Drive, $4,500 for expenses related to HVAC replacement and repairs.
The EDA Board of Directors will have their next regular monthly board meeting via Zoom on Friday, August 27, 2021, at 8 a.m.
EDA Finance Committee scrutinizes FY-22 Budget proposal, dynamics
Friday morning, July 9, the Finance Committee of the Warren County Economic Development Authority met to discuss the EDA’s Fiscal Year-2022 Budget proposal. In addition to Committee Chairman Jim Wolfe and members Jorie Martin and Tom Patteson, present for the in-person meeting at the EDA’s Kendrick Lane Office were EDA Board Chairman Jeff Browne, Executive Director Doug Parsons, Administrative Assistant Gretchen Henderson, and County Board of Supervisors Chair Cheryl Cullers.
The County Board of Supervisors holds the purse strings for the EDA, as the new EDA board and staff continue to navigate the financial and legal aftermath of the $26-million-dollar-plus financial scandal uncovered during the administrative leadership of former EDA Executive Director Jennifer McDonald and a previous EDA Board of Directors.
How the financial consequences of that yet-to-be resolved civilly or criminally alleged misuse, embezzlement or fraudulent acquisition of EDA resources continues to impact the retooled EDA was a topic of interest during the committee meeting. As annual debt service revenues from property rentals and loan paybacks versus loan debt service expenses were discussed in a second phase of the budget review, that point was made quite pointedly after a debt service revenue deficit of $704,700 was noted.
“Let’s make this clear for the public,” Committee Chairman Wolfe injected with a glance the media’s way, continuing, “So, there are three (primary) figures on the page … there is the $220,000 General Fund Operating Allocation. And the way to think about it is as a matter of public policy the County says, ‘economic development is a good idea, let’s put some money toward that kind of development’.
“There’s another operating supplement of … $39,200.
“And because of all the debts of prior activities, there’s another roughly $700,000 in unfunded debt payments because of past transactions. Those don’t have anything to do with current economic development or moving forward. That’s trying to clean up after the other ones. – Did I misstate that in any way?” Wolfe concluded with a question for his EDA colleagues.
Rather than a correction, Executive Director Doug Parsons elaborated on Wolfe’s observation with added detail on how the deficit numbers broke down between inherited debt versus that acquired by the new EDA – the short answer being all six of current EDA loans with a total annual debt service of about $1.5 million were inherited and none acquired by the retooled EDA board and staff.
During the committee meeting Parson also pointed to a $658,000 General Fund Cap number plugged in by the county administrator that could be adjusted upwards to help cover that $704,700 debt service shortfall. The shortfall was created by the difference in the $1,556,700 annual debt service of the six inherited EDA loans and the $852,000 of Offsetting annual revenue from the Baugh Drive Warehouse rent ($345,600) and the ITFederal Loan payback ($506,400).
Operations and the Future
In the first phase of discussion it was the Operational Budget under scrutiny as the new EDA board and staff continues to move forward with economic development in the community, while still traversing the legal and civil liability minefield of the financial scandal referenced above. A 28-line-item FY-22 Operational Budget totaling $367,100 was brought to the table.
Major areas of concern discussed included “Marketing” of the community to potential businesses seeking a favorable geographic and social environment; “Maintenance” of EDA properties – variables and potential HVAC costs at Baugh Drive and the EDA office complex were put on the table; “Legal” and “Auditing” fees; “Insurance” including, not only “Property Insurance”, but also “Professional Liability” insurance; the impact of a 2.5% Cost Of Living Act (COLA) increase on staff salaries; and continued efforts on community education to limit and reverse the spread of the Spotted Lanternfly in the county.
Wolfe observed from his experience that marketing was often a first budget line item to be reduced during tight economic times, but added that “it should be the last”. A $10,000 “Marketing” request was reduced to $4,300 by the County Administration. While the importance of advertising was agreed upon, its type and context to achieve maximum positive exposure and result remains an issue the EDA Board has devoted some discussion to recently. How that may translate into a final number submission remains to be seen.
A $10,000 “Maintenance” request was unaltered by the County. However, with looming HVAC maintenance or replacement issues at several locations, the potential need of more than the originally submitted amount was noted.
Legal, Auditing & Insurance variables
Legal fees were listed at $84,000 – pared back from a $96,000 request – and auditor fees at $17,500. It was explained the $17,500 was for one fiscal year’s audit. But the advantage of seeking both the FY-2020 and FY-2021 audits in the coming budget year was broached to catch the EDA up with the County in the auditing process. This past year the EDA went through a lengthy, soon-to-be finalized by the firm of Brown-Edwards, audit of the FY-2018 and FY-2019 budget years when alleged embezzlements and other financial misappropriations were occurring.
Of the coming-year audits beginning with FY-2020, Parsons commented: “They will be drastically more simple than 2018 and 2019 because we were all here” throughout those years’ budget and operational processes.
It was noted that while the EDA must put the FY-2020-and-21 audit services out to bid, due to their experience here through more trying budget cycles it seemed a longshot that Browne-Edwards would not get the call back.
On the insurance front, $10,000 was listed for “Property Insurance” and $400 for “Professionally Liability Insurance”. With the EDA having received a $500,000 “Liability” payoff from current carrier Cincinnati Insurance, the potential of a bidding war to pick up the Warren County EDA’s liability coverage seems slim.
