Correction: Royal Examiner would like to acknowledge a typo in the second paragraph under the subheader “Family and Friends” in the October 4 story “McDonald family members, business associates added as defendants in EDA civil suit”. A “caps” hit for the dollar sign did not take and the number “4” was printed in its place. The correct amount in the amended EDA civil complaint said to have been paid to North at closing on the Robin Hood Lane property was $1,713.89, not “41,713.89”.
Royal Examiner apologizes for this mistake.
Following approval of amending its civil complaint following a two-and-a-half-hour closed session Friday morning, attorneys for the Front Royal-Warren County Economic Development Authority late Friday afternoon entered amendments adding seven defendants to its civil suit seeking recovery of as much as $21 million in allegedly misdirected and embezzled EDA assets.
Included in those new civil case defendants are former EDA Executive Director Jennifer McDonald’s former Administrative Assistant Michelle “Missy” Henry, husband Samuel “Sammy” North, mother Linda Hassenplug, as well as Hassenplug’s former Little RugRatz Daycare LLC, and former B&G Goods principal William Lambert.
Henry North and Lambert’s additions may not come as a surprise as all three have been served with several criminal felony indictments related to the EDA financial fraud investigation.
“Payments to family members” has also been cited in the Cherry Bekaert financial fraud investigation report upon which the EDA civil suit and EDA Special Grand Jury investigation are built.
Two new names of McDonald business and financial associates, Jesse F. Poe and April D. Petty were also added to the civil case defendants list.
The amended complaint cites Poe as “an associate in the financial affairs of Jennifer R. McDonald and Michelle Henry”.
Petty is listed as “an associate in the financial affairs of Jennifer R. McDonald”.
In an “Overview” section of the amended civil complaint it is alleges “unlawful payment of Warren EDA Funds Disguised as Easement Payments to pay for” Samuel North, Jessie Poe and William Lambert’s homes.
Family and Friends
Henry is cited for “Breach of Fiduciary Duties and/or Negligence” during her time as McDonald’s administrative assistant.
The amended complaint cites a McDonald “payment of $110,000 from the EDA to Service Title company which in turn paid that amount to, in part, purchase a home at 1309 Robin Hood Land in Front Royal, Virginia for Defendant North and to also pay $1,713.89 to Defendant North at the closing of the purchase of 1309 Robin Hood Lane.
“In addition, Campbell Realty company, owned by Defendant McDonald’s aunt and uncle, received $2,725 in commission from the purchase of 1309 Robin Hood Lane. Defendant McDonald was the broker for Campbell Realty in the transaction,” the complaint continues, adding, “The EDA did not approve of using Warren EDA funds to buy Defendant North a house …”
“Using $280,000 from the Warren EDA, by a check delivered by Defendant McDonald, Defendant Jesse Poe purchased a home at 118 Jutland Court in Stephens City, Virginia,” the amended complaint continues. It alleges that payment came from a forged invoice “purporting to be from the Shenandoah Wetlands Credits, LLC for $285,000.
The complaint adds that Poe received $2,475.60 at closing and that Century 21 got a sales commission of $16,300 and that McDonald was again, the agent in the sale.
And Lambert is cited as being the beneficiary of a McDonald forgery involving an EDA easement purchase from the New Hope Bible Church. That purchase was for $65,000 according to the complaint.
“Defendant McDonald forged documents, however, indicating the purchase price was in fact $345,000. Using these documents as a cover, Defendant McDonald diverted $345,000 from the Warren EDA for the purchase of 400 Craig Drive in Stevens City, Virginia.”
Again the recipient of the purchase received a closing settlement, this time $4,763.49 in cash. And it is further noted that the Century 21 real estate company owned by McDonald’s aunt and uncle was again involved, receiving a $16,000 commission in the transaction in which McDonald and her uncle were the agents.
The amended complaint adds that at the time, “Defendant Lambert was engaged to marry Defendant McDonald’s sister” and formerly resided at McDonald’s mother’s Stuart Drive home in Front Royal.
