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EDA in Focus

High drama on day two of Sayre defamation suit against McDonald

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The Warren County Courthouse continues to be ground zero for EDA-related activity. Royal Examiner File Photos/Roger Bianchini

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.

Sayre awarded $20,000 in defamation suit against former EDA director

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.

Backdoor men – on April 16 it was not an illegal entry with no signs of forced entry when the FBI and VSP searched the EDA office complex, including the former executive director’s office which was locked down since her Dec. 20 resignation.

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.

Sayre – McDonald defamation suit continued to September 11

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.

Archie Fox and Tom Sayre were skeptical of some answers given by McDonald and EDA board Chair Greg Drescher concerning the rationale and process of the EDA Workforce Housing project at a June 6, 2017, work session. However, such questions had been on table from media and one council source for eight months.

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.

First impression of EDA reply: 383 pages later what have we learned?

“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.

This social media photo of Tom Sayre and Jennifer McDonald during the ITFederal ground breaking ceremony was referenced by Sayre during his testimony – he said it illustrated what he perceived to be a good working relationship with McDonald at the time.

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.

Sayre testified that Bianchini was just one of several he suspected might be involved in a brake line cutting incident on one of his vehicles several years ago. He also testified he had worked to repair the relationship with the reporter.

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?)

Bianchini reflective, perhaps pondering suing everyone who has ever questioned his memory due to all the existential emotional angst it has caused him over the years …

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.

McDonald approached this reporter in January 2018 concerning his interest in a story about what she said was a three-year lucky streak at the Hollywood Casino slot machines netting her around $2 million in winnings. State Police report a different outcome, about $750,000 in losses, including what she won over that period.

“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.

What, me worry? Why would municipal and EDA officials worry over McDonald’s suddenly publicly-admitted gambling habit – if she’s winning, it’s not a problem, right?

Conflicting resolutions

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.

Tom Sayre, left, and attorney Tim Bosson outside the courthouse following awarding of $20,000 in Sayre’s $25,000 defamation suit against Jennifer McDonald. How much did you say you were making at that human resources director’s job, Bosson may be have been thinking.

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EDA in Focus

Legal questions surround Town offer of one-time, recoverable FRPD payment

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Without accepting any responsibility for the nearly $9-million cost of its new police headquarters building, at a hastily called Tuesday evening Special Meeting to accommodate the turn of the fiscal year today, Wednesday, July 1st, the Front Royal Town Council unanimously approved a “Reservation of Rights Agreement” allowing the Town to pay a portion of the first debt service payment of Fiscal Year 2021 on that Town/EDA capital improvement project. The project was completed in October 2018 and the Town has yet to compensate the EDA for any of its costs in financing the project as will be elaborated on below.

Also approved during the eight-minute meeting prior to an adjournment to closed session for personnel matters believed to be the first of two town managers interviews scheduled this week, was an extension past June 30, and alteration to the contract payment terms of Interim Town Manager Matt Tederick. That will be covered in a separate Royal Examiner story.

Councilman Jake Meza says the Town saved about $50,000 by hiring Matt Tederick as a contractor, but as of July 1 that arrangement no longer exists. Royal Examiner photos and video by Mark Williams.

As to the Reservation of Rights Agreement with Warren County, the authorized one-time payment of $10,528.95 covers half of the Front Royal-Warren County Economic Development Authority’s interest-only payment of approximately $21,102 due at the July 1st start of FY-2021.

Contacted Wednesday morning, EDA Executive Director Doug Parson explained the EDA’s loan to facilitate construction of the Town Police headquarters have thus far been interest-only payments based on a 30-day month. That will change on November 1, when the United Bank loan moves to principal and interest payments. Parsons estimated that would take the monthly payments to about $50,000 from the $21,000 interest-only range.

The United Bank’s interest rate on the loan is 3%. However, the town council has taken the legal stance that it should only have to pay a 30-year, 1.5% interest rate it asserts was verbally promised to it by former EDA Executive Director Jennifer McDonald. As previously reported by Royal Examiner, that 1.5% rate was tied to the construction project qualifying for a 30-year New Market Tax Credit Program (NMTC) loan with a nine-year waiver of interest payments. However, the NMTC program loans are for municipal capital improvement projects that create new jobs, which the FRPD project did not.

