McDonald draft statement goes public – another side of the EDA story

Jennifer McDonald planned to make one more public appearance to tell her side of the story to municipal government – her May 24 arrest derailed that plan. But now we have a public release of what she planned to say. Royal Examiner File Photos/Roger Bianchini

A draft of comments former EDA Executive Director Jennifer McDonald planned to deliver at a municipal meeting, likely the Warren County Board of Supervisors, outlines her side of the story regarding multiple allegations at the base of the EDA civil litigation filed March 26. McDonald is the pivotal figure in the nine-defendant lawsuit seeking recovery of what has climbed to over $21 million dollars in allegedly misdirected EDA assets.

McDonald’s May 24 arrest by Virginia State Police on four felony financial fraud and embezzlement charges aborted that planned public defense in front of one of the boards now being criticized for a lack of oversight of EDA operations and McDonald’s role in those operations.

The McDonald draft statement was published June 20th on Kristie Atwood’s “One Mad Mother” Facebook page. For some time Atwood has been publishing materials on her Facebook page that would seem most likely to have been leaked to her from McDonald. Atwood would appear to have a common cause with McDonald – to make the Warren County Administration and Board of Supervisors look bad – if for differing reasons: Atwood has threatened a multi-million dollar lawsuit against the County over building permitting issues with her home, while McDonald asserts many of her actions now cited as fraudulent in nature were, in fact, approved and/or known to EDA and County officials and allowed to proceed.

Kristie Atwood has been a vocal critic of county government in the wake of county permitting of unsatisfactory work on the home she was having built. On June 20 she published the draft of McDonald’s planned statement to public officials telling her side of the EDA story.

McDonald’s draft comments were also hand delivered to this reporter “off the record” by McDonald during a meeting at Samuels Public Library the month prior to her arrest. However, with Atwood’s social media publication of the identical draft statement, though my copy had a sexually-tinged paragraph posted by Atwood crossed out for deletion, Royal Examiner sees an “on the record” opportunity to explore portions the former EDA executive director’s explanation of some of her actions cited as fraudulent by her former employer based on the Cherry Bekaert “working papers” report on indicators of fraud in EDA finances and related real estate transactions.

This initial look will summarize an overview of the five-page statement and then focus on its ITFederal references.

The Blame Game

The gist of McDonald’s draft statement echoes with some specificity her civil attorney Lee Berlik’s written response to the Complaint against his client in the EDA civil litigation:

“The Warren EDA … is engaged in an attempt to smear Ms. McDonald by blaming her for every bad decision made by the Warren EDA board over the last several years and turning business deals the Warren EDA now regrets into implausible conspiracies,” Berlik wrote.

While McDonald does not directly address the $52,000 or more in credit card payments made under the auspices of Afton Inn contractual work that appears to have initially landed her in jail, she does comment on social media references to related allegations in the EDA civil litigation.

“Now I get to read the Facebook comments about how my house, credit cards, and essentially all my bills are paid off and that is simply not true. I still have a mortgage that I have held since 2004 when I built my house, I have a mortgage on rental properties, I have credit card bills, I have all of the bills a normal person has and then some,” McDonald wrote, adding of the social media frenzy she was initially exposed to in the wake of the EDA civil litigation filing of March 26, “This is all based on one-sided opinions, not facts. I continue to be harassed by the Internet crowd, threatened by folks in local stores, and stalked by the crazies and for what?”

From the perspective of an EDA board that continued to support her through November 2018, the “what” is an orchestrated, years-long conspiracy going on under their noses involving multiple projects they, at least in some cases like ITFederal and Workforce Housing, as a board approved the expenditure of EDA resources on.

Why were these people laughing? On April 27, 2017, then-EDA Board Chairman Greg Drescher and Jennifer McDonald find mirth in a motion approving a $445,000 purchase of the 3.5 acre Workforce Housing parcel that was supposed to be a $10 gift. The EDA civil suit cites the property as a $650,000 loss achieved with the Nov. 28, 2018 EDA sale of the property to believed Aikens Group affiliate Cornerstone LLC for $10 – ironically the price the EDA was initially supposed to pay for the property as a ‘gift’ from McDonald relatives in September 2014.

McDonald calls some of these allegations against her, including but not limited to the ITFederal project and other Truc “Curt” Tran-related land moves and the Workforce Housing fiasco and its ever-fluid developmental and cost scenarios, a result of “selective amnesia” on the part of EDA board members and county officials. As noted above, from her perspective that amnesia revolves around the fact that many projects cited as evidence against her, were approved by the EDA Board of Directors with the support of the Warren County Board of Supervisors and/or Front Royal Town Council.

In its civil filing the EDA counters that many of its worst decisions were based on misinformation presented to it by McDonald. But no one from McDonald to her EDA Board of Directors to County or Town officials who gave the okay to various aspects of these projects, explains why virtually no one involved at the EDA or municipal levels did due diligence to get at the truth of what was being presented to them about various projects they were being asked to support with hundreds of thousands and even millions of dollars in investments – whoever it was that was doing that presenting.