Information on April Petty inclusion eluded this reporter in the 104 pages of documentation put into the Circuit Court Clerk’s computer system around 4:30 p.m. Friday. So this story will be updated as additional information is received or found.
Legal dust up
“Unlawful Payment of Warren EDA Funds” are cited to McDonald’s mother’s RugRatz Daycare and to McDonald’s civil attorney “Berlik Law, LLC”.
The listing of a $10,000 payment to Berlik Law for legal services under the Afton Inn redevelopment project led to a tense moment in day two of the recent Tom Sayre defamation case against McDonald. During a sometimes contentious cross examination of Sayre by Lee Berlik, Sayre suddenly turned the cross examination table, asking Berlik several times, “Are you going to give the money back, Mr. Berlik?”
Berlik did not respond and the judge admonished the battling legal pair to get back on track of the case at hand. Sayre was awarded $20,000 of the $25,000 he was seeking in damages in that civil action. McDonald has dropped her $600,000 defamation case against Sayre.
The amended complaint may seek an answer to the question Sayre asked Berlik in court on September 11. Berlik has told the media he never worked for the Afton Inn.
However the amended complaint states, “The Berlik Law Firm has refused to return the unauthorized payment from the Warren EDA and has taken the position that the money may have been permissibly paid to that firm which it was not. It has further asserted that because the money has been spent on services rendered, albeit not services rendered for the Warren EDA, the Berlik Law Firm is entitled to enjoy benefits of the stolen money.”
Admission to what?
As the original complaint did, the amended complaint notes that on December 20, 2018, the day she resigned under pressure from her board of directors in the wake of findings of the contracted investigative public accounting firm Cherry Bekaert, McDonald admitted in an email to being liable for the return of $2.7 million of EDA assets. The complaint calls that admission as a “gross” undervaluing of “the extent of her theft and unlawful distributions”.
And the amended complaint alleges that “Defendant McDonald’s pattern of forging documents to defraud and steal, and to cover up her misconduct and fraud, has continued unabated even during the pendency of this litigation.”
Civil Contempt request
In a later amended motion put into the court clerk’s office computer system after 5 p.m. Friday afternoon, the plaintiff asks that McDonald be held in contempt of civil court orders. The motion contends that McDonald moved a piece of real estate against court order.
The court froze the movement of some McDonald assets for potential recovery of allegedly misdirected EDA assets through real estate transactions on May 31. A transcript of that third day of civil case hearings in included in the contempt request motion.
According to an included exhibit that piece of real estate at 68 Pine Hills Road was conveyed to McDonald’s sister Gail Addison by Deed of Gift on August 16, 2019. David Crump who represented McDonald in her misdemeanor false police report criminal case last October – she was acquitted – is listed as the preparer of the deed.
Perhaps ironically, McDonald’s mother Linda Hassenplug is listed as the Notary Public who signed the deed. McDonald’s husband’s signature is also on the signature page along with McDonald’s.
Stay tuned for further developments.
Little civil consequence of more criminal prosecution delays in EDA case
Contacted about the new dates in late 2022 of trials in the now federal prosecutor-handled criminal indictments against former Front Royal-Warren County Economic Development Authority (EDA) Executive Director Jennifer McDonald, current EDA Board of Directors Chairman Jeff Browne said while it has little, if any, impact on the EDA’s civil litigation seeking recovery of assets, he understands public frustration from continued delays on the criminal side of the EDA financial scandal.
“I don’t believe the delay in the criminal case impacts our civil case. We have no control over the criminal case, but it is frustrating that Warren County residents must wait so long for justice to be served. I understand the reasons for the delay, but it still is frustrating,” Browne told Royal Examiner.
The reason for the delay continues to be, as it has been from the outset for the most part, the volume of evidentiary documentation in the case, as well as the introduction of new attorneys into the legal equation who must absorb the information in that documentation estimated at well over a million pages.
Most recently, federal Judge Elizabeth Dillon granted McDonald’s newest attorney, court-appointed Andrea Harris’s request for a continuance of McDonald’s criminal trials slated for the first week of this month. The federal prosecutor from the Western District of Virginia did not object to the continuance. Consequently, new trial dates between October 11 and November 18, 2022, are now on federal docket. Since the delay came at the request of the defense, speedy trial guidelines will not come into play.