Councilwoman Lori Athey Cockrell took the opportunity of council’s passage of the agreement facilitating a one-time, half monthly payment on the FRPD debt service as an indicator that the council and its staff are working proactively with the Warren County government to resolve outstanding legal and financial issues surrounding the EDA.

Prominent among those Town-County/EDA issues is what EDA officials have called “an undisputed” $8.4 million Town “moral obligation” debt on principal to the EDA on the police headquarters construction project. With interest, the balance on that debt is $8.8 million, EDA Director Parsons told Royal Examiner Wednesday.

EDA Board of Directors Chairman Ed Daley was present to watch Tuesday’s council action unfold. Asked for a reaction prior to having a chance to read the Reservation of Rights Agreement, Daley said, “Anything that moves it forward is positive.”

However, after a closer read, exactly how far forward Tuesday’s council action takes the Town-County-EDA discussion, remains a question.

$440,000 invoice – $10,500 (recoverable) payment

The opening paragraph of the Reservation of Rights Agreement notes that the Town had received a June 2 invoice “ostensibly setting out all costs incurred by the EDA in constructing and financing the construction of the Town of Front Royal Police Department (‘Costs’), including the costs and expenses associated with the loan from United Bank obtained to finance construction (‘Loan’)” and continues to note those costs and loan “are currently the subject of dispute” in the Town’s civil action against the EDA.

It is a civil action in which the Town’s contracted Damiani & Damiani law firm appears to have mirrored much of the language in the EDA’s initial civil litigation against Jennifer McDonald and 14 civil co-defendants and which seeks essentially all ($20 million-plus) of the $21.3 million the EDA alleges was misdirected by its former executive director and her first group of co-defendants. In April the EDA filed a second civil action, adding nine defendants and “not less than” $4.45 million in recoverable assets to its litigation.

But as to that June 2 invoice from the EDA, an invoice implying a request for payment on a debt, according to numbers in that invoice what the EDA presented to the Town was a bill for slightly over $441,300 spent thus far on the $8.8 million FRPD headquarters construction loan balance.

What the County and EDA got in response was the above-cited agreement facilitating a recoverable $10,529 payment that on a closer examination appears to try and legally tie the County and EDA’s hands in future court proceedings.

Legal ties that bind?

That agreement references ongoing “discussions” between the Town and County “which may result in amending the Town’s claims in the Litigation (against the EDA)”.

Contacted Wednesday, County Administrator Doug Stanley said county staff had not been involved in those discussions. Attempts to reach Board of Supervisors Chairman Walt Mabe, Vice-Chair Cheryl Cullers, and County Attorney Jason Ham for information on the referenced discussions and council proposal were unsuccessful prior to publication.

Reservation of Rights Agreement, Condition 1 states – “The Town denies that it owes any moral or legal obligation to repay the Loan”

So, referencing the “Reservation of Rights Agreement” passed 6-0 by council Monday, it states:

“WHEREAS, to facilitate the discussions, the County has asked the Town to make the disputed July 1, 2020, payment on the Loan and the Town has agreed, subject to the terms and conditions stated herein.” – As noted above, what was agreed to was a payment of $10,528.95, or half of the interest-only payment due for July, under the following conditions:

Condition 1 – “The Town denies that it owes any moral or legal obligation to repay the Loan” followed by Condition 2, noting that its payment is calculated on the unrealized New Market Tax Credit interest rate of 1.5%, rather than the actual 3% bank loan interest rate.

Condition 3 – “The County and the EDA acknowledge that this payment shall not be construed as, considered to be, or argued to be, in any forum, admission for any purpose, including but not limited to of liability of the Town for the Loan or the Costs.

Condition 4 – “The County and the EDA acknowledge that the Town’s payment is for a disputed debt, under a reservation of rights, and the Town reserves the right to continue to deny liability for the Loan or Costs and to recoup this payment should the discussions prove ultimately unsuccessful.

And drum roll, please, Condition 5 – “All parties agree that payment hereunder shall be inadmissible for any purpose except by the Town to recover this payment as damages in the Litigation.”

So, while Councilwoman Cockrell called the agreement a sign of good faith negotiations in the public interest by the Town, adding that news reports the Town is acting other than in good faith concerning the EDA as creating “a false narrative”, is she right?

Perhaps the EDA’s and County’s attorneys would be the best judge of that – hopefully prior to the signing of the “Reservation of Rights Agreement” by County and EDA officials. For at issue appears to be whose rights are being reserved, and in exactly what legal context regarding the Town’s civil litigation against the EDA and any related litigation over the Town’s responsibility to pay for its $9-million police station.

