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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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EDA welcomes Town Manager Steven Hicks to meeting & gets good news from McDonald bankruptcy hearing

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Things appear to continue to be turning in a positive direction for the Warren County Economic Development Authority (WC-EDA) in the wake of the recent sale of the Afton Inn for redevelopment by the 2 East Main LLC investment group. On the heels of that sale, authorized at a Special Meeting of February 12 and finalized a week later, the WC-EDA held its monthly meeting by way of the now familiar virtually connected ZOOM format the morning of Friday, February 26.

Two things stood out during the open session sandwiching a 57-minute closed session. The first was the welcoming of Town Manager Steven Hicks shortly after the 8 a.m. meeting start. It was the first appearance of a town manager with an accompanying update on Town business at an EDA Board of Directors meeting in about 18 months.

Beginning with the Afton Inn sale, it appears a newly thawed relationship between Town Hall, at right, and the WC-EDA has begun. It continued with Town Manager Steven Hicks presence at the Friday, Feb. 26, EDA Board meeting. Royal Examiner Photos by Roger Bianchini

That traditional line of communications was terminated during the tenure of former Interim Town Manager Matt Tederick as the town government took on an increasingly adversarial and litigious stance with the EDA as a revamped EDA board worked to right its ship in the wake of the $21-million-plus financial scandal alleged to have developed during the tenure of former EDA Executive Director Jennifer McDonald.

EDA civil litigation gets reboot

The second positive note came post closed session during Board Chairman Jeff Browne’s Executive Committee Report. Browne acknowledged a decision by Harrisonburg-based U.S. Bankruptcy Court Judge Rebecca B. Connelly returning consideration of exactly what assets Jennifer McDonald can claim as part of her bankruptcy filing to the state court level.

“The bankruptcy court has remanded her particular case to state court to assess damages, at which point damages are assessed it will go back to the bankruptcy court to decide whether or not it should go back to the state courts or be handled in the bankruptcy court,” Browne told his board.

Contacted after the meeting, Browne elaborated on the implications of Judge Connelly’s ruling. He explained it will allow the EDA’s civil litigation against McDonald to re-start to determine exactly what EDA assets McDonald may have misappropriated and how they may have been used to purchase properties or other tangible assets. Her surviving real estate company MoveOn8 is also part of her bankruptcy filing, he noted.

The EDA’s civil litigation against Jennifer McDonald, on the job in December 2016 as the late Patty Wines, right, chairs meeting, and other co-defendants not in bankruptcy court, can once again proceed at the state level in the Warren County Courthouse.

When the state court findings are returned to the U.S. Bankruptcy Court in Harrisonburg, Judge Connelly will determine what assets McDonald can legitimately claim as her own that are subject to bankruptcy claims and asset distribution, versus what assets held by her or her real estate company the EDA would have civil claim to as restitution for her alleged criminal acts of embezzlement and misappropriation of EDA funds to her own use.

A virtual Town-EDA ‘lovefest’

Back on the Town-EDA relations front, EDA Board Chairman Browne welcomed Hicks by virtual connection, offering him the opportunity to give his report prior to adjournment to the closed session. And while an opening portion of that report was acknowledgment of the town council’s decision to move forward with creation of its own EDA with Hicks as executive director, that there was a renewed sense of Town-EDA cooperation was soon apparent.

“As town manager I’m here to help in any way I can,” Hicks told Browne and the four-member EDA Board quorum present virtually (Browne, Harold, Pattison, Wolfe), before reporting on the status of the Town’s FY-2022 Budget process.

“I just want to congratulate you on your new position. You must have found the secret to a 48-hour day,” Browne told Hicks at the conclusion of the town manager’s report. “I just want to tell you for our board, that anything we can do to help in the areas you’re focused on: redevelopment, tourism, retention of businesses are all good things that we look forward to working with FREDA (Front Royal Economic Development Authority) on.

EDA Board Chairman Jeff Browne, above virtually at Friday’s EDA Board meeting, and Front Royal Town Manager Steven Hicks, below in file photo of recent council meeting, seem to be on the same page on cooperation between now separate County and Town EDAs.

“We would like to work with you and coordinate with the Town. I think that we can do a lot to help economic development for the entire area. So, we appreciate you’re stepping up and taking on what will be a challenging task,” Browne added of Hicks new dual role.

“Will do – I’ll definitely stay in contact and share everything as much as I can with you and Doug (EDA Executive Director Doug Parsons) and Ed (Warren County Interim County Administrator Ed Daley). So yea, sounds great,” Hicks replied.

At that point EDA Board member Jim Wolfe, who has taken point in his board’s work on development of short and long-term Strategic Planning on economic development and job creation, joined the conversation. Wolfe offered to get a copy of what the WC-EDA has done on that front recently to Hicks by Monday.

“Then you and I can sit down and talk about it at some point. And if any other board members want to join me … So, I want to make sure that the … Town has our plan and use that for a touch point for how you coordinate on different projects,” Wolfe said of developing a unified plan of action community wide.

EDA Board member Jim Wolfe jumped on the Town-County EDA cooperative bandwagon with an offer of added assistance from himself and other EDA board members, to Hicks in his new role as FREDA executive director.

“I’d appreciate that,” Hicks replied, perhaps seeing his “48-hour days” reduced in some measure by that level of County EDA involvement with his work on the Town side. Continuing in that vein of cooperation, Hicks added, “Again, I just wanted to call in (on ZOOM) and touch base with you all and be as transparent as I can. And always reach out to me when you need anything, and I’ll do the same.”

“Good, thank you so much,” Browne replied to the new attitude being reflected out of Front Royal Town Hall as Hicks signed off from the meeting.

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Summary of the Warren County EDA Board meeting of Friday, February 26

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The EDA Board of Directors conducted their regular monthly board meeting this morning, February 26, via Zoom. The Board welcomed Front Royal Town Manager Steven Hicks prior to going into Closed Session. Mr. Hicks noted that the Town’s budget proposal for the fiscal year 2022 was being prepared. A summary overview was included in the board packet and digital copies of the 32-page presentation are available from the EDA office. Please contact Administrative Assistant Gretchen Henderson at 635-2182.

Board Chair Jeff Browne congratulated Mr. Hicks on his appointment to Executive Director of the Front Royal EDA and stated that the Board of the Front Royal Warren County EDA is looking for working with him.

Following an approximately 30-minuted Closed Meeting, the Board approved a motion on the disposition of McKay Springs. In order to facilitate and expedite the sale of parcels at the McKay Springs location, the Board approved transferring the parcels deeded in the name of the EDA to Warren County.

Continuing in Open Session, Jeff Browne gave a report from the Executive Committee. He advised the Board and the public that Warren County will be designated as a Spotted Lanternfly quarantine locality in mid-March, along with Clarke and Frederick counties, and the City of Winchester. This will impact businesses located in and doing business in Warren County. For more information please visit www.vdacs.virginia.gov/plan-industry-services.shtml

Director Jim Wolfe shared information on the progress of the EDA Strategic Plan updates. He’s looking forward to feedback on the working document and completing a final draft for review.

Asset Committee Chair Greg Harold discussed a new development that will have an impact on the EDA-owned property on Royal Lane. He shared the news that the Town of Front Royal is considering updating the Town Code to allow a Conditional Use Permit to be bonded with the property rather than the owner. With this change, Harold expects to improve the successful marketing of this property for a developer of multi-family workforce housing. The EDA is very interested in selling this property and supports the Town Planning Department in its efforts.

EDA Executive Director Doug Parsons had several items of interest to share, including the launch of the renovated EDA website at www.wceda.com, and that the auditors are finalizing their report. Additionally, he reported that the proceeds of $323,179.18 from the sale of the Afton Inn have paid down the principal on the First Bank & Trust Line of Credit. This lowered the payment, saving the taxpayers $1,242.70 per month, or $14,912.40 per year.

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EDA announces that the Afton Inn sale has been finalized

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The Economic Development Authority (EDA) and Town of Front Royal issued the following joint press release today, February 19, 2021:

On Friday, February 12, the Economic Development Authority (EDA) Board of Directors passed a resolution accepting a final sales price from developers 2 East Main, LLC of $325,000 for the purchase of the Afton Inn located in Front Royal’s downtown. The Board is pleased to announce that the settlement has taken place and the building has been sold!

This transaction came to fruition with the cooperation among the Town Council of Front Royal, Warren County Board of Supervisors, EDA, and the developer. The Board is grateful for the willingness of Town Council, and Warren County Board of Supervisors to focus on a goal that resulted in a “win” for everyone. EDA board members Greg Harold and Jeff Browne, plus EDA Legal Counsel Sharon Pandak, of Greehan, Taves, and Pandak worked hard to make this sale happen. The developers, Jim Burton and Alan Omar, had an unwavering commitment to the vision for this property.

“This is a privately funded transaction. It won’t cost County or Town taxpayers anything to transform the Afton Inn into a welcoming anchor building for visitors to Main Street,” said Jeff Browne, EDA’s chair.

Front Royal Mayor Chris Holloway welcomed the news of the sale. “On behalf of Council, I am proud to share in the celebration of the sale of Afton Inn and look forward to partnering with the developer to remove any barriers to restore and modernize this building expeditiously. The sale of Afton Inn marks an important milestone for our community as we continue to focus on redevelopment,” said Holloway.

(The EDA Board of Directors will have their regular February monthly board meeting via Zoom on Friday, February 26, 2021, at 8 a.m.)

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After year-and-a-half gap, town council catches up on EDA activity, in and out of town

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In restarting a public dialogue between the existing Economic Development Authority and the Front Royal municipal government on February 8, EDA Board of Directors Chairman Jeff Brown reminded town officials of his observation to them on that last occasion 18 months earlier while the Town was still involved in a three-pronged effort with the EDA and Warren County to investigate and correct what allowed the now $24-million-dollar-plus EDA financial scandal to fester and develop over a several-year period.

Noting he had also been the one to give that report, Browne revisited it: “I said there was a catastrophic failure of oversight by the EDA, County, and Town with plenty of blame to go around*. I haven’t changed my view on that,” he said in opening.

After a positive exchange with new Town Manager Steven Hicks, EDA Board Chairman Jeff Browne reintroduced the Front Royal Town Council to the dynamics and current status of the EDA as it continues to conduct business in and out of town. Royal Examiner Photos Roger Bianchini

“There was massive embezzlement, bad investments, poorly written agreements, and a dangerous system of overly centralized check writing and bookkeeping. It all set up for a perfect storm,” Browne echoed from his 2019 report to council, pointing to “insufficient checks and balances, lots of misplaced trust and weak verifications” – concluding, “You had a right to be concerned then.

But that was 18 months ago as the new EDA Board of Directors, with County, and initially, for a short time Town, assistance were already involved in dismantling, replacing, and rectifying the EDA structure as the financial scandal evolved under criminal and civil court scrutiny.

Of the direction since then, Browne pointed to installation of the very checks and balances previously missing, including County-mandated third-party bookkeeping, and “multiple eyes on all transactions”. He said the refurbished EDA Board had developed what he termed “a guns and butter strategy” that freed the new EDA staff – Executive Director Doug Parsons and Administrative Assistant Gretchen Henderson – to pursue economic development initiatives (butter), while the new EDA Board of Directors oversaw the legal and peripheral issues (guns).

File photo of an EDA Board meeting prior to departure of Gray Blanton, upper right, and Ed Daley, center-left, the latter to an ‘interim’ stint as WC Administrator from which he hopes to return to the EDA Board of Directors.

However, that year-and-a-half of “Guns and Butter” was a strategy the Town Council missed involvement with, choosing rather what one might term a “Lawyers, Guns and Money” strategy as so poetically described on our Opinion page recently by Fred Schwartz. The lawyers, guns (metaphorically of course) and money to a great degree were pointed directly at the EDA over the objection of then Mayor Gene Tewalt, who unsuccessfully recommended a policy of cooperation and rebuilding with the EDA and County, as opposed to a litigious one supported by council and pushed forward through the office of the former interim mayor and interim town manager.

Browne proceeded into detail on the EDA’s current holdings, in and out of the town limits, and explanations on the EDA’s attempt to divest itself of properties it “never should have been involved in” by the new board’s estimation.

Shot of the Stokes Mart building and adjacent apartments at 514-516 E. Main, one of the properties the new EDA has moved to divest itself of ownership of.

He also pointed to over a million dollars thus far recovered in insurance and settlements with involved parties in the EDA’s civil litigation.

He pointed to the recent recruitment of drone manufacturer Silent Falcon to the county; as well as the potential landing of an eastern regional medical marijuana manufacturer/distributor in Parallel LLC, that could bring a major commercial tax revenue source, along with hundreds of jobs to the county and town, not to mention the purchase of Baugh Drive warehouse the EDA hopes to divest itself of ownership of as soon as possible.

The sprawling warehouse at 426 Baugh Dr. currently has three short-term lease tenants, with a fourth in the wings, as well as at least one potential buyer on the horizon, as the new EDA works to clean up the real estate management situation it inherited.

The EDA Board Chairman pointed to a drive west for business relocation into the Valley that he said the EDA and County are working to take advantage of, utilizing advantages like the Interstate Highway system crossroads and Inland Port that are located here. Of working together to achieve the maximum result of that effort, Browne observed, “We either hang together or we hang separately”. As to the advantages of working together economically, Browne pointed to the pending sale of McKay Springs parcels that are jointly owned by the EDA, County and Town.

In response to queries, he admitted the EDA was currently financially insolvent due to repercussions of the financial scandal, and was being financially supported by the County at this time. However, some council members seemed surprised to learn that Warren County had not absorbed the EDA into its departmental structure, which could present a roadblock to the Town actively reengaging its continued membership in the half-century-plus old joint Town-County EDA. While the Town is currently advertising for applicants to a unilateral Town EDA Board of Directors, an EDA it would be totally responsible for the financial support of, the County has kept the EDA’s quasi-governmental, independent status open as a door by which the Town could reenter into active membership with the existing EDA.

While confrontational at times, the EDA board chairman’s exchanges with council and the mayor appears to have achieved dividends as illustrated by the late week move towards sale of the Afton Inn, below, for redevelopment. Above, Gary Gillespie during his Q&A with Browne.

And while some council grilling of Browne on details, particularly with pre-prepared written notes, took the tone of hostile cross-examination, the end result of Browne’s report and Q and A with council appeared, four days later, to be positive, as illustrated with the EDA’s Friday move toward the completion of the sale of the Afton Inn for redevelopment without a Town challenge on the title to the property.

See the entire EDA presentation and back and forth with town officials in this video.

Footnote: As Royal Examiner has previously reported, while the Town has attempted to distance itself from any portion of “blame” for the EDA financial scandal due to its agreement to no longer have EDA board appointment authority after the County took over full EDA operational funding nearly a decade ago, it was heavily involved with in-town EDA operations throughout the financial-scandal timeframe. In fact, it was the town council that authorized a $10-million-dollar “bridge loan” to the EDA to help facilitate the bank loan for the ITFederal construction project at the Royal Phoenix Business Park at the former Avtex site. That $10-million loan said to have been acquired “under false pretenses” in the EDA civil litigation, is the largest single item in the EDA’s civil suit seeking the return of over $24 million in allegedly misdirected or embezzled EDA, County, or Town assets. In seeking the “bridge loan” then EDA Executive Director Jennifer McDonald told town officials that without that show of “community support” in fronting that $10 million for the ITFederal project in town, the bank was hedging on approval of the loan to ITFederal through the EDA. That was likely because, as Royal Examiner has also previously reported, other than the $2-million value of the 30-acre Avtex property parcel gifted to it for a dollar by the EDA in 2016, ITFederal listed assets of only about $20,000 in its loan application.

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EDA in Focus

EDA Board authorizes sale of Afton Inn as Town withdraws title claim

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“Can we sing Hallelujah now,” Economic Development Authority Board member Jorie Martin exuded following 5-0 roll call approval (Gordon absent) of a motion by Greg Harold, seconded by Martin, authorizing the sale of the Afton Inn property to developer 2 East Main LLC at a price of $325,000. The sale is to be accomplished upon signing of the Deed of Sale and necessary Title company documents “at the earliest possible time”.

Virtual jubilation, here it is EDA’s Greg Harold, was in order as the Town allowed the EDA sale for renovation of the Afton Inn property to proceed, without an ownership challenge on sales proceeds which are earmarked to pay part of the EDA Afton project bank loan off. Royal Examiner Photos by Roger Bianchini

The landmark achievement, in the works now well into last year if not longer as the EDA and Town negotiated some rocky legal terrain on a variety of fronts, was accomplished Friday afternoon following an approximate 45-minute Special Meeting Closed Session of the EDA Board of Directors convened shortly after 2 p.m.

Royal Examiner contacted EDA Board Chairman Jeff Browne, who along with Board Secretary Greg Harold will sign the Afton Deed of Sale for the EDA, shortly after the 3:05 p.m. adjournment of the February 12 Special Meeting. “Is this a done deal, is the Town okay with this,” we asked Browne four days after an occasionally tense Monday night meeting exchange with Front Royal Mayor Chris Holloway on the dynamics of a potential Afton sale.

Yes, the EDA board chairman replied, explaining that subsequent communications with the Town this week enabled Friday’s action to proceed on the most recent extended 2 East Main LLC sales contract deadline date of February 12.

“To me this is symbolic that we’re working together to get some things done and getting the Afton Inn resolved is a good sign. And hopefully we’ll move on and get other things resolved as well,” Browne said of renewed EDA-Town communications.

A BIG Fix is coming – ‘Just’ when you were getting used to seeing this at the head of Front Royal’s Downtown Business District, soon it will be a little different (see below).

He noted that the EDA had received a letter from the Town indicating it would not dispute the EDA’s title claim to the Afton property ownership. And while there was some language in that message found somewhat “cloudy” by the Sterling-based title company or EDA counsel, a subsequent letter signed by Mayor Holloway dated February 12 promised that language would be clarified to remove any perceived ambiguity.

Browne pointed out the sales price is the originally discussed one that has fluctuated somewhat up and down over the months the sale was on hold due to variables involving both the EDA’s financial scandal civil litigation and Town questions over its ownership interest in the property.

As Browne noted during his February 8 report to the Front Royal Town Council, 2 East Main LLC plans to begin its massive renovation project within a year and hopes to complete the $2-million project within two years. See more detail on those renovation plans in Royal Examiner’s December 29 story “From Town Eyesore to Downtown Anchor: Reimagining the Afton Inn”

Above, 2 E. Main LLC graphic of its plan to restore and expand the Afton Inn, originally the Montview Hotel circa 1868, to become a high-end anchor building for downtown Front Royal. Below, Board of Architectural Review (BAR) members Angela Toler, Duane Vaughan and Nancy LeHew peruse 2 E. Main plans. The Town BAR recommended approval of those plans.

Also following Friday’s closed session, the EDA approved a short-term lease proposal on part of the Baugh Drive warehouse space with WOW Airlines. An initial three-month lease will be offered on 4400 square feet (s.f.) of warehouse space and 860 s.f. of office space, which includes a $1,000 security deposit and $900 utility payment, with month-to-month renewal options after the initial three-month period.

WOW Airlines would be the fourth short-term lease tenant in the sprawling Baugh Drive warehouse that the EDA eventually hopes to sell, possibly in relation to its connection to Parallel LLC’s bid to become the region’s medical marijuana distributor.

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EDA in Focus

EDA chairman’s reference to Royal Examiner Afton Inn redevelopment story leads to mayoral media attack – Why does that sound familiar?

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The Front Royal Town Council and staff got their first, face-to-face, first-hand, factual update on Town-County Economic Development Authority business in over a year on Monday, February 8. “I want to tell you how much we appreciate the opportunity to update town council and restart a dialogue on issues of mutual concern,” post-financial scandal revamped EDA Board of Directors Chairman Jeff Browne said in opening that dialogue.

“It’s been a year-and-a-half since an EDA Board member addressed Town Council – it’s too long. We need to be talking, we have a lot of issues we have to address. This is a great start,” Browne said, acknowledging “other meetings” that led up to his appearance before council the second Monday of February 2021. Contacted later about that impetus, Browne told Royal Examiner that he had “reached out” to new Town Manager Steven Hicks in January.

Above, EDA Board Chairman Jeff Browne makes the first report to council in a year-and-a-half at the invitation of new Town Manager Steven Hicks, pictured below. “It’s too long. We need to be talking, we have a lot of issues we have to address,” Browne told Town Council. Royal Examiner File Photos by Roger Bianchini

“We had a good exchange of ideas while I briefed him on some issues on the immediate horizon. He then invited me to speak to Town Council, updating them on what the EDA was doing and to answer the question of whether EDA could help the Town buy properties,” Browne explained.

What turned into an approximate 50-minute report highlighted by some constructive back and forth with council, also had a less constructive moment. About 35 minutes into his EDA report, Browne got into an exchange with Mayor Chris Holloway on the topic of the prospective sale of the Afton Inn for redevelopment. It is a sale of the derelict and long-deteriorating Afton Inn next door to Town Hall at the head of Front Royal’s Historic Downtown Business District that Browne said he hopes will come to fruition by the new extended deadline approaching over the next week.