As Royal Examiner previously reported, on August 31 McDonald was re-arrested on a 34-count indictment handed down by the Western District of Virginia Federal Prosecutor’s Office in Harrisonburg.
Of those 34 counts, 16 were for money laundering, 10 for bank fraud, 7 for wire fraud, and 1 count of aggravated identity theft regarding someone identified as “T.T.” – our best guess representing ITFederal principal Truc “Curt” Tran. The 40-paragraph True Bill elaborating on the charges to a Harrisonburg Grand Jury is dated August 25, and signed by then-Acting U.S. Attorney Daniel P. Bubar. McDonald was once again released on bond.
The charges and outline of the case in support of them echo earlier criminal indictments filed at the state level before the State Special Prosecutor’s Office in Harrisonburg turned the case over to federal authorities in late 2019. The state special prosecutor had dropped the indictments it had filed to avoid speedy trial issues due to the volume of evidentiary material – estimated at 800,000 to over a million pages at the time. Failure to meet speedy trial deadlines could have led to defense motions for dismissal of charges on the criminal side of the EDA financial scandal case.
EDA emerges from lengthy Closed Session to consider assistance to Angel Tree Program and C-CAP winter food storage
(Editor’s note: The Salvation Army notified Royal Examiner that their holiday toy collection/distribution program is known as Angel Tree, as opposed to the Marine Corps Toys for Tots effort. We in turn notified the EDA Board Chairman and received permission to make the correction to this press release.)
The EDA Board of Directors met today for their regular monthly meeting. All board members were present along with legal counsel. The Board went into closed session for approximately two and half hours to discuss transition, personnel, loan restructure, and disposition of property. The Board returned to open session at approximately 11:30.
The Board discussed the transition and how the county and the EDA were working well together. Taryn Logan, Assistant County Administrator, is also the Interim EDA Executive Director working on new prospects and marketing of EDA property. Ed Daley, County Administrator will work with the EDA on current projects. The County and EDA are actively recruiting a new Executive Director and administrative assistant. Jeff Browne thanked board members for stepping up to keep the EDA operation running smoothly.
Jeff Browne discussed the use of a portion the EDA administrative building through December 22nd for the Salvation Army Angel Tree holiday toy collection and distribution campaign. The EDA will also assist C-CAP in finding proper storage for needed food through the winter.
Jeff Browne and Scott Jenkins discussed the use of interns beginning in January to assist with EDA research and future projects. Scott Jenkins reviewed the “job description”. Taryn Logan stated the use of interns by the county has been a very successful venture in the past. Ed Daley, County Administrator, also supported the proposed program.
Marjorie Martin (Jorie) will assume the duties to update the website working with Queen Consulting. Meeting dates, and updated site information will posted.
The Board is working with vendors to clean the air conditioning ducts in the EDA administration building.
Next EDA Board Meeting: Combined meeting for November and December, December 3, 2021: The meeting will be held via zoom at 9:00 AM
County Supervisors change November meeting date – stay mum on Closed Session EDA litigation discussion
The only open session action taking by the Warren County Board of Supervisors at a Special Meeting of Tuesday, October 26, was authorization to change the date of a November Supervisors meeting from the 16th to the 18th. That item was a late addition to the agenda made and acted on prior to a scheduled closed session.
The bulk of the 5 p.m. meeting, about an hour-and-a-quarter, was taken up by a Closed/Executive Session to discuss Economic Development Authority litigation. As Royal Examiner readers know, that is an oft-behind closed doors topic over the last two-plus years in the wake of the $26-million to $62 million FR-WC EDA financial scandal that began unravelling in mid-2018. No announcement or action regarding that litigation was offered during the brief open session to adjournment shortly after 6:20 p.m.
