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EDA in Focus

Next potential federal grand jury EDA indictment date is October 15

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The Virginia State Police deferred to the FBI as the lead agency in the April 16 search of the EDA’s offices. That search came just over two weeks after both the State and Federal level grand juries looking into our EDA had been empanelled. The U.S. Western District of Virginia Federal Grand Jury will remain empanelled for a year, as will the state-led local grand jury which has been granted a six-month term extension through March 31, 2020. Royal Examiner File Photo/Roger Bianchini

According to the Clerk’s Office of the Western District of Virginia Federal Court in Harrisonburg, their grand juries are empanelled in April for a term of one year. Those grand juries explore alleged federal crimes in all the counties of the district, rather than isolated specific inquiries.

So the federal grand jury that would be looking into violations of federal law regarding the Front Royal-Warren County Economic Development Authority financial fraud situation is still empanelled. It is being presided over by Judge Joel Hoppe.

According to the clerk’s office the only way to know whether a federal grand jury will hand down indictments on a specific investigation is when those indictments come down. Meeting dates for the Harrisonburg Western District Grand Jury are first and third Tuesdays of the month, though the October 1 meeting has been canceled the clerk’s office said.

So the next potential date when federal indictments could be issued regarding the investigation of the Front Royal-Warren County EDA is October 15. Sources indicate that when specific case indictments come at the federal level, they are likely to come all at once, rather than in a series as has been the case with the special grand jury led by the Warren County Commonwealth’s Attorney’s Office and VSP.

Stay tuned for any announcements from Harrisonburg at that time.

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EDA meets, goes into closed session and tours properties

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Following a 25 minute closed session discussion of legal matters including loans, accounting, debt service and matters involving First Bank & Trust the Front Royal-Warren County Economic Development Board of Directors made no announcements regarding any of those matters at a Special Meeting called for Friday morning, October 11.

The EDA Board met in closed session the previous day in what was termed an Emergency Finance Committee Meeting. A number of First Bank & Trust officials from Abington were present for the meeting. First Bank & Trust is the holder of the $10 million EDA loan to ITFederal that is part of the $21.3 million in assets the EDA is seeking recovery of in its civil litigation. As previously noted by Royal Examiner, including in yesterday’s Opinion piece “County, EDA officials cited for failed oversight – why not the Town?” EDA officials say the ITFederal loan was acquired “under false pretenses”.

While there were no announcements forthcoming from either closed session, in open session near the end of Friday’s meeting Tom Patteson did announce his resignation as Treasurer and member of the Finance Committee, effective at the end of October. Patteson noted he is not resigning from the EDA board.

The EDA board, minus absent Mark Baker, views map locations of various properties it owns in the county, inside and out of the town limits. Royal Examiner Photos/Roger Bianchini. Video by Mark Williams, Royal Examiner.

Following Patteson’s announcement of his pull back on official duties the board convened an Asset Committee meeting during which EDA Administrative Assistant Gretchen Henderson did a power point presentation locating EDA properties, including some small ones along Leach Run Parkway she noted she had discovered by accident during a search of the County Global Imaging site <WarrenGIS.org>.

The global imaging presentation on the location of EDA properties served as a prelude to a tour of some of those properties by the board following adjournment of meeting. Properties visited included the 426 Baugh Drive warehouse, the 404 Fairgrounds Road office building, and vacant Happy Creek Technology Park properties off Shenandoah Shores Road.

Moving through a lingering early morning fog, EDA board members and staff begin a property tour close to home in the Kendrick Lane office complex.

During a brief open session at the outset of Friday’s special meeting the EDA board authorized closing of one of its bank accounts with First Bank of Strasburg. Henderson later explained the move as part of the EDA’s consolidation and transfer of financial assets over to Warren County, which has agreed to become fiscal agent for the EDA.

The transfer of financial responsibility to the County government is part of the EDA’s self-generated reform and move to transparency of operations as it deals with the repercussions of the contracted financial fraud investigation of public accounting firm Cherry Bekaert. Thus far the legal consequences of that investigation have centered on alleged actions of former EDA Executive Director Jennifer McDonald involving her real estate and certain other business dealings with family, friends and business associates.

Solar puzzle
One of those business dealings came into discussion during the first stage of the post-meeting tour of EDA properties. As staff explained an absence of electrical metering in one of the vacant spaces at the EDA’s Kendrick Lane Office complex, the issue of the Town’s sole authority to charge clients for power service in Town was broached.

While the Town opened a 15-acre solar field as part of its Energy Services Department in May 2017, the two roofs of the EDA office complex were not part of that solar field.

Above, Energy Director David Jenkins on site during construction of Town’s 15-acre solar field; below the Kendrick Ln. office complex rooftop solar array the EDA cannot charge tenants for the provision of power from. The EDA is seeking recovery of $536,037 in what it contends were unauthorized payments for an installation it claims its former executive director told her board would come at no cost to the EDA.