Because according to the document approved unanimously Tuesday night by the Front Royal Town Council, the Town has no “moral or legal” obligation to pay the EDA-undertaken $8.8-million loan that financed the construction of the Front Royal Police headquarters.

Is that something EDA and Warren County officials really want to sign off on in exchange for a one-time, recoverable, half monthly debt service payment?

Let’s see, a total of $20 million or more at stake versus a “recoverable” $10,500 payment – what do you think?

Ed Daley – File Photo.

We asked EDA Board Chairman Daley his opinion on Wednesday after he had a chance to review the Reservation of Rights documents more closely.

“The first the EDA heard of this was last night, which seems odd in that we are asked to sign off on it. But we’ll need to consult with our attorney first,” Daley reasoned.

Of the contention on a lack of Town liability to pay for its police station included in the document, Daley observed, “The EDA was happy to facilitate a project like that. But it was their (the Town’s) contract, their design, we just helped finance it. I think they need to get their financing together and pay for their police station.”

After we read the conditions in the agreement to her over the phone, EDA Attorney Sharon Pandak lauded the opportunity for further communications on Town-EDA/County issues but was skeptical as to a recommendation on the EDA signing off on the Reservation of Rights Agreement as worded.

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Sleeping with the enemy? After long closed session, EDA wonders if it should make 2 year-end reports

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The Front Royal-Warren County Economic Development Authority had an end of the fiscal year report from its committees at the regular monthly meeting on Friday morning, June 26. In addition to the status of its finances, assets, communications with related agencies, and executive committee business, the board elected officers for FY-2021. See the EDA office’s press release describing details of various actions taken regarding those reports in the related story below.

As for its officers, the EDA Board of Directors decided to stay the course for another year. On a motion by Tom Pattison, seconded by Jeff Brown after a check with EDA attorney Sharon Pandak that he could vote as one of the nominees, by a 5-0 vote, Gordon absent and Gray Blanton’s seat vacant, the board re-elected its sitting officers: Ed Daley chairman, Browne vice-chair, Jorie Martin treasurer, and Greg Harold secretary.

It was still a virtually conducted meeting for the EDA, which is fine with the media at 8 a.m. Royal Examiner Photos/Roger Bianchini

But before those reports, officer elections and new business are taken care of, five minutes after convening the 8 a.m. meeting the EDA board moved into closed session to discuss “the disposition of publicly held real property” including the Royal Lane so-called “Workforce Housing” parcel recently reacquired without the necessity of additional litigation, as well as discussion of the EDA’s resurrected small business loan program, and its two-pronged civil litigation.

As you “indoor sports fans” know, the first prong of that litigation is against its former Executive Director Jennifer McDonald and 24 co-defendants alleged to have conspired with her to misdirect, fraudulently obtain and/or embezzle $21.3 million of EDA assets. The second prong is the Town of Front Royal’s suit against the EDA. That suit alleges lost assets of over $20 million as a consequence of the EDA financial scandal. After three-hours-and-20 minutes behind closed doors, the board emerged without action or announcement and moved to the open meeting agenda.

The virtual presence of Sands Anderson civil case lead attorney Cullen Seltzer and his colleague Dan Siegel may have offered a clue as to which topic may have accounted for the largest time slot behind closed doors.

The re-tooled EDA board and staff at work in December 2019. From left at table are Tom Pattison, Chair Ed Daley, Greg Harold, Executive Director Doug Parsons, Vice-Chair Jeff Browne, Gray Blanton, and Jorie Martin, the latter two around the table from Browne. The board continues to morph with the addition of Melissa Gordon replacing Mark Baker and Gray Blanton’s recent departure.

“Without the necessity of additional litigation” – what a novel concept. Wonder if anyone in Town Hall has considered such an idea in lieu of an “all in” rather expensive legal gamble that every asset the EDA recovers is somehow owed to you – despite their lack of work on your behalf for over a decade publicly verbalized as justification to pull away from them toward the creation of a second EDA the Town would have full operational funding responsibility for, as opposed to none with the existing EDA?