As has been previously reported, the EDA financial scandal involves civil and criminal cases, the latter now handled at the federal level by the U.S. Attorney’s Office in the Western District of Virginia headquartered in Harrisonburg. Before criminal indictments were dropped by the Special Prosecutor at the state level due to speedy trial concerns surrounding the mountain of documented evidence, estimated at over a million pages, there were as many as 23 co-defendants alleged as co-conspirators of former EDA Executive Director Jennifer McDonald. The federal prosecutor launched action on August 31, filing a 34-count indictment against McDonald, including 16 counts of money laundering, 10 for bank fraud, 7 for wire fraud, and 1 count of aggravated identity theft regarding someone identified as “T.T.” (ITFederal principal Truc Tran perhaps?)
In related civil litigation, McDonald and the EDA reached an agreement in which $9-million-dollars of assets were ruled out of McDonald’s bankruptcy court filing as owed to the EDA, though without any admission of fault by McDonald. As part of that agreement the EDA recently announced assumption of ownership of McDonald Real Estate LLC MoveOn8’s undeveloped 41-acre Happy Creek parcel valued at over a million dollars.
The EDA and Town of Front Royal are also engaged in dueling civil countersuits initiated by the Town, claiming disputed lost assets related to the financial scandal. During the tenure of Interim Town Manager Matt Tederick, other than then-Mayor Eugene Tewalt, the town council chose to ignore EDA offers to sit down in a non-litigious, good faith effort to determine exactly what was owed to the Town related to the alleged misdirected EDA assets involved in Town and County capital improvement and economic development projects financed through the EDA. The Town has since initiated an effort to create its own unilateral Front Royal EDA (FREDA) operating independently of the over half-century-old Town-County EDA, which technically the Town is still a legal, if now silent, partner in.
That independent EDA effort has become a political hot potato in the coming Town Special Election to fill resigned member Jacob Meza’s seat. In recent years the County had fully funded EDA operational costs, with each municipality covering its own debt service related to EDA financing of projects. Independent conservative council candidate Bruce Rappaport has made the unilateral Front Royal EDA a major target of his campaign, citing it as a waste of town taxpayer money and destructive wrench in the cog of Town-County relations.
‘Ghosts of EDA Loans Past’ come back to haunt county supervisors
The most interesting part of Tuesday evening’s Warren County Board of Supervisors meeting was likely behind closed doors after the board adjourned to Closed/Executive Session for a legal-based answer to North River Supervisor Delores Oates question as to what benefit to the County and its taxpayers there was in approval of a Resolution admitting a “moral obligation” to continue to pay the debt service on bank loans made by the EDA during its developing financial scandal, circa 2016 or so. There was one of three loans at issue of particular interest – the $10-million-dollar loan to Truc “Curt” Tran’s ITFederal company poised to jumpstart commercial redevelopment at the 149-acre portion of the former Avtex Superfund site known as the Royal Phoenix Business Park.
Of particular interest, because the “moral obligation” for that loan was initially believed covered by the Town of Front Royal, whose elected officials agreed to provide a $10-million-dollar “bridge loan” requested by then EDA Executive Director Jennifer McDonald to indicate to First Bank and Trust that “the community” stood behind the loan and proposed project it supported. That request for and Town show of financial support for the ITFed project came despite the fact the company showed virtually no assets other than the three acres at the Royal Phoenix/Avtex site valued at slightly over $2-million-dollars that was “gifted” to the company by the EDA behind closed doors for one dollar.
A clue to what the county supervisors heard over about 15 minutes in Closed Session may have been offered by the board’s action out of it. After some hesitancy in response to the Chair’s call for a motion on the Resolution, Oates’ motion for approval of the “EDA First Bank and Trust Support Agreement”, seconded by Walt Mabe, passed by a unanimous roll call vote. The vote commits the County to continue to absorb those “moral obligation” payments through the Fiscal Year 2021-22 at an estimated cost of $214,000.
In open session, responding to questions about the Resolution in support of the “EDA First Bank and Trust Support Agreement”, County Administrator Ed Daley mentioned consolidation of three loans, including the above-mentioned ITFederal loan (at $9,551,500), as well as a First Bank and Trust Line of Credit ($8,691,600), and a First Bank of Strasburg loan ($3,450,000). Contacted later, Daley cited one condition that would bring the EDA’s payments to the bank on the ITFederal loan in line with what ITFederal pays the EDA monthly at about $42,000. Before the EDA payments fluctuated to more or less than the ITFed payments, sometimes as much as $7,000 a month more.