McDonald civil cases attorney Lee Berlik wrote on the first page of a defense motions filing of April 16, emphasis in context, “Plaintiff suggests every statement by every counterparty it now regrets crediting was a false statement by Ms. McDonald … instead of a false statement to Ms. McDonald.”

Enter the Dragon

In the ITFederal case the lack of due diligence appears to be at least in part the source of origin bringing the company forward – Sixth District Congressman Robert Goodlatte – that absolved ALL involved, from McDonald to her EDA board, to the town council and county board of supervisors save one former councilwoman, from any semblance of due diligence before handing, not only the Royal Phoenix Business Park (the remaining 117 acres were used as collateral on the $10 million dollar EDA/ITFed loan from First Bank & Trust), but also the “farm” over to Tran essentially for one dollar, American, AND the Goodlatte-suggested $10 million dollars for ITFederal operational expenses.

This way to prosperity then-Congressman Robert Goodlatte promised of ITFederal landing at the Avtex Brownfield site as early as September 2014, when the 147-acre Royal Phoenix site was released for development by the Environmental Protection Agency.

“At the ceremony for the release of the Avtex site (September 2014), Goodlatte (then-U.S. Congressman, R-6th) mentioned to several of my Board members what a great opportunity ITFederal would be for the Avtex site,” McDonald wrote in her draft statement, adding, “We started work immediately to make sure we were doing everything in our power to get this business to Front Royal that we thought would create 600 jobs and a $40 million investment in this community. Everyone was ecstatic that we had finally landed what we thought to be the best project that had come our way in over 20 years,” McDonald writes in her draft statement.

And it was not McDonald, but rather the EDA Board of Directors that authorized a 30-year payback term for Tran to the EDA when the Town “Bridge Loan” was extended to Tran from September to November 2015; while the EDA has a seven-year balloon payback in full arrangement with First Bank & Trust achieved in December 2015. The latter is an arrangement, which as we have reported previously, EDA/County Attorney Dan Whitten explains the EDA hopes to refinance at the seven-year mark allowing it to have Tran continue to cover its bank payments over the life of its 30-year ITFederal loan – a loan McDonald attorneys have pointed out Tran remains current on and within reduced benchmarks approved by the EDA Board of Directors.

What McDonald continues to describe in her defense is a virtually blank check given the ITFederal CEO for every idea that might pop into his, or someone’s, head – like the above-referenced “farm”.

“In fact, the Board not only agreed to give Mr. Tran the land (reporter’s note: 30 acres publicly valued by the EDA at $2 million dollars) for $1 if he met certain milestones, but they agreed to help in the purchase of a farm for Mr. Tran, extend a $10 million loan to Mr. Tran, an incentive package to Mr. Tran, and breaks on utility tie ins. All of this in an effort to make sure the community kept the 600 jobs and the $40 million investment as promised,” McDonald wrote.

An aerial view of the believed ‘Front Royal Farms’ property below the treeline in middle of photo that was purchased by ‘Curt’ Tran, just west of the FRLP property. The Tran ‘farms’ parcel comprises about 80-plus acres in the lower, central portion of photo stretching from Happy Creek Road and the RR tracks to the left. Royal Examiner File Photo/Roger Bianchini Courtesy of CassAviation

Now this is my favorite part of McDonald’s statement – her description of how certain reduced benchmarks on the ITFederal $10-million loan were agreed upon – kill the messenger, aka blame the media (they might be telling the truth):

“When Mr. Tran was being bashed in the local news he came to Mr. Drescher (EDA vice chair) and Mrs. Wines (EDA chair) with a letter in hand stating he was ready to move on to a different community because of the bashing UNLESS (EMPHASIS in context) the EDA considered reducing the scope of his obligation. Mr. Drescher and Mrs. Wines took his letter and concerns to the Board and they ALL agreed to reduce the scope of his project,” McDonald writes (why wasn’t I playing poker with these people back then?!?)

The result of that EDA board-approved reduced project obligation is the thus far empty one-story, 10,000 square foot building standing in lieu of the promised three-building 50,000-plus s.f. complex promised to be the foundation of a $40 million dollar investment resulting in 600-plus high-paying tech industry jobs first promised in a press release from Congressman Goodlatte’s office; not to mention ITFederal principal Truc “Curt” Tran sitting on the bulk of a $10 million dollar loan he has about 27 years left to pay off, with only the apparent necessity he spend about $2 million of it here, and provide 10 jobs of indeterminate wage in the 10,000 s.f. building within the next year.

As late as Dec. 20, 2018, even McDonald critic Tom Sayre, 3 months into civil defamation litigation with the EDA executive director, was proud to pose with ‘Curt’ Tran on site behind EDA headquarters.

In her statement McDonald aggressively counters the EDA civil litigation inclusion of that $10 million at the financial center of fraud allegations revolving around her.

“Now here we stand several years later and the Board has changed, the project has not been completed, and everyone wants to point the fingers at yours truly. I have kept my mouth shut for many years now with all of the bashing, hatred, and down-right bullying that I have endured because of the decisions made, not by me, but by the EDA Board, Town Council and Board of Supervisors. My role as Director was to take the beating for everyone and the decisions that had been made and I did just that UNTIL the accusations of embezzlement, malfeasance, moral turpitude, etc started to role.”