The irony of still working for a town government that is claiming that essentially every penny the EDA is out to recover in its civil litigation should come to it directly or indirectly despite the above-referenced public claim by Councilman Gary Gillespie, undisputed by his colleagues, that the EDA hasn’t really worked on the Town’s behalf in 15 years, was apparent as the board discussed a fiscal year-end presentation to its sponsoring municipalities.

Should they present to the Town, as well as the County, Chairman Daley, and his board wonder? There appeared little enthusiasm for a presentation to town officials who have repeatedly rejected EDA offers of “good faith negotiations” to determine exactly what the EDA may owe the Town in misdirected assets. Once again the scheduled interim town manager’s monthly update to the EDA board on Town business was neither presented nor even submitted in writing despite the Town’s maintaining its co-founding EDA connection on a legally advised chance for asset distribution was the EDA to somehow fail, despite state codes that prevent EDA’s from declaring bankruptcy.

The Warren County Courthouse is casting a long shadow over relations between, not only the Town and EDA, but potentially between the Town and County, the latter of which has full operational funding responsibility for the existing EDA due to negotiations on double taxation responsibilities of town citizen. However, many including several council candidates are wondering if it is a necessary legal shadow.

And what might such a presentation to a municipal body that is claiming no oversight responsibility of the EDA despite enabling the largest single item in the EDA’s civil suit, the $10-million ITFederal loan, by issuing a three-month $10-million “bridge loan” at McDonald’s request to convince a bank to make that loan despite serious asset questions about the eventual recipient, sound like?

“Mr. Mayor and Council, the EDA ends the fiscal year with $85,089 in its operational checking account and another $62,936 in its rental income account ($148,025 combined) – BUT we’d have a lot more if the Town would make good on its undisputed $8.4 million principal debt to us on the construction of the new town police headquarters, not to mention the $701 of daily interest on that FRPD project debt, though a disputed portion based on verbal promises of the former EDA executive director, that is accumulating as the civil litigation creeps forward.

Also noted during the financial report of board Treasurer Jorie Martin, was a $64,439 balance in the EDA’s Rural Business Enterprise Loan (RBEL) account and a $307,043 balance in its Intermediary Relending Program (IRP) account.

Chances are some of those loan balances will find their way into the hands of businesses located inside the Front Royal town limits.

EDA’s June 26 meeting action agenda

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EDA in Focus

EDA’s June 26 meeting action agenda

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The Front Royal/Warren County EDA Board of Directors held their regular monthly board meeting today:

Finance Committee

Finance Chair Jorie Martin reported that the EDA will end the fiscal year with a positive bank balance. Additionally, the FY 2018 and FY 2019 audits and solar panel removal are all proceeding on schedule.

EDA Chair Ed Daley took the opportunity to point out that the EDA has reduced its total loan balance during FY2020 by approximately $2,000,000. Factors that contributed to this success included the EDA completing the sale of three properties-two to a private developer in the town and one to a small business in the county.

Proceeds then went toward other loans which reduced principal amounts. Additionally, the EDA negotiated an interest rate reduction on a line of credit. These decisions translate into savings to the taxpayers.

Small Business Loan program-Mrs. Martin reported considerable improvement in payments and collections in the Rural Business Enterprise Loan (RBEL) program during FY20. In May 2019, only 56% of loan clients were up-to-date on their payments. As of June 2020, 70% of clients were on time. Additionally, as Executive Director Doug Parsons reported, the USDA Small Business Loan committee is currently reviewing applications from two new borrowers. They are vetting these applicants and look forward to supporting these small businesses in the Front Royal and Warren County areas. Finally, the board approved a Pay Agreement with Steve Ontiveros, of Fireball Arcade, for repayment of his RBEL loan.

Other Actions from Finance-The board approved Mrs. Martin’s motion to cancel the EDA insurance policy covering the Avtex property and EDA office building at 400 Kendrick Lane currently held by Stoneburner-Carter Insurance. The motion also approved the EDA to enter into a policy with Grange offered through McGreevy Insurance. The new annual policy provides more in-depth coverage at a lower cost, saving taxpayers approximately $1,000.

Finally, the board approved a motion for Phil Rexrode to complete electrical work on the solar panel removal. He will disconnect the solar panels from the current electrical system and connect the EDA office building back to Town electric.

Asset Management Committee

Chair Greg Harold shared an overview of the committee’s activities and accomplishments during FY20. Highlights included:

Afton Inn-The negotiations and sales agreement of the Afton Inn will be the fourth property sale by the EDA and the third in the Town of Front Royal. Seeing this property in the hands of private development is a real win for the community and will contribute in a major way to the revitalization of East Main St., Front Royal.