Despite the commitment to an estimated $214,000 in payments through this fiscal year, the board’s unanimous vote in support of its moral obligation payments likely reflects negative consequences were the County to bail on covering an EDA debt mid-fiscal year. But again, the agreement is only to the end of the current fiscal year, June 30, 2022. What might the future of “moral obligations” related to the “Ghost of EDA Loans Past” bring in FY-2022-23? – Stay tuned for another seasonal episode of “A Front Royal-Warren County EDA Carol”.
Thermal Shelter bathrooms
County Administrator Daley was also prominent in responding to another matter raised by three speakers during Public Comments about things, not on the meeting agenda. That was the elimination of two bathrooms in the Health and Human Services Complex at the old 15th Street middle school utilized by the County and involved churches and civic organizations to house the community’s homeless indoors at night during the winter. Opening that discussion was First Baptist Church Pastor Christy McMillin-Goodwin, followed by Aneita Bryant and Jim Bunce.
That trio said an alternate plan for mobile outdoor restrooms was unadvisable due to security and additional personnel to monitor out-of-building night trips, as well as potential severe weather issues. Noting a replacement plan that would not have new indoor facilities in place in time for this winter’s thermal shelter setup, these speakers wondered how the removal plan had been initiated without notice to those involved in helping the County operate the thermal shelter. Bryant suggested allowing access to the next closest indoor facilities.
In responding, Daley said he had been at point for the County in initiating the bathroom removal due to failing pipes that caused toilet backup issues. He said he had envisioned a much quicker turnaround in replacing the removed indoor facilities in that section of the building than ended up being the case. He promised to work proactively with those involved to see that an adequate alternate overnight option was available when the thermal shelter opens as winter arrives.
Also Tuesday following public hearings, the board unanimously approved three Conditional Use Permit applications, two for short-term tourist rentals and one for a private use campground. Following application summaries by Planning Department Deputy Director Matt Wendling the first two CUP applications, Charles and Lou Ann Dotson’s for the Private Use Campground on their property on Burma Road in the Man-Da-Lay Subdivision; and Jacob W. Lott Jr. and Sandra J. Kiepfer for a short-term tourist rental on their 1.6-acre lot on Little Indian Road in the Blue Mountain Subdivision in Linden went to a vote with no public hearing speakers. Wendling did note that a letter from the chairman of the Blue Mountain Property Owners Association had been received, expressing “no problem” with Lott and Kiepfer’s short-term tourist rental application.
Up last were Nicole and Sean McMinn with a short-term tourist rental permit application for their 2.42-acre property on Sagar Drive in the Highland Estates Subdivision in the Fork District. Again, there were no public speakers after the applicants responded to the board chair’s offer to summarize their request. The D.C.-based couple told the board they had run into little opposition from neighbors, and what opposition there had been from neighbors was not from those closest, but with property over a thousand feet from theirs.
And while there were no public speakers, the McMinns noted a number of letters to the board from supporters of their short-term tourist rental CUP application, which they asked to be read into the meeting record. Board Clerk Emily Ciarrocchi then read nine letters of support, including one with “25 to 30” signatures. Several of the letters, including one from the owner of the Downriver Canoe Company, noted positive impacts on tourism-related businesses from short-term renters. One letter noted, “They come; they spend; they leave”.
The board then made its final unanimous vote of approval on a motion by Archie Fox in whose district the applicant’s property lies, seconded by Walt Mabe.
Following that vote, Happy Creek Supervisor Tony Carter noted a “Bless you” included in one of the letters read by the clerk that was well-timed to a sneeze by someone present in the government center meeting room.
In fact, facing a future out of the public eye politically – Carter did not file to be on the ballot for reelection to his Happy Creek seat in November – Carter appeared at times Tuesday to be auditioning for Comedy Club spots during his member report and at various other times during the meeting. In fact, his coming local election, Halloween costume advice during his member report led three of his four colleagues to decline to try and “follow that act”.
