Limitations, assertions in EDA investigative report present a mixed bag

An emailed explanation to the mayor and town council by Front Royal Town Attorney Doug Napier about how he may have appeared on a list of 28 recipients of USDA Rural Business Enterprise (RBEL) Loans given through the EDA between 2005 and 2018, points to certain admitted limitations in the Cherry Bekaert investigation of EDA financial “irregularities” and associated indicators of potential criminality tied to those irregularities.

Front Royal Town Attorney Doug Napier. “I never sought, nor received, an EDA loan,” said Napier.

“Our consulting services may or may not be in accordance with government auditing standards or auditing standards issued by AICPA (American Institute of Certified Public Accountants). We have not audited, reviewed, or compiled any financial information related to the EDA and accordingly, we do not express an opinion or any form of assurance on the EDA’s financial information under such standards …” Cherry Bekaert wrote in its “Transmittal Letter” accompanying its presentations of its finding to EDA Attorney Dan Whitten dated “May XX, 2019” in court-filed documents.

However they do add, “Our services were performed in accordance with the Statement on Standards for Consulting Services issued by the American Institute of Certified Public Accountants (AICPA).”

Napier’s name appears at the top of the list of RBEL loans on page 97 of the Cherry Bekaert summary of its self-described “working papers” accumulated in its exploration of Front Royal-Warren County Economic Development Authority finances. Napier is listed first due to the oldest date – January 25, 2006 – of loans cited on the list. The loan was for $30,000 and carried no balance remaining at the time the list was compiled by the contracted investigative public accounting firm.

“I never sought, nor received, an EDA loan,” Napier writes, adding, “Perhaps it is an EDA deed of trust (loan) for which I was the trustee which would list me in the Clerk’s Office as a party. At any rate, I never got an EDA loan, or any other EDA money for that matter. Even when I represented the EDA from 1996 to 2006, I received no compensation from the EDA. It was part of my County Attorney’s duties.”

Napier cites his naming as a principal in the loan, rather than the involved legal trustee, as one of “a few errors in the EDA Cherry Bekaert report I noticed”. An attempt to reach Napier, who appears to be recovering from eye surgery from one aside in his email to council and the mayor, by email about what other errors he noticed, was unsuccessful prior to publication.
As far as the limitations in its process that might allow such mistakes to occur, the very first line in Cherry Bekaert’s “Transmittal Letter” of its work to EDA Attorney Whitten is, “These working papers do not constitute a report”.

That opening sentence continues to acknowledge to Whitten that the material was “prepared solely at the request of and for Daniel Whitten, Esq., County Attorney and Counsel for the Economic Development Authority concerning matters regarding your client (the EDA) … under the terms of our engagement letter dated September 11, 2018.”

The second paragraph continues, “The following contains our complete working papers of procedures we performed under your direction regarding certain financial matters of the EDA based on information supplied by you and the EDA.”

The final sentence of the third paragraph, of five, in the “Transmittal Letter” adds, “Finally, our engagement cannot be relied on to detect or disclose all errors, irregularities, or illegal acts, including but not limited to fraud, embezzlement, or defalcations that may exist.”

And as reported in our lead story on the release of the Cherry Bekaert materials in the EDA civil litigation court files the company observes of its process, “Our scope and internal review procedures were limited in nature and used to determine predicates of irregularities indicative of embezzlement in the form of corruption activities and billing scheme sufficient to warrant a fraud examination.

Cherry Bekaert investigative report appears in EDA civil suit files

“The remainder of our working papers contain your allegations, our analysis and findings, along with evidence we obtained under your direction,” Cherry Bekaert concludes of the presentation of its estimated 2900 pages of documentation now in the EDA $21-million-dollar civil case file.

So it appears that nine months and $600,000 later the EDA, Warren County and finally the public (and Town) as a consequence of court-ordered evidentiary production has a national investigative public accounting firm’s detailed analysis of all the materials furnished to it by the EDA to uncover financial irregularities in the conduct of EDA business.

Thus far those provided materials and professional accounting analysis have pointed to the EDA’s former executive director as the central figure in multiple financial irregularities resulting in four criminal indictments against her.

Of the result of its review procedures related to the materials presented to it by the EDA and its attorney, Cherry Bekaert concludes in its “Transmittal Letter” of its assembled materials now included in the EDA civil litigation court files, “The irregularities discovered included material misrepresentations, falsifications, and evidence used to conceal suspected defalcations perpetrated by the former EDA Executive Director, Jennifer R. McDonald (“MCDONALD”), and other parties acting together, discussed in these working papers.”

Considering the above “and other parties acting together” representation when and where might the next legal hammers fall?

While keeping an eye out for RSW Jail booking reports, next we’ll delve into the 16-allegation Cherry Bekaert working papers files to see what clues they may offer.