“I’ve been working on this for nine months and nobody will touch us,” Martin told her colleagues of interest from other companies. The advisability of sticking with Cincinnati if possible, but changing local agent Stoneburner-Carter due to proprietor Tony Carter’s current and past seat on the Warren County Board of Supervisors, was broached.
County EDA Board elects officers for coming fiscal year; reviews operational, budget and banking matters
On Friday, June 25, the Economic Development Authority Board of Directors met for their monthly board meeting, which included a two-and-a-half-hour closed session during which legal, banking, and real estate matters were discussed. The latter topic included the potential disposition of real property related to Avtex Redevelopment, as well as real estate at Baugh Drive and the Stephens Industrial Park. No announcements came out of the closed session.
During the open session that followed, the Directors discussed EDA committee reports, a draft Fiscal Year-2022 budget, and held officer elections for the coming Fiscal Year. Starting July 1, 2021, EDA Board officers will be Chair-Jeff Browne, Vice-Chair-Greg Harold, Treasurer-Jim Wolfe, Secretary-Jorie Martin. Tom Pattison’s motion to nominate that slate of officers passed without opposition, and there were no counter nominations.
Browne, who took over as EDA board chairman in the wake of Ed Daley’s departure for what was initially an interim appointment as County Administrator that has stretched on long enough that the “interim” has been removed from his title, called the board’s current and recent personnel “a great group to work with”.
Browne also noted that Friday’s meeting at the Warren County Government Center was the EDA board’s first in-person meeting in over a year since the COVID-19 pandemic restrictions went into effect. He called the meeting, held for the most part in the caucus room adjoining the main meeting room “a hybrid meeting” as it was broadcast, as have been all EDA meetings over the past year, on ZOOM.
During committee reports, Jorie Martin noted positive work on the Joint County-Town Tourism Board – “The bottom line is that I’m hoping this board will continue to work together, and I think it’s much more effective for us to be together as the County and the Town working together for tourism,” she noted, pointing to the next Joint Tourism meeting on Wednesday, June 30. Hmm, County and Town working together on economic development as opposed to litigating and duplicating efforts – what a novel idea.
Operations and Budget
During his Executive Director’s Report, Doug Parsons informed his board of two “Business Retention and Expansion” projects with “significant new jobs and investment” prospects he termed “very exciting”. The EDA executive director also gave recently elevated County Planning Director Joe Petty a pat on the back, calling him “great to work with” on these initiatives.
Parsons also noted recently recruited drone manufacturer and operations contractor Silent Falcon’s plans for an Open House “to showcase their products and renovated space” at the County’s Front Royal Airport (FRR) in July or early August (OH BOY, Royal Examiner video camera field trip!!!).
The makeup of committees as to numbers and bylaws adjustments to accommodate necessary changes was discussed with EDA attorney Sharon Pandak. It was noted that with a two-person committee, a public notice of a “meeting” would be necessary just for one committee member to call the other to discuss projects. With a three-member (or more) committee, that would not be necessary.
Chairman Browne noted the advantage of having a point person forwarding projects to the point of authorization and final decision-making by the board. He stressed the importance of striking a balance between efficient operations and transparency in the wake of operational irregularities discovered during the financial scandal investigation. That criminal investigation, now in the hands of the Western District of Virginia federal prosecutor’s office, and consequent civil litigation targeting the previous executive leadership of Jennifer McDonald, and alleged co-conspirators, found a lack of adequate oversight by the previous EDA Board of Directors in place dating from around 2014-15 to early 2020. The new board is trying to avoid such absentee oversight without creating unnecessary micro-management that could stall successful recruitment or other economic development efforts.
After noting the relocation into the new Warren Memorial Hospital space earlier in the week, it was agreed that Jim Wolfe would spearhead efforts with ownership to market the old hospital. Options related to the presence of a commercial kitchen in the 108,000 s.f. space was broached as to possible uses as a culinary school and working restaurant in a portion of the building.
A draft FY-2022 Budget was reviewed, with comments on potential impacts of bank loan refinancing opportunities. Executive Director Parsons said if all refinancing opportunities came to fruition, it would equal $138,000 annually “to the good” for the EDA as it continues to emerge from the shadow of the alleged financial scandal that pre-dates the current EDA board and staff.
Also noted was a $90,900 adjustment from the potential of refinancing of the IT Federal loan, which is the single biggest line item – $10-million to $12-million – in the EDA’s civil litigation regarding the above-referenced financial scandal alleged to have occurred under the previous board and executive director’s tenures, the latter which ended in December 2019.
Parsons was noting an average monthly legal expense of about $7,000 just prior to the loss of the ZOOM connection to the board’s first “in-person meeting in over a year” at the Warren County Government Center. Contacted later, Parsons said several phone connections failed around the same time shortly before the meeting’s adjournment, cutting communications with several remote participants or observers, including EDA Attorney Sharon Pandak.
The Board of Directors will hold a Special Meeting on Friday, July 9, 2021, from 10-to-11:30 a.m. to take part in FOIA/COIA training, led by EDA Counsel Sharon Pandak of Greehan, Taves, and Pandak. The EDA Board of Directors’ next monthly meeting is scheduled for Friday, July 23, 2021.
(Some info in this story came from an EDA Press Release on the meeting.)