See all the fun, business, and other public perspectives, including opening Public Comments speaker Michael Williams question as to whether a recent church-sponsored candidates forum in which the moderator was shown prior to the forum to have contributed to one church-associated candidate’s campaign could threaten that church’s tax-exempt status on U.S. Constitutional separation of church and state guidelines, in the County video:
EDA gets McDonald company property as part of settlement agreement
On Wednesday, October 20, Warren County Economic Development Authority Board of Directors Chairman Jeff Browne verified the EDA’s acquisition of the 41-acre “Happy Creek Road” parcel owned by former EDA Executive Director Jennifer McDonald’s Moveon8 real estate LLC. Acquisition of the undeveloped property assessed at just over a million dollars according to county court records is part of the $9-million-dollar no-fault settlement agreement reached between the EDA, McDonald, and the Harrisonburg Bankruptcy Court handling McDonald’s 2020 bankruptcy filing. The EDA will now be able to market the property as a developable EDA asset. It is located near the intersection of Happy Creek Road and Leach Run Parkway.
Browne said that in addition to receiving full value on the Happy Creek parcel, the EDA was in line to receive a percentage of the sale price of other McDonald assets distributed through the bankruptcy court proceeding. Exactly how close those percentages might get the EDA to the $9-million-dollar settlement figure remains to be seen. It was not immediately clear as to whether the EDA will have an outright full value claim to any other McDonald-held properties or assets.
McDonald is the central figure in the EDA financial scandal that began unravelling in mid-to-late 2018. She resigned in December 2018 under mounting pressure from her board of directors. She has been accused in civil and criminal court of utilizing her EDA position to misdirect EDA assets to her and others personal benefit. Western District of Virginia federal authorities have taken over the criminal side of the EDA case after a state special prosecutor’s office in Harrisonburg dropped criminal charges against McDonald and as many as 23 co-defendants due to speedy trial concerns as it wrestled with the volume of evidentiary material – estimated at 800,000 to over a million pages at the time. With charges against some defendants originating with the county commonwealth attorney’s office that initially handled the criminal investigation during Brian Madden’s tenure heading the department, failure to meet speedy trial timelines could have led to defense motions for dismissal of criminal charges against the defendants.
On August 31, 2021, federal prosecutors made their initial move, handing down a 34-count indictment against McDonald. Of those 34 counts, 16 were for money laundering, 10 for bank fraud, 7 for wire fraud, and 1 count of aggravated identity theft regarding someone identified as “T.T.” – ITFederal principal Truc Tran perhaps?
EDA completes audits for 2018 and 2019; 2020 audit is next
The Board of Directors of the Front Royal and Warren County Economic Development Authority accepted its audited financial statements for fiscal years 2018 and 2019, today, October 5, 2021. The audit of the financial statements was conducted by the firm of Brown Edwards, CPAs of Harrisonburg, VA.
“We have received the final outside audits conducted for 2018 and 2019,” said EDA Board Chairman Jeff Browne. “This was a huge effort on the part of Brown Edwards, and they have done very good work in challenging circumstances. Getting these two financial audits completed is a major step forward in putting the EDA’s past difficulties behind us. Now we can better focus on economic development issues to benefit the community.”
“The auditors’ letter points to three areas for improvement of internal controls,” Browne said. “It was important to make each improvement recommended by the CPAs, and we have done just that. The Warren County staff now administer the check-writing duties, collection of rents, and have layers of approvals for expenses within EDA and the County administration that were not there three years ago.”
The audited financial statements show that, at the end of the fiscal year 2019, the EDA’s total net assets were $38,036,737, and its net liabilities were $44,575,435, resulting in a deficit net position of $6,538,698. The EDA will work with Warren County’s auditors starting with the fiscal year 2020, which audit can now be undertaken.
The EDA Board of Directors will have their next regular monthly board meeting via Zoom on Friday, October 29, 2021, at 9 a.m.