Connect with us

EDA in Focus

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

Published

on

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

Share the News:

EDA in Focus

Economic Development Authority Board of Directors Meeting – January 24, 2019

Published

on

The Economic Development Authority held their monthly Board of Directors meeting on January 24, 2020.

One of the topics was the sale of the Stokes Market (most recent the Main Street Market) to William Huck, owner of C&C Frozen Treats on Main Street in Front Royal. Huck has been trying to remodel the property he owns adjacent to C&C but because of costs higher than anticipated and issues with zoning and permitting, he has been exploring other options to open his newest business known as My Lagniappe – it’s a Louisiana expression that means ‘An extra or unexpected gift or benefit, such as that given to customers when they purchase something.’ If you know Huck, you know he always offers his customers a little lagniappe.

William Huck of C&C Frozen Treats say he’s invested in Front Royal 110% – now better place on earth. Supervisors Delores Oates and Cheryl Cullers seem to agree. Photos and video by Mark Williams, Royal Examiner.

The solar panels on the roof of the EDA office building was also a point of discussions. The EDA is advertising for any party interested in purchasing the solar electric system currently stationed on top of the EDA Building at 400 Kendrick Lane, Front Royal.

County Administrator Doug Stanley thanks EDA Board for offer of solar panels to RSW Jail, but no thanks.

The RSW Jail has said they are not interested in the solar panels. The cost of installation and unknown purchase price makes the project not cost effective.

Discussion also included workforce housing, the 2018 audit, Afton Inn renovations and the big one, running out of money by March.

Watch the EDA Board at work in this exclusive Royal Examiner video:

Disposition of Solar Panels

Share the News:
Continue Reading

EDA in Focus

Town given okay to amend its civil suit against EDA, with some explanation

Published

on

Following a conference call with involved attorneys at their respective offices at 8:45 a.m., Friday morning, January 24, Judge Bruce D. Albertson granted the Town of Front Royal leave to amend its current $15 million civil filing against the Front Royal-Warren County Economic Development Authority. The Town has 30 days to file an amended suit and the EDA will have the option of filing a demur to dismiss the amended suit as not factually supported legally.

The Town initially filed its suit seeking the return of $3 million of its assets believed to have been misappropriated as part of the EDA financial scandal, on June 21, 2019. That filing was described by Town Attorney Doug Napier at the time as largely precautionary to prevent any statute of limitations deadlines from being passed on yet-to-be-determined fraudulent EDA transactions utilizing Town assets.

Just over three weeks later on July 12, the suit was amended to $15 million, as previously reported, still without any elaboration on the sources of that number.

The Warren County Courthouse, a familiar sight for EDA-involved principals – Royal Examiner File Photos

Of the January 24 judicial okay to again amend its suit, Town Attorney Napier said any coming amendment would “have to be legally cognizable” – or accompanied by legally supportable documentation. Napier said the Town had a scheduled meeting with its contracted auditor, Mitchell and Company, next week. That meeting may shed light on which direction, and how far in either, the Town’s amended civil suit against the EDA will next go.

The EDA’s civil litigation against what has grown to a total of 14 human and business entity defendants currently stands at $21.3 million. And despite his being dropped from the list of EDA civil case defendants in the wake of his death last spring from a possibly self-inflicted gunshot wound, electronic computer and phone records of former Sheriff Daniel McEathron have recently been subpoenaed from his estate in the EDA civil suit.

The initial amendment to the original Town claim against the EDA coincided with the Town’s pulling back from participation in the “EDA Reform Committee” and three-way EDA-Town-County joint meeting efforts geared toward fixing what had gone wrong to allow the alleged misappropriations and embezzlements circling the former EDA executive director, Jennifer McDonald, to happen over a number of years.

At the helm of the EDA for a decade prior to her December 20, 2018 resignation, McDonald has been the central figure in both the civil and criminal cases brought as a result of the Cherry Bekaert investigation of EDA finances begun in September 2018. She currently faces 34 financial felony charges brought by the special grand jury empaneled to investigate potential criminality tied to EDA finances in recent years.