The EDA is looking forward to 2 E. Main, LLC realizing their vision for the property.

Royal Lane “Workforce Housing” property-Mr. Harold completed considerable research on this parcel, also located in the Town. The Board of Directors approved his motion to sell the property through a Request for Development Proposal (RFDP) process. That proposal is under attorney review and is projected to be published by mid-July. This is an opportunity to bring to Front Royal the first multi-tenant housing development in 22 years.

Communications Committee

Litigation Update-EDA Vice-Chair and Communications Committee Chair Jeff Browne gave an update on the civil suit EDA v. Jennifer McDonald, et al. and the Town v. EDA suit. The board approved a resolution appointing Mr. Browne as Designated Representative of the EDA for interrogatories and depositions in the suit EDA v. Jennifer McDonald, et al. Mr. Browne will work with EDA counsel from Sands Anderson as the civil case continues through the judicial process.

Existing Business Listening Groups-Mr. Browne is working with the Front Royal Chamber of Commerce on creating business listening groups. Any business leaders, finance professionals, and anyone interested in the local tourism industry is encouraged to participate.

Other EDA Business

Annual Report-EDA Staff and the Board of Directors are preparing an annual report for presentation to the Warren County Board of Supervisors in July. Dr. Daley expressed an interest in presenting this report to the Front Royal Town Council as well.

Annual Officer Elections

The board approved each of the current officers-Chair, Vice-Chair, Treasurer and Secretary-to serve another one-year term.

As of May 2020, the Town of Front Royal owes the EDA $8,444,797.16 for the construction of the Front Royal Police Department headquarters. This loan costs Town taxpayers $703.39 per day in interest expense. In April 2019, the Town Council approved a resolution to issue a bond for permanent financing of the project but has not followed through on its commitment. The EDA welcomes community support in encouraging the Town Council to follow through and secure permanent financing in order to retire the EDA construction debt.

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EDA in Focus

Still working for the Town – EDA announces sale of 514 E. Main apartments

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Both gone now – the market and adjacent apartment building. Royal Examiner File Photos/Roger Bianchini

In a late-afternoon press release from the office of Executive Director Doug Parsons, the Front Royal-Warren County EDA announced the sale of another in-town parcel. Here is that release in its entirety:

The Front Royal/Warren County Economic Development Authority (FRWCEDA) is pleased to announce the sale of their apartments at 514 East Main Street to East Main Apartments II, LLC, owned by Jim and Dawn Weber of Front Royal. The property sold for $127,500.00 and the proceeds of the sale will pay off one of the FRWCEDA’s loans for the apartments and the old Stokes Market, which also sold recently.

“We’re pleased that Jim and Dawn Weber have purchased this property. They are experienced developers, and we know the property and tenants will be in good hands”, said Doug Parsons, Executive Director, for FRWCEDA.

“These properties weren’t congruent with our economic development mission and goals, and we’re excited to see them return to the private sector to generate more tax revenue while reducing the taxpayer’s debt and future expenses.”

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EDA in Focus

EDA Asset Committee reviews status of Royal Lane property in open and closed session

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At the open portion of a Front Royal-Warren County Economic Development Authority Asset Committee meeting, Friday morning, June 19, Committee Chairman Greg Harold took his recently altered committee lineup through a review of the recently re-acquired Royal Lane “workforce housing” property.

As readers will recall, the property written off as a $640,000 loss in the EDA’s original civil complaint was inexplicably let go at the end of November 2018 about 11 weeks prior to that March 26, 2019 civil filing at a sale price of ten dollars. Then EDA Board Chairman Gray Blanton later told Royal Examiner that he had only seen the signature page of the deed of sale. And acting EDA attorney Joe Silek Jr. – then EDA/County Attorney Dan Whitten had recused himself from the transaction – told Royal Examiner that the deed had been sent to the Winchester attorneys for the purchaser without a sales price filled in, though he declined to elaborate on how or why that had occurred.

However, the buyer, the Cornerstone LLC branch of regional developer the Aikens Group, returned the property to the EDA earlier this year at a cost of about $26,000. The price was explained as the stated value of in-house legal or other preparatory work done during the Aikens Group purchase and ownership.