Director of Energy Services David Jenkins explained to this reporter that while the EDA would be able to provide power to its office and Kendrick Lane tenants from the rooftop solar array, that by Town Code the EDA would not be able to charge tenants for that power. So the EDA faces a decision to provide free power in the Kendrick Lane complex or abandon the solar power idea, at least as it applies to tenants there.

The contracting of solar panel installation by McDonald through her business associate Donnie Poe’s Earth Right Energy LLC (ERE) is one focus of the EDA’s $21.3 million dollar civil litigation. Of that amount, $945,037 is being sought from ERE for various projects EDA litigation states were never approved by the EDA Board of Directors or were approved under false pretenses.

Pages 31 and 32 of the amended EDA civil complaint indicate $536,037 of the ERE payments being sought for recovery were for “unapproved payments related to the solar installation at the Warren EDA’s offices on Kendrick Lane in Front Royal, Virginia.” The EDA contends McDonald told her board the Kendrick Lane solar installation would come at no cost to the EDA.

“She explained that the installation of equipment by Earth Right Energy would be absorbed by Earth Right Energy as part of a scheme whereby Earth Right Energy would either sell solar energy generated by equipment it installed and/or reimburse the Warren EDA through certain tax credits,” the EDA’s amended civil complaint states.

Be that as it may, the office spaces once occupied by Amerisist and the Selah Theater group in the east building were judged as very marketable as rentals, perhaps with some remodeling of the theater space to accommodate a new client’s business needs.

And then after one more quick Kendrick complex vacant space stop it was off to a tour of other major EDA properties around the town and county being marketed for sale.

Above, the entrance way to the sprawling former Amerisist assisted living offices; below, the Selah Theater space recently vacated by a move to Winchester near its director’s home and employment base.

While the fog had begun lifting by the time the EDA board headed out for Friday’s off-site property tour, the legal status of ITFederal’s Royal Phoenix site development and enabling $10-million loan remains VERY foggy.

In this first Royal Examiner video, watch the EDA meeting and tour presentation by EDA Administrative Assistant Gretchen Henderson:


In this second Royal Examiner video, go along on the tour of 426 Baugh Drive warehouse:

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Berlik moves to withdraw as McDonald’s civil counsel as payment in dispute

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Is Jennifer McDonald’s civil case counsel on the verge of a “take the money and run” move? Hot on the heels of being cited in the amended EDA civil complaint filed on October 4 for the return of a $10,000 wire transfer made to the Berlik Law Firm, LLC on November 21, 2018 by McDonald, the Reston-based law firm filed a motion to withdraw from further representation of the embattled former EDA executive director.

Berlik, his co-counsel Jay McDannell and the firm filed the motion for withdrawal to the Warren County Circuit Court on October 9. The filing appears to be signed by McDannell.
McDonald is not contesting BerlikLaw’s withdrawal petition.

“I have been notified that my current attorneys, Lee E. Berlik and Jay M. McDannell of BerlikLaw, LLC, may file a motion to withdraw from these cases. Should they proceed to file such a motion, I want the Court to know that I consent and agree to their withdrawal,” a statement from McDonald accompanying the motion reads. The statement notes BerlikLaw’s representation of McDonald and her two real estate LLC’s, DaBoyz and MoveOn8 also named as defendants in the EDA civil litigation.

That letter consenting to the attorney withdrawal is dated July 3, 2019. In it McDonald cites the Berlik attorneys’ representation of her personally in three civil matters: the now amended EDA civil litigation seeking recovery of $21.3 million in which she is the primary figure among 15 defendants, including 10 surviving people and five related business entities; and dueling defamation suits with County Supervisor Tom Sayre.

Berlik’s most recent representation of McDonald was on September 11 in a losing cause when Sayre won a $20,000 defamation judgment from McDonald in Warren County General District Court. Well, Sayre was seeking $25,000 in damages so you might generously call it a mixed legal result.

And since July 3, McDonald has dropped her $600,000 defamation suit against Sayre.

Following the EDA’s amended civil filing of October 4, BerlikLaw’s receipt of $10,000 cited as Afton Inn legal expenses in the Cherry Bekaert report on financial fraud in EDA operations is directly addressed in the EDA civil litigation.

Across the street from the Warren County Courthouse, the Afton Inn in February prior to work stoppage after it was named as a vehicle for the misdirection of EDA assets by former Executive Director Jennifer McDonald in civil litigation filed on March 26. That alleged misdirection now includes a $10,000 payment to McDonald’s civil attorneys. Royal Examiner File Photo/Roger Bianchini

“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,” the amended EDA civil complaint states, adding of BerlikLaw’s stance, “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 the benefits of the stolen money.

“The Warren EDA neither knew of nor approved of this payment. It had no need for services from the Berlik Law Firm,” Sands Anderson attorneys for the EDA wrote in the amended complaint.
When the issue of the wire transfer came up in Sayre-McDonald defamation case hearings in June, Berlik told media outside the courtroom, “I don’t work for the Afton Inn.”

