May 29, July 17 set for further motions arguments in EDA civil case

It was a who’s who of the controversy swirling around the audit and investigation into EDA finances and its aftermath on Wednesday morning, May 22, on the second floor of the Warren County Courthouse.

A motions hearing on the EDA civil litigation filed on March 26 was slated for the 9 a.m. Circuit Court docket before Judge Clifford L. Athey Jr., while the Special Grand Jury empanelled by Athey on March 27 to investigate potential criminality tied to the EDA financial investigation and civil litigation was beginning three days of witness testimony across the hall.

It appeared that all people named as civil defendants, save Truc “Curt” Tran who was represented by counsel, were present along with relatives, attorneys, former EDA co-workers and Front Royal Police investigators who worked the EDA office break-in case. The interesting mix created a standing room only crowd in the second-floor hallway, as well as some confusion as to which circuit courtroom was whose ultimate destination.

Sheriff, ITFed principal Tran, Donnie Poe named with McDonald in EDA civil suit

While there was large and varied crowd at the courthouse Wednesday morning, neither of these players, Tom Sayre left, and ‘Curt’ Tran, was a part of it. Sayre is engaged in dueling defamation lawsuits with Jennifer McDonald; Tran and his ITFederal LLC are two of nine EDA civil suit defendants

In opening the motions hearing Judge Athey noted that he would be leaving the circuit court bench in September for a seat on the Virginia Court of Appeals, so would not be the judge who would ultimately hear this civil case. He surmised the 26th District’s Chief Judge would assume that role.

But it was Athey who would hear and rule on a bevy of motions before him on Wednesday.

The judge agreed with defense attorney calls for more detail in the six-counts tied to the EDA civil complaints seeking a minimum total of $17.6 million from nine defendants, five people and four Limited Liability Corporations (LLC’s) tied to those five people – Jennifer McDonald, Donald Poe, Justin Appleton, Truc “Curt” Tran and Daniel McEathron.

Defendant attorneys cite vagaries, legal conflicts in EDA civil suit

Attorneys for the Sands-Anderson law firm that filed the suit on the EDA’s behalf have drawn heavy defense counsel criticism for listing all defendants together in one lawsuit seeking a lump-sum amount from all – “implausible conspiracies” was the term used by Jennifer McDonald attorney Lee Berlik in his motions filing.

And while there is a great deal of specificity as to acts and amounts of money in the 160 paragraphs preceding the 39-paragraphs comprising the six counts, such detail is absent in the listing of those counts of: 1/ Fraud and Fraud in the Inducement; 2/ Conversion; 3/ Conspiracy; 4/ Unjust Enrichment; 5/ Breach of Fiduciary Duty of Loyalty; and 6/ Ultra Vires (improper) Transactions and Agreements.

Tran defense motions echo earlier filings, cite vague summary of allegations

While not an attorney, for this long-time court observer it is surprising that the EDA civil action wasn’t broken into separate suits involving the various acts, entities and amounts of money cited in the first 160 paragraphs of the civil complaint. And while I would have asked Sands-Anderson and EDA civil case attorney Cullen Seltzer about that strategy, he was not speaking on the record following the approximate half-hour hearing.

Athey gave defense attorneys 21 days to file memos in support of their Demurrers and Motions for Bills of Particulars on the cases against their clients; and the plaintiff counsel 21 days to file Briefs in opposition to the defense assertions; and an additional seven days for defense responses to the plaintiff Briefs.

Those defense and plaintiff filings will be argued at the end of the Motions Day of July 17.

As to a motion to Quash the complaint against Earth Right Energy and its principals Donald Poe and Justin Appleton, Athey set a hearing for next Wednesday, May 29, at 9 a.m.

There was an interesting revelation by plaintiff attorneys in the wake of Jennifer McDonald’s co-attorney Jay McDannell’s request for the now seven-month, three-quarters of million dollar “forensic audit” of EDA finances the County has fronted the EDA money for. McDannell sought that detail so as to better understand and prepare a defense for his client on the financial misappropriation allegations against the former EDA executive director.

Noting the EDA and County retention of the accounting firm of Cherry Bekaert, out of its Richmond office, Seltzer said there could be a problem with the 10-day time period Athey ordered for provision of the McDonald attorney-requested audit materials.

“We’ve been hearing this for six months – it’s time to put up or shut up,” Athey told the plaintiff attorney.

Seltzer then appeared to indicate that Cherry Bekaert had not done a “forensic audit” as it has previously been referenced in County and EDA discussion, but rather what was later termed an intrinsic fact-finding. He also said a “final audit gap complaint” was not yet prepared or available for submission to discovery motions. Previously EDA officials have indicated that after the EDA board and staff have reviewed the most recent draft of the Cherry Bekaert financial investigation in closed session, the hard copy has been shredded.

“Whatever they’ve prepared – file it,” the judge instructed plaintiff counsel.

‘Forensic audit’ – what forensic audit?!? It is an ‘intrinsic fact-finding’ mission.

McDonald attorney McDannell also addressed the potential of criminal prosecutions against his client from the Special Grand Jury investigation going on across the hall on Wednesday. McDonald’s counsel, as well as other case defense attorneys, have pointed to the potential of Fifth Amendment assurances (the right not to self-incriminate) from testimony in the civil case were criminal indictments handed down by the special grand jury’s related investigation into their client’s actions.

Athey noted that no indictments have yet been filed and observed that similar arguments were put forth “in every divorce case where adultery is alleged”. The judge appeared to side with the plaintiff in this argument, noting that the issue could be revisited were criminal indictments, in fact, handed down against defendants in the civil case.

McDonald’s counsel also argued to quash a portion of plaintiff subpoenas on his client’s finances related to her legal representation. In explaining the request Seltzer noted that the former EDA chief executive is accused of “defrauding a significant amount of money from the EDA” and wondered if some of that money was being used to fund her defense.

“Is she using stolen money to pay her attorneys,” Seltzer asked.

However, Athey granted the defense motion to quash that portion of the plaintiff subpoena for financial records.

The specter of criminal charges stemming from the EDA financial investigation – by whatever name placed on it – hung over Wednesday’s EDA civil case motions hearing.