The undeveloped, rolling-hilled 3.5-acre parcel at the end of Royal Lane on the town’s southeast side is also at play in the April addition of Century 21 Campbell Realty, and proprietors Walter and Jeannette Campbell as defendants in the EDA’s civil litigation case seeking the return of a total of over $21-million dollars from what has climbed to a total of 24 defendants.

But the property’s legal history wasn’t the topic of Harold’s presentation to his committee. Rather, it was an outline of the property’s originally planned use for development as a 36-unit, three-building “workforce housing” rental apartment complex; its potential versus any competitive properties for such development; and the zoning and permitting status of the property.

A look at single-family homes along Royal Ln. – the treed workforce housing parcel adjacent to existing development ‘curbside utilities’ is partially visible at the end of the road. Royal Examiner File Photos/Roger Bianchini

Artist’s rendering of one of three, initially-planned 12-unit Workforce Housing apartment buildings.

That status, Harold said, is C-1 zoning with extensive Special Use Permitting; nearby access to Town electric, water, and sewer central utilities extended to adjacent residential and commercial development; and a lack of comparably permitted C-1 zoned properties in Front Royal near shopping and other commercial amenities desirable to potential renters.

Harold pointed to a “robust need” for quality and affordable rental units in Front Royal, but also noted that federal Housing and Urban Development (HUD) guidelines didn’t specifically qualify the type of professional employment that affordable “workforce housing” projects could rent to. Discussion following the EDA purchase of the parcel from the Campbells, Jennifer McDonald’s aunt and uncle, initially for $10 as a gifted property said to qualify the Campbells for federal tax credits which later fell through due to delays in the development of the property, had targeted a “young professional” tenant base of law enforcement, teaching and emergency services personnel.

Questions about the EDA or anyone’s ability to limit rentals to such specific professional networks were raised by some, including former Councilwoman Bebhinn Egger, early in the purchase, zoning, and permitting process in 2016-17.

Another question raised by Egger, the Town Council’s then lone voice in the EDA oversight wilderness, was why with so many questions attached to the property and its residential development potential, the EDA Board of Directors had agreed to purchase the parcel for $440,000, over $100,000 above its assessed value of a little over $300,000, after the Campbell’s tax credit opportunity fell through.

Remember these days – above, Bebhinn Egger goes head to head with Jennifer McDonald in 2017, as her colleagues remained silent, unquestioning and even belittling of Egger for her questions on EDA projects now at issue in dueling civil litigations; below, McDonald far left and the EDA Board of Directors listen to report on County business from the county administrator, circa April 2017.

The explanation then forwarded by McDonald and then EDA Board Chair Patty Wines that the EDA had already spent nearly half a million dollars on pre-development costs turned out not to be true. McDonald later told Royal Examiner that only about $16,000 for a VDOT traffic study had been unrecoverable money at the time of the EDA’s $440,000 purchase decision.

But whether any of these variables played into the Asset Committee’s exploration of the property is unknown. Because after Harold’s presentation during the 48-minute open session, EDA Attorney Sharon Pandak read a motion to go into a closed session that was moved and seconded by committee members and unanimously approved by those members, Harold, Ed Daley, Jorie Martin, and Melissa Gordon.

That motion included discussion of the “disposition of public real property where discussion in an open meeting would adversely affect the bargaining position and negotiating strategy of the EDA; and consultation with legal counsel regarding related legal matters for the Royal Lane property …”

There was no announcement following the half-hour closed session and the Asset Committee meeting was adjourned to so quickly that by the time this reporter re-logged into the virtually-conducted meeting, he found himself a lonely “participant” of one.

But considering the late afternoon press release on the sale of the 514 East Main Street apartments – Still working for the Town – EDA announces the sale of 514 E. Main apartments – it may be debatable whether both of those closed session topics related to Royal Lane. But with the previous discussion of residential development not being the natural province of EDA’s, this reporter votes “probably both”.

Still working for the Town – EDA announces sale of 514 E. Main apartments

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Crime/Court

Rappawan, Campbell Realty civil hearing date set; April Petty, Jesse Poe pre-trial hearing request under consideration by court

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Although neither she nor her attorney was present live or virtually for scheduled Economic Development Authority civil case hearings Thursday morning, June 18, Jennifer McDonald’s presence was apparent throughout defense motion’s hearing arguments in the cases of defendants April Petty and Jesse Poe.