Of the inclusion of that $10 million EDA loan to Tran being part of an alleged, far-reaching conspiracy to enrich herself and her family, McDonald writes, “Not a penny of that money came to me or anyone in my family. 100% of the money went to ITFederal at the closing. All documents were signed by Patty Wines (not Jennifer McDonald). The mere fact that anyone sitting on the EDA Board, Town Council, or Board of Supervisors would even suggest otherwise is pathetic and absurd.”

But again, what McDonald fails to explain, as has everyone else she lists as involved on the EDA, County and Town side (other than Bébhinn Egger), is whether ITFederal and its CEO were EVER in a position to achieve what was being promised, initially by the aforementioned and since-retired Sixth District Congressman Robert Goodlatte. For a small amount of online research, as done by this reporter and Norma Jean Shaw in 2016 would reveal a company, not with a $140-million dollar Defense Department contract ballyhooed by Goodlatte and McDonald, but rather a company struggling for at least five years to realize $35,000 to $50,000 in private sector contracts, among other issues.

Above, an early architectural drawing of the first planned ITFederal building at the Royal Phoenix site totaling about 27,000 s.f. – the reality, below, is a one-story, 10,000 s.f. building with phase one of a nice ‘Western Bypass’ connector road built by the Town headed its way.

Cherry Bekaert details what Royal Examiner’s news staff discovered in 2016**:

“Our research of ITFederal and other associated entities from the Business Plan (ITFederal’s for Royal Phoenix site) indicates the companies are very small (likely less than 10 employees). They maintained unsophisticated websites with little to no physical office locations and TRAN’s home residence appears to be the main headquarters of ITFederal and VDN (a second Tran company, VDN Systems). ITFederal, VDN and ACRC (a third Tran company, American Commonwealth Regional Center) appear to be shell companies with little to no invested capital and questionable customer base representations e.g. spouses and/or near relatives (“Katrina Tran” and “Tran CPA”) holding executive positions,” page 40 of the Cherry Bekaert summary states.

In fact, the EDA fraud investigator reports that “startup capital” for ACRC’s Virginia Information Technology Project, LLC – apparently the ITFederal Royal Phoenix project – was listed as $2,022,000, $2 million of which was the publicly-stated value of the 30 acres gifted to ITFederal behind closed doors by the EDA for one dollar.

“Hence, the startup capital represented by TRAN in the Business Plan appears to be little more than $2,000 cash and $20,000 in other current assets, both of which were unverified,” Cherry Bekaert reports.

And of that much-ballyhooed $140 million federal contract with the Nuclear Regulatory Commission that was to be the basis for ITFederal’s $40 million dollar, 600 high-paying tech jobs investment in this community, Cherry Bekaert observes, “… our research indicates ITFederal LLC and VDN Systems, Inc, both controlled by TRAN, were listed … with one award from the Nuclear Regulatory Commission for approximately $5,000 in 2014, not the $140,000,000 represented in the Business Plan.”

SURE, let’s give him ALL the money he wants, or doesn’t want – Congressman Bob-a-lot and Jennifer said it’s a GOOD idea!

So while there may be plenty of blame to go around; and McDonald may have developed her own “selective amnesia” as to what unauthorized or self-serving financial or real estate moves ostensibly on behalf of the EDA she may have made, it is McDonald who until June 24 sat alone in jail without bond. And now that there has been a second arrest, it is one downward on the EDA/Municipal hierarchy, rather than up as McDonald seems to assert she believes the case should be.

“Based on suspicion and belief” from public comments at County and Town meetings in the wake of the March 26 filing of the EDA civil litigation, it is an opinion a significant number of people in this community share.

UPDATE: Second former EDA staffer arrested on embezzlement charges

** FOOTNOTE: Evidence within the EDA financial investigative report notes that Goodlatte’s office called McDonald in an effort to silence the 2016 media “bashing” of ITFederal. It reports a consequent call from McDonald to WZRV owner Andrew Shearer about the matter, which perhaps coincidentally, almost immediately was followed by the termination of Norma Jean Shaw as station news director – Shaw was on the Goodlatte side of the WZRV news team exploration of ITFederal – and a terse email from Shearer shutting down this then-WZRV new team member’s inquiry to ITFederal officials about the company’s contract base. So the year after his sudden lockout from the paper he helped create, Bianchini was released from the WZRV news team about a month or so after Shaw.

The then out-of-work investigative news team was soon reunited at the newly created Royal Examiner online newspaper. As this reporter wrote in one of his first stories for Royal Examiner (October 27, 2016) revealing the one dollar giveaway of the 30-acre ITFederal parcel: “One of the best-kept secrets in Front Royal and Warren County seems to be the cause of a year-long delay in federal approval of the FIRST commercial property sale at the remediated Avtex Superfund site in Front Royal. In fact, we had to start a new online news source just to get that reason published and into the public conversation – just kidding, sort of …

Feds OK ‘Dollar Special’ on first Avtex property sale