Inside the courtroom on June 19, David Downes as counsel for one potential witness raised the specter of the $10,000 November 2018 payment.

Downes told the court that Berlik “can’t continue to use potentially stolen funds” to pay for his representation of McDonald” adding without suggesting Berlik had previously been aware he may have been paid with stolen funds – “He’s on notice.”

The possibility of McDonald’s use of embezzled money to pay for some aspect of her civil litigation attorneys fees was initially raised by Sands-Anderson attorney Cullen Seltzer on the EDA’s behalf during a May 22 motions hearing.

“Is she using stolen money to pay her attorneys,” Seltzer asked Judge Clifford L. Athey Jr. during discussion of McDonald’s civil counsel’s request to quash a plaintiff subpoena of his client’s financial records related to her legal representation.

In explaining the request to the court 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 legal costs.

And now BerlikLaw may have to argue the legal basis for that November 2018 payment in civil court, not on behalf of McDonald, but on its own behalf.

Lee Berlik could not be reached for comment on his firm’s withdrawal as McDonald’s civil counsel, or its stance on the November wire transfer payment prior to publication.

Sayre elicits public comment on alleged McDonald embezzlement scheme

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Op-Ed: County, EDA officials cited for failed oversight – why not the Town?

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The status of the ITFederal project and the $10 million loan that facilitated it is likely to be under increasing scrutiny by EDA civil attorneys contending that loan was acquired under false pretenses. Royal Examiner File Photos/Roger Bianchini

Many have wondered when or even if prosecutors and state investigators guiding the Warren County Special Grand Jury’s look into criminality tied to the Economic Development Authority financial fraud investigation would expand its focus beyond a tightly knit circle surrounding former EDA Executive Director Jennifer McDonald.

On Tuesday, September 24, they got an answer, if not precisely the one many citizens critical of the political and economic status quo here were hoping for.

That answer was a total of 42 indictments, three each against 14 new players, including the entire elected Warren County Board of Supervisors, the top county administrative official and recently departed County and EDA attorney, as well as a mix of former and sitting EDA Board of Director members.

The disappointment for some was that those indictments were all misdemeanor charges related to an absence of due diligent oversight of EDA affairs, specifically over the last four months of 2018 regarding the continued administrative authority of Jennifer McDonald. (See linked story below)

The bookings at the Magistrate’s Office of the Rappahannock-Shenandoah-Warren County Regional Jail (RSW Jail) didn’t even generate the orange jail jumpsuit mug shots many social media denizens would have likely framed for posterity.

No mug shots today – County and EDA officials charged with misdemeanor failures of due diligence in the conduct of their office were not booked into the jail, as any defendant in similar circumstances released on their own recognizance would not be RSW Superintendent Gilkison has explained.

But while County officials rightfully face scrutiny for their failed due diligence, the Town of Front Royal governmental apparatus has thus far escaped unscathed, at least regarding criminal liability and even the level of public criticism aimed its way.

No Front Royal Town official has yet been indicted for criminal negligence regarding financial oversight of EDA operations; and to our knowledge there is no “recall them all” petition being circulated against the Town Council.

Why?

Three years ago, it was an overwhelming majority of Council that threw a defensive and protective shield around both McDonald and two of the more implausible projects she was instrumental in bringing forward.

This mid-2016 photo perhaps shows varying levels of disinterest expressed by all of Bébhinn Egger’s Town Council colleagues over her claims about ITFederal at the time.

In fact, those two projects, ITFederal and Workforce Housing, account for nearly $11 million, $10 million and $650,000 respectively, of the $21 million in EDA assets alleged to have been either misdirected by McDonald or moved under false pretenses during her executive oversight.

But some Town officials have claimed Front Royal has nothing to do with EDA operations since the County took over the Town’s portion of the EDA’s annual operational funding in 2012.

But as Royal Examiner has reported previously, that notion is questionable at best with much of the EDA’s work being done on behalf of the Town on projects inside the town limits. ITFederal, Workforce Housing, the Afton Inn and new police headquarters construction project come to mind.

If that wasn’t the case how do Town officials explain filing suit against the EDA to recover as much as $15 million in Town assets they contend were misdirected, lost or acquired under false pretenses? Do they think McDonald snuck into a secret town vault to pick the lock or hacked into Town bank accounts and sent their $15 million to a secret offshore location?

No, if experience tells us anything chances are that if McDonald had asked the Town Council for $15 million they would have just given it to her with a pat on the back.

In fact, that’s exactly what Council did in 2015 when McDonald came and asked for a $10 million “bridge” loan to help prop up the EDA’s case with First Bank & Trust to finance a $10 million loan to ITFederal through the EDA. Council was even kind enough to extend that initial one-month loan taken out of an investment account generating nearly $4,000 of monthly interest for two additional months without fee compensation for lost interest revenue beyond the first month.

It seems very possible that without that three-month Town handover of the desired ITFederal loan amount the bank loan for ITFederal would never have been achieved, reducing the EDA’s claimed losses by almost half.

But when Councilwoman Bébhinn Egger warned her colleagues that ITFederal did not appear to be what it was purported to be financially or from a business standpoint by McDonald, Congressman Robert Goodlatte and the company’s CEO Truc “Curt” Tran the reaction was not one of cautious due diligent verification.

Rather, the unanimous consensus of Egger’s colleagues was to either ignore or berate her, not to mention your then newly created online news source, for telling them things they didn’t want to hear – even if as it turned out, they were verifiably true at the time – as in no $140 million government contract basis upon which to create 600 high paying tech industry jobs as part of a $40 million ITFederal investment in this community.

From left on Nov. 28, 2016, Councilmen John Connolly, Hollis Tharpe, Bébhinn Egger, Gene Tewalt, Bret Hrbek, Mayor Tim Darr, and Jacob Meza at far right, bid farewell to Town Manager Steve Burke, second from right. Only one of this group, you know who she is, performed due diligent oversight of EDA affairs. It was a majority state of affairs that lasted on council for another year and a half.

Revisionist History?

The day after the County and EDA misfeasance and nonfeasance misdemeanor bookings the Town of Front Royal issued a pat-us-on-the-back press release in which Interim Mayor Matt Tederick lauded the town government’s role in launching the Virginia State Police investigation into EDA finances.

“Due to the watchful eyes of the Town Government, potential financial irregularities involving the EDA were discovered in the late spring and early summer of 2018. The Town Council swiftly turned their findings and suspicions over to the Virginia State Police, who in turn immediately commenced an investigation,” Tederick states, adding, “The citizens need to rest assured that the Front Royal Town Council will continue to pursue its lawsuit against the EDA and any others in order to hold those responsible for the Town’s losses accountable. The public’s continuing confidence in Town government is greatly appreciated and I might add, warranted.”

Pals – then EDA Executive Director Jennifer McDonald and private citizen Matt Tederick pose before start of Sept. 25, 2017 Town Council meeting. It was a meeting at which Council voted against a Board of Architectural Review recommendation to deny the EDA request to allow demolition of the Afton Inn to facilitate redevelopment at the site.

As far as ascertaining responsibility for any Town losses, both current and past councilmen and mayors over the past five years might begin by looking in the mirror.

As for “continued confidence”, as mentioned near the end of our story on a Council initiative to explore creation of its own EDA, if Tederick is referencing the work of town staff, as opposed to all but one of its elected officials (Egger) in recent years, he may be on to something.

After all, in June 2017 Town Police investigators began to develop suspicions that some reported criminal actions targeting the EDA offices and its then executive director had been staged from the inside.

And about a year later Town Finance Director B. J. Wilson did discover an eight-year history of over $291,000 in Town debt service overpayments to the EDA that finally set the process of EDA financial scrutiny in motion.

But that scrutiny was a long time coming, about 2-1/2 years after council was warned by one of its own that things appeared horribly amiss in some EDA projects. And the scrutiny of 2018 did not generate from any Town Council initiative targeting the EDA, but as noted above from staff discoveries while exploring Town finances that landed a “smoking gun” of precise evidence on Council’s lap.

It was Wilson, Town-contracted auditors and the Town Attorney who took the point in confronting McDonald, EDA Board Chairman Greg Drescher and EDA Attorney Dan Whitten over those debt service overpayments of nearly $300,000 on August 23, 2018. It was at that meeting during which the term “fraud” may have been first broached regarding EDA finances.

Greg Drescher and Jennifer McDonald appeared grumpy at times under questioning by Tom Sayre and Archie Fox at June 2017 joint work session on the EDA’s Workforce Housing Project.

That mid-2018 meeting between Town and EDA officials led to Drescher’s resignation as EDA board chairman the following day. It was also likely a driving factor in the County’s hiring, on behalf of the EDA, an investigative public accounting firm, Cherry Bekaert, to begin a probe into irregularities within EDA finances.

It was also a meeting that, as Tederick observed, led to the launching of a State Police investigation. But by that point, not to forward staff’s information on EDA financial irregularities to law enforcement for scrutiny might have eventually been seen as indictable as a more serious felony charge of complicity in a cover up of financial fraud.

As for that State Police investigation, one might contend it was begun a year earlier by the Front Royal Town Police. But that investigation was allowed to be shut down in 2017 at the request of EDA Board Chairman Drescher to allow, first the EDA board, then its executive director to control the investigation of alleged crimes targeting the EDA and its chief executive through a hired private investigator.

It was a request and decision that allowed the alleged EDA financial subterfuge, whatever its source, to go unchecked for an additional year and a half.

Accountability – where?

But beyond an honest self appraisal of its past complicity in throwing a protective shield up against scrutiny of EDA projects and its executive director’s assertions about them, should town officials be vigilant about past EDA activities that may have targeted more of its assets versus those of the County? – Certainly.

But why not continue the joint reform process the interim mayor and council propelled forward, rather than just withdraw from it? After all, new EDA Executive Director Doug Parsons has promised full cooperation in determining an accurate appraisal of the Town’s losses within those EDA losses financial fraud investigators have reported being misdirected through EDA operations over a number of years.

And we would suggest the interim mayor and council not continue a course of self-delusional praise and finger-pointing that tries to minimize the Town Council’s own long-term lapsed due diligence regarding EDA affairs it was directly involved in facilitating.

In mid-2016 Bret Hrbek, left, was Jennifer McDonald’s staunchest defender among many, when Bébhinn Egger, right, raised concerns about assertions about EDA projects, particularly ITFederal.

And speaking of that involvement, the media asked former EDA/County Attorney Whitten why the $10 million ITFederal loan the Town was so instrumental in helping achieve was included in the EDA civil litigation for recovery even though it is current on its rather lax terms.

“Because it was acquired under false pretenses,” Whitten replied following an EDA board meeting three months ago.

Whitten’s response echoed the above-referenced, ignored and even vilified warnings three years earlier that something appeared amiss in the EDA’s representations about ITFederal.

So “warranted continued confidence” may be a stretch, at least as it applies to elected Town officials over the past three to five years.

Nonetheless it appears Town officials may avoid the embarrassment of criminal charges, not to mention a high degree of public anger, for their long pattern of failed due diligence regarding oversight in their dealings with the EDA.

Why?

The answer we believe is two pronged legally: first, a statue of limitations on misdemeanor offenses; and second what we would contend was an unnecessary relinquishment of the Town’s authority to appoint two of the seven EDA board members based on the EDA’s fair funding formula split on Town-County investment in EDA operations.

As for a potential third prong in the Town’s escaping the extreme level of public scrutiny and recall petitioning aimed the County’s way, a primary social media purveyor of that public anger has not threatened to sue the Town for millions of dollars, so a public shaming there may have less interest.

But back on the legal side, note that the three indictments filed on the 14 County and EDA officials on September 20 for which they were booked on September 24 and 25, all involved EDA transactions between September and December 2018. Those charges involve only $309,000 of the allegedly misdirected or embezzled $21.3 million being sought for recovery by the EDA in civil litigation.

What about liability for a lack of due diligent oversight during the movement of the other $20.99 million, particularly that $10 million ITFederal loan the EDA now claims was acquired under false pretenses?

There is likely to be none – because misfeasance, nonfeasance and even malfeasance in the conduct of public office are misdemeanor criminal offenses. And there is a one-year statute of limitations on misdemeanor offenses. Also in the September to December 2018 timeframe, the Front Royal Town Council did not have appointment authority of EDA board members.

That is because when the County assumed responsibility for the Town’s 34% portion of the EDA’s annual operating budget in 2012, the Town Council allowed its appointment authority of two of the seven EDA board members to be withdrawn.

Was it a necessary condition? – We would contend not.

Because that County assumption of full annual operational funding from the previous 66%-34% County-Town split was made as part of the long and ongoing negotiations on two fronts: double taxation of Town citizens on certain services provided countywide; and compensation to the Town for its extension of central water-sewer utilities into the North Commercial-Industrial Corridor outside the town limits without annexation.

North Corridor commercial development was enabled by the Town’s extension of central water sewer outside the town limits without annexation. Many believe the Town continues to suffer from lost commercial tax revenue after a judicial striking down of agreed upon PILOT fees tied to utility bills as the Town’s major compensation for that lost tax revenue. Photo Roger Bianchini/Courtesy CassAviation

So if the County is essentially saying either, “We are going to stop the double taxation of Town citizens for countywide services” or “We owe you more compensation for your lost commercial tax revenue due in large part to a Town-County North Corridor compensation arrangement struck down by a Circuit Court judge, and this is part of how we’ll do it,” why would the Town Council agree to withdraw or reduce its past oversight of EDA operations it remained deeply involved in?

Whatever the reason, in 2012 the Town Council did agree to relinquish its EDA board appointment authority, and thus direct supervisory authority over EDA operations. In fact, that relinquishment is referenced in motions filings surrounding the EDA’s claim of sovereign immunity in response to the Town’s $15 million civil action against it.

“That the Town of Front Royal voluntarily waived its right to control the EDA, contrary to the statutory mandate, does not create an actionable fiduciary duty to (the Town’s) benefit,” EDA attorneys wrote in reply to the Town’s opposition filing on the EDA claim of institutional sovereign immunity.

However those arguments play out at a November 8 motions hearing and whether that “voluntary” waiver of its EDA oversight right was a bad decision or not, it has paid off for Town officials in an unexpected way.

Because by allowing the County to assume full EDA board appointment authority, that 2012 Council may have saved its 2015 to 2018 successors from legal liability for the absence of Council’s own due diligence in its oversight of its EDA affairs. And while like the County and EDA officials who were indicted, that misdemeanor liability would have only extended back a year and involve an estimated $309,000, it was a long-term failing the Town itself alleges led to the misdirection of up to $15 million in Town assets.

Regardless, unlike County and EDA officials, in the absence of direct authority to limit the EDA executive director’s conduct of her office over those last four months of 2018, the Front Royal Town Council appears poised to skate home free of any legal liability for its own lapses of judgment regarding its business dealings with the EDA in recent years.

And without “smoking gun” evidence of payoffs to look the other way or shared profiteering from the alleged EDA financial fraud under legal and civil scrutiny, it would appear the worst offense those not indicted for illegally moving or receiving EDA assets can be charged with is failed due diligent oversight, and that within that one-year misdemeanor statute of limitations. And for the above cited reasons it would appear that such charges could only come on the County and EDA sides of the equation, as it did on September 24.

So more than any proactive due diligence by elected Town officials generating “continued confidence”, legally on the failed municipal oversight front you might say it just pays to be lucky timing wise; not to mention have a voluntary withdrawal of EDA board appointment authority in your pocket. I guess you could also say that County generated initiative to acquire additional control of EDA board appointments for its added operational financial contribution kind of backfired long term – because misery loves company, right?

Criminal and non-criminal dereliction of public duty: Where might they apply in the EDA financial scandal?

Grand Jury indicts 14 County and EDA officials for lack of EDA oversight

Council divided on move toward second, Town-controlled EDA

Defense attorneys move to quash grand jury misdemeanor indictments

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Town, EDA civil motions arguments continued to November 8

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A scheduled Wednesday afternoon motions hearing in the Town of Front Royal’s civil suit against the Front Royal-Warren County Economic Development Authority has been continued to November 8, at 9 a.m.

Apparently Harrisonburg-based Judge Bruce D. Albertson and attorneys for both sides were aware of the continuance, because as the clock turned to the scheduled single case 2 p.m. docket none of that trio was present. However this reporter, a colleague from another media outlet, EDA Board of Directors Vice Chairman Jeff Browne, a court bailiff and Circuit Court clerk were all present along with a single spectator who had traveled from Winchester.

A clerk’s call to the judge’s office and Browne’s call to the EDA attorney’s office quickly confirmed the new hearing date.

What will be argued on the new hearing date is the EDA’s claim of institutional sovereign immunity from the financial liability at issue in the Town’s litigation seeking recovery of “as much as $15 million” in misdirected Town assets related to the EDA’s own civil litigation seeking recovery of $21.3 million in EDA assets.

Current EDA Executive Director Doug Parsons has promised to work with Town officials to ascertain exactly how much the EDA owes the Town in overpayments or misdirected asset allocation.

However Town legal staff indicated the threat of statute of limitations deadlines on misdirected Town assets due to uncertainty on exactly what assets at what time are involved, in the decision to file the Town civil suit against the EDA/IDA.

Town Attorney Doug Napier is on one end of the sovereign immunity legal arguments anticipated at a motions hearing now scheduled for Nov. 8. Royal Examiner File Photo/Roger Bianchini

Of the Town’s dispute of the EDA sovereign immunity claim, EDA counsel wrote, “Plaintiff (the Town) argues that there is a fiduciary duty owed by the EDA to the Town that is actionable if breached. However, the relationship between the EDA and the Town of Front Royal is governed solely by statute,” which appears to be a legalese point of law based in the relationship between EDA’s and the municipalities that create them to oversee economic development for them.

“That the Town of Front Royal voluntarily waived its right to control the EDA, contrary to the statutory mandate, does not create an actionable fiduciary duty inuring to its benefit,” EDA Attorney Rosalie Fessier wrote, further observing, “The General Assembly has imposed a matter of accountability and protection of the public money within the statutory scheme and did not provide for a procedural remedy in the manner sought in this case.”

Town legal counsel contends that the EDA as an entity and its former executive director made unfulfilled promises regarding Town assets that negate the sovereign immunity claim: “… here, the EDA and McDonald represented to the Town they were going to invest in certain investments on behalf of the Town, the EDA and McDonald were engaged in ministerial, not discretionary, duties … The facts alleged above constitute an implied in fact, if not an express, contract between the EDA and Town. As pled, the EDA and McDonald breached those contracts.”

Uh oh, breaches of “implied” versus “express” contracts and fiduciary duties; and a “voluntary” abdication of oversight authority by the Town are likely to lead to some mind bending legalese arguments on November 8 – can’t wait.

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New EDA chief responds to Town concerns – ‘It’s just not the case’

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Interim Mayor Tederick at head of table leads council through discussion of ending the Town’s relationship with the existing EDA. It was an idea that quickly gained steam with council’s younger and less-tenured members. Royal Examiner File Photos/Roger Bianchini

During recent discussion of the Town’s economic development future it was commented that the myriad legal issues the EDA is currently facing may be occupying an undue amount of its staff’s attention, leaving little time for proactive economic development initiatives. The observation appeared to be in support of the idea the Town should pursue creation of its own EDA, severing all ties to the existing Front Royal-Warren County Economic Development Authority that has guided Town and County commercial and industrial growth, maintenance and redevelopment for three-plus decades.

Those legal issues Town officials worry are keeping a new EDA staff from its primary function include the Town’s own civil suit against the EDA to recover “as much as $15 million” in misdirected Town assets from the EDA, in addition to the EDA’s own expanding civil litigation now seeking recovery of $21.3 million from what has now climbed to 10 surviving human defendants and five associated business entities.

The central figure in that EDA civil suit is its former Executive Director Jennifer McDonald, who resigned on December 20, 2018, under increased scrutiny of contracted financial fraud investigators and her own board of directors.

With a contract agreed to in late April, Doug Parsons took over executive leadership of the EDA on May 8. He took the helm from Interim Executive Director John Anzivino with the hope of guiding the Front Royal-Warren County EDA out of the financial scandal that developed over local girl McDonald’s decade of EDA leadership and toward a regained sense of purpose and direction of the EDA’s mission.

Following the September 27 monthly meeting of the EDA Board of Directors we asked Parsons about the concern expressed by Town officials that his and Administrative Assistant Gretchen Henderson’s time was overburdened by legal issues generated during both of their predecessor’s tenures. Henderson began with the EDA two days before Parson’s arrival.

Doug Parsons says the new EDA staff has not lost focus on its primary mission of economic development, retention and expansion.

“I respectfully disagree – it is just not the case,” Parsons replied adding, “We are actively marketing our properties on East Main Street, 404 Fairgrounds Road and 426 Baugh Drive. We’ve had very healthy interest in all our properties.

“We have worked with existing industry on business retention issues to see if we can help them with challenges or opportunities for expansion.

“We have worked with the State Development Officer on several prospects and with the State Site Characterization Program to increase the competitiveness of our sites to others in the state. And I would especially note that we are working to increase the tier rating of the Happy Creek Technology Park,” Parsons said of the 143 acre business park lying mostly inside the town limits.

Parsons noted that two large vacant parcels in that business park lying totally in town have all the infrastructure in place for development and that the EDA is working with the Town on rezoning to industrial to help foster that development.

I guess that’s what contracted law firm Sands Anderson is on board for, to carry the EDA’s litigation ball and allow economic development officials to focus on economic development issues.

Sands-Anderson attorneys Cullen Seltzer and Dan Siegel, at head of table to EDA Board Chair Ed Daley’s right, at the Oct. 4 EDA Special Board Meeting after which $3.7 million and seven defendants were added to the EDA’s civil litigation.

In fact during a break in the EDA board’s October 4 special meeting, Parsons told us he would miss the planned tour of the ITFederal site to make a noon appointment on EDA business.

Parsons pointed out that a majority of the EDAs’ micro loan recipients are small businesses located in town, “So our micro loan program has benefitted town businesses,” he observed of an ongoing relationship.

“So I feel we are working on economic development issues as well as mitigating the troubles of the past,” Parsons said of the EDA’s ongoing positive relationship with the Town of Front Royal.

Parsons concluded his remarks with an invitation.

“The Town of Front Royal has an open invitation to attend our board meetings. So any interested parties, council members or staff, can attend and learn more about our operations and activities,” he said, adding a thank you to two regular Town attendees at the EDA’s monthly 8 a.m. meetings, Town Manager Joe Waltz and Community Development Director Felicia Hart – “I would like to thank Joe Waltz and Felicia Hart and everyone at the Town for their past cooperation on projects.”

The EDA board and staff appear to be working hard to retool and refocus on its primary mission – seems like a good time to bail according to some on town council.

As for the council initiative to sever ties to the existing EDA over the lingering consequences of past misdeeds alleged to have occurred under different leadership, Parsons said, “If they start their own EDA that is entirely their choice. I will respect their decision one way or the other. And I hope to work with them in a spirit of cooperation on the Happy Creek Technology Park and Avtex site.”

Council divided on move toward second, Town-controlled EDA

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EDA in Focus

UPDATE: McDonald family members, business associates added as defendants in EDA civil suit

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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.


Sands-Anderson attorneys Cullen Seltzer, left, and Daniel Siegel, center, with new EDA Board Chairman Ed Daley to right, presented grounds for specific amendments to the EDA civil litigation Friday morning. Among the filed amendments are seven new defendants the EDA will seek recovery of allegedly misdirected EDA assets from.

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 …”

The EDA office complex on Kendrick Lane was the launching pad for an expanded civil litigation filing on Friday, Oct. 4. The EDA has asked that McDonald be held in contempt of civil court for moving an alleged property frozen by the court.

“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.

Tom Sayre and his defamation attorney Tim Bosson after winning a $20,000 judgment against Jennifer McDonald; McDonald’s civil attorney Lee Berlik is under civil scrutiny for receipt of $10,000 of allegedly stolen EDA assets he refuses to return.

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.

The EDA civil and criminal cases continue to build around the actions of its former executive director, Jennifer McDonald. Many wonder if the investigations aren’t missing some higher profile, peripheral figures from the local, state and even federal levels. McDonald is currently free on bond.

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Oct
15
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10:00 am Acrylic Painting: An Individuali... @ Art in the Valley
Acrylic Painting: An Individuali... @ Art in the Valley
Oct 15 @ 10:00 am – 12:30 pm
Acrylic Painting: An Individualized Approach @ Art in the Valley
With an emphasis on individuality and creativity, this acrylic painting class welcomes all skill levels. Some concepts we will explore include various paint application techniques, color theory, and composition. Within these basic parameters, we will[...]
Oct
16
Wed
10:30 am Art Class “Fall is Here” @ Art in the Valley
Art Class “Fall is Here” @ Art in the Valley
Oct 16 @ 10:30 am – 12:00 pm
Art Class "Fall is Here" @ Art in the Valley
We are offering classes for children ages 7-12 who would enjoy expressing themselves through art. The students will expand their creative side with drawing, painting and constructing, using various mediums such as acrylic, pastels, watercolor[...]
7:00 pm Author Jeff Hunt book signing @ Warren Rifles Confederate Museum
Author Jeff Hunt book signing @ Warren Rifles Confederate Museum
Oct 16 @ 7:00 pm – 8:30 pm
Author Jeff Hunt book signing @ Warren Rifles Confederate Museum
Author Jeff Hunt will be presenting and signing copies of his books from the Meade and Lee Series at multiple events in the state of Virginia. The first event is at 7:00 pm on Wednesday,[...]
Oct
17
Thu
1:30 pm The Fundamentals of Oil Painting... @ Art in the Valley
The Fundamentals of Oil Painting... @ Art in the Valley
Oct 17 @ 1:30 pm – 4:00 pm
The Fundamentals of Oil Painting - Fall 2019 @ Art in the Valley
This class will focus on proven approaches for successful oil paintings. Subject matter will be the student’s choice. No previous painting experience with oils necessary. The class will introduce students to fundamental concepts of color[...]
Oct
18
Fri
10:00 am R-MA Homecoming @ Randolph-Macon Academy
R-MA Homecoming @ Randolph-Macon Academy
Oct 18 @ 10:00 am – 4:00 pm
R-MA Homecoming @ Randolph-Macon Academy
Randolph-Macon Academy will welcome alumni and their families back to campus on Friday and Saturday, October 18th and 19th, during the annual Homecoming weekend. Events that are open to the general public include the Homecoming[...]
1:30 pm The Fundamentals of Acrylic Pain... @ Art in the Valley
The Fundamentals of Acrylic Pain... @ Art in the Valley
Oct 18 @ 1:30 pm – 4:00 pm
The Fundamentals of Acrylic Painting - Fall 2019 @ Art in the Valley
This class will focus on proven approaches for successful acrylic paintings. Subject matter will be the student’s choice. No previous painting experience with acrylics necessary. The class will introduce students to fundamental concepts of color[...]
Oct
19
Sat
10:00 am R-MA Homecoming @ Randolph-Macon Academy
R-MA Homecoming @ Randolph-Macon Academy
Oct 19 @ 10:00 am – 4:00 pm
R-MA Homecoming @ Randolph-Macon Academy
Randolph-Macon Academy will welcome alumni and their families back to campus on Friday and Saturday, October 18th and 19th, during the annual Homecoming weekend. Events that are open to the general public include the Homecoming[...]
10:30 am 2nd Annual Peak Leaf Music & Bre... @ Valley Roots Farm
2nd Annual Peak Leaf Music & Bre... @ Valley Roots Farm
Oct 19 @ 10:30 am – 7:00 pm
2nd Annual Peak Leaf Music & Brewers Festival @ Valley Roots Farm
Join us for the 2nd annual Peak Leaf Music & Brewers Festival! Come party on Saturday, October 19th, 2019, for a day of live music, local brews, local merchants, and local food trucks; all for a[...]
1:00 pm Workshop: An Introduction to Col... @ Art in the Valley
Workshop: An Introduction to Col... @ Art in the Valley
Oct 19 @ 1:00 pm – 6:00 pm
Workshop: An Introduction to Color Theory @ Art in the Valley
This one day workshop will be an introduction to color theory as it applies to image-making. We will talk about primary, secondary and tertiary colors and how to mix them from a simple palette for[...]
5:30 pm 7th Annual Front Royal Zombie Walk @ Bing Crosby Stadium
7th Annual Front Royal Zombie Walk @ Bing Crosby Stadium
Oct 19 @ 5:30 pm – 8:30 pm
7th Annual Front Royal Zombie Walk @ Bing Crosby Stadium
Put on your best zombie costume and practice your best shambling limp, because it’s time for the annual FRONT ROYAL ZOMBIE WALK! The Walk will begin at Bing Crosby Stadium at 6pm sharp. We will[...]