Prior to those arguments a hearing date of July 30, beginning at 8:30 a.m. was set for pre-trial motions in the cases of Rappawan Inc., and principal William Vaught Jr. and Century 21, Campbell Realty Inc., and principals Walter and Jeannette Campbell. Attorneys for those defendants were among the few physically present in the older, larger Warren County Circuit Courtroom with Judge Bruce D. Albertson Thursday morning.

The Campbells were represented by Warrenton attorney Peter Hansen; Rappawan and Vaught by local real estate attorney Joseph Silek Jr., though it appeared Hansen might also have a hand in the Rappawan case. However, he said he would defer to Silek on the availability of the July 30 date for that client.

It was noted that coming motions reply dates were July 10 for a plaintiff response to defense motions, and July 24 for a defense reply to the plaintiff’s assertions in their reply.

‘They didn’t know’
In arguing for a pre-trial plea in bar hearing for his clients, April Petty and Jesse Poe – the latter not to be confused with fellow civil defendant Donald Poe – attorney William Shmidheiser III repeatedly told the court he was not disputing lead civil defendant Jennifer McDonald’s embezzlement of the amounts of money cited in real estate home purchases McDonald achieved for his clients, rather he was asserting his clients had no knowledge that that money (totaling $410,000) had been embezzled.

While not directly involved in Thursday’s EDA civil hearings, Jennifer McDonald, left with then EDA Board Chair Patty Wines, cast a long shadow over two defendants’ arguments for a pre-trial hearing chance to plead their innocence. Their arguments, who would have suspected a successful local real estate agent and Economic Development executive of criminal embezzlement? Royal Examiner File Photo/Roger Bianchini

So, Shmidheiser told Judge Albertson his clients should have the right to present their cases to him at a plea and bar hearing prior to the primary civil trial alleging a conspiracy among all 15 defendants to benefit from McDonald crimes, admitted or alleged, in an amount totaling over $21 million dollars.

The amount of embezzled money he cited involving his clients was $125,000 in Petty’s transaction and $285,000 in Jesse Poe’s. Their attorney said his clients recruited McDonald to be their real estate agent for home purchases from knowing her through family connections. Poe dated a niece of McDonald’s at the time, his attorney said; and Petty knew McDonald as the successful “golden child” of relatives she knew socially.

Shmidheiser said that if his clients could be proven to not have been involved in the larger conspiracy alleged by the plaintiff in a pre-trial plea and bar hearing, it would serve the “judicial economy” in simplifying and speeding up the primary case.

Arguing for the plaintiff EDA after being introduced to the court over phone connection by lead Sands Anderson/EDA attorney Cullen Seltzer, was Sean Hudson. Hudson countered the defense “judicial economy” argument, noting that Schmidheiser’s clients weren’t denying that embezzled funds had been used in their real estate transaction, only that they weren’t aware it was embezzled at the time of their home purchases with former EDA Executive Director McDonald acting as their real estate agent.

EDA attorney Hudson also noted that neither Petty nor Poe had offered to return the embezzled money utilized in their home purchases; adding his firm had not yet been able to depose either defendant, a conversation between plaintiff and defendants that could lead to a pre-trial settlement offer.

Defense counsel Shmidheiser countered that once involved, he had offered multiple dates for depositions of his clients but that an impasse with Sands Anderson over a location for those depositions – the law firm’s Richmond home base or Warren County where the case will be heard – had occurred.

Their attorney also noted that neither April Petty nor Jesse Poe had been indicted by the EDA Criminal Case Special Grand Jury after testifying before it, in Petty’s case at least, multiple times. That indicated the grand jury believed his clients’ stories, Schmidheiser asserted to the court.

The Warren County Courthouse is cranking back up toward a late-pandemic caseload, though still partly by remote hook up and masked, social distancing inside.

“She would like some closure. She has a lot at stake,” her attorney said, pointing to her federal emergency management job.

As the arguments concluded, Judge Albertson returned to the oft-touched topic of “fairness” and asked plaintiff counsel if he thought it “fair” that the court is allowed to at least “consider a pre-trial resolution for two or more defendants”.

After a long pause, Hansen offered that he thought keeping the defendants in the primary civil action would achieve the best chance of a pre-trial settlement, ultimately serving to streamline the case to the desired “judicial economy”.

Judge Albertson then took the arguments under advisement.

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