But she promised us – Jennifer McDonald at a May 2017 Town work session, as Town Manager Joe Waltz and Interim Police Chief Bruce Hite listen

Stated justification for one publicly voiced Town financial dispute with the EDA, the 4% bond interest rate the Town has been asked to cover on construction of the new Front Royal Police Department headquarters, has pointed heavily at “promises” made by McDonald. Those promises revolved around anticipation the FRPD project would qualify for the New Market Tax Credit Program offered municipalities for economic growth capital improvement projects.

However, as a non-job creating project the FRPD construction did not qualify for what would have been a 1.5% interest rate over the 30-year life of the bond issue with funding through the NMTC Program. As that dispute festers on the edge of Town-EDA litigation, the Town has refused to pay what appears to be an undisputed $8.4-million in principal payments bill the EDA has submitted to the Town on the FRPD project.

Written references in a Memorandum of Agreement and Resolutions of support of the NMTC funding cite “anticipation” of the program’s funding and support of that funding being pursued.

Despite late 2017, early 2018 recommendations of then Town Manager Joe Waltz, Finance Director B. J. Wilson and People Inc. NMTC Program Administrator Bryan Phipps that a guaranteed bank-offered 2.65%, 30-year interest rate would be preferable to competing with multiple municipalities for limited NMTC funds, a council majority chose to hold out for the NMTC financing the FRPD project ultimately did not qualify for.

But 1.5% will save us millions over 30 years … if we get it – that is still a fuzzy picture

However, some Town officials have pointed to verbal promises made by McDonald that the funding was in place, as a basis for the Town claim it should not pay more than 1.5% interest rate tied to those promises.

A “legally cognizable” argument on one Town claim against the EDA?

Time will tell.

Share the News:
Continue Reading

EDA in Focus

EDA sells 404 Fairgrounds Road property

Published

on

404 Fairgrounds Road

The Front Royal/Warren County Economic Development Authority (EDA) has announced the sale of its 404 Fairground Road property to Excelsior Enterprises.

Warren County businessmen Jack Donohue and Dan Beller are the new owners and will immediately begin converting it into state-of-the-art rental office space, complete with a kitchenette, printer, conference room, WiFi, coffee, and other amenities. This renovated space will be available by spring for small businesses and entrepreneurs. All parties interested in renting office space at this location are encouraged to call 540-692-0697.

The additional acreage at the site will also be developed into a new facility for Timber Works, Mr. Donohue’s expanding Warren County company. For nearly a decade, they have been serving the Shenandoah Valley and Northern Virginia regions, offering tree trimming and removal, land clearing, stump grinding and forestry mulching. Timber Works prides itself on quality, safety, and customer service. The company is highly rated on Google and Yelp and has received the Angie’s List Super Service Award 3 years in a row. Their website is https://timberworksva.com and they can be found on all major social media platforms. Timberworks has five employees and plans to add another crew in 2020.

“We’re excited to sell this property to Excelsior Enterprises and look forward to seeing this property develop into new space for start-up and small business and expanded operations for Timber Works”, said Doug Parsons, Executive Director of the WCEDA. “We’re working hard to sell our properties and shore up our financial situation”, Parsons said. “On behalf of the EDA’s Board of Directors, we want to thank Mr. Donohue and Mr. Beller for their investment in this property and in Warren County.”

All proceeds of this sale will go toward paying down the EDA’s debt.

Share the News:
Continue Reading

EDA in Focus

Supervisors ponder EDA financial needs as the ‘Ides of March’ approaches

Published

on

The full Front Royal-Warren County Economic Development Board of Directors was present Tuesday night, January 14, in support of its officers’ presentation of its financial status to four of five Warren County Supervisors, Tony Carter absent. That status, as reported during the EDA’s January 10