Browne pointed out that prospective buyer 2 East Main LLC has promised to start redevelopment within a year of purchase and complete it within two years. The Town is currently disputing the EDA’s ownership and ability to sell the Afton Inn without the Town signing off on a sale. It appears that despite the content of a disputed 2014 MOA (Memorandum of Agreement) between the Town and EDA indicating that the EDA would first recover whatever proceeds an Afton sale generated towards its expenditures in maintenance and marketing the property since 2014, that the Town is seeking the first call on those proceeds. The current proposed sale price of about $330,000 would not cover all those claimed EDA expenses.

Mayor Holloway pressed Browne on whether, were the involved bank, First Bank & Trust, willing to reconsider taking what the EDA owes on its Afton property/construction loan, would the EDA be willing to split the proceeds with the Town. Browne replied that to whatever extent that was legally supported he was on board. However, with the EDA’s claim of about $500,000 invested in the property since the 2014 property swap that extracted the Afton from the angry-at-the-Town hands of Northern Virginia developer Frank Barros in exchange for old Town Hall, there will essentially be nothing left over for either the EDA or Town from the pending sale after the bank takes its share to cover the EDA property/construction loan.

“But you have to understand our position – we basically gave up two buildings, two buildings, for what you’re saying we’re going to get nothing,” Holloway replied, adding, “And over $500,000 of work you say has been put into the Afton Inn so far, with a two-million-dollar completion to do it up right. I think anybody that could go buy that building right now would wonder where that $500,000 went.”

The mayor continued to wonder at the EDA’s numbers and the forecast cost of $2 million dollars for 2 East Main Street LLC’s renovation project, which building professional Holloway forecast might replace windows.

Mayor Holloway, above, called the proposed EDA sale of the Afton Inn and proposed $2-million rebuilding to be accomplished in two years by buyer 2 E. Main LLC a zero-sum return to the Town and its taxpayers. Wonder if downtown business owners feel the same. Holloway also questioned the EDA’s investment in the property, wondering where all the money went. Well, Mr. Mayor, it’s not a pile of bricks laying on the ground next to Town Hall.

When Mayor Holloway said, “I think the citizens of the Town deserve something out of this. We gave up the old Town Hall, we gave up the Afton Inn, and we’re getting basically nothing in return,” Browne attempted to respond twice to point to the 2 East Main LLC redevelopment plan replacing a festering eyesore with a new anchor building for Front Royal’s downtown business district. However, twice Holloway cut Browne off by continuing his line of thought, first that “There’s nothing to show for it yet” and then that “It’s been going on for over 10 years, if not longer” before Browne regained the floor.

“You are getting – I don’t know if you read the Royal Examiner article, but you’re getting a fabulous-looking” – Browne got out before Holloway again cut him off, commenting, “I don’t read the tabloids, I want facts.”

“Okay, well it’s factual what’s in there on that issue (of redevelopment plans). The developers, who are world-class developers, are the ones interested in doing it, and it will be a beautiful looking building,” Browne continued of the referenced December 29 Royal Examiner article on 2 East Main Street LLC renovation and expansion plan. – “From Town Eyesore to Downtown Anchor: Reimagining the Afton Inn”

Contacted later, Browne elaborated of the referenced article, “I was getting ready to point the Town Council to the Afton Inn article you wrote that outlined the vision of 2 East Main to rehab the Inn. I found it very factual and balanced.”

Above, graphic from Dec. 29, 2020, Royal Examiner story illustrating 2 E. Main’s planned restoration and expansion of the Afton Inn into a commercial and residential anchor building for Historic Downtown Front Royal. Below, the current status of the Afton Inn after over 15 years in limbo. Will the mayor and council continue to block the sale and renovation? – Stay tuned to Mayor Holloway’s ‘favorite tabloid’ news destination for the answer.

But facts that don’t merge with certain politician’s personal agendas or self-serving worldviews have been typically dismissed as “fake news” or “tabloid journalism” 70 miles to our east in recent years. Now it seems some of our local elected officials with “alternate fact” laced agendas have learned the “bait the media” game from their political mentors to the east.

Watch the Town Council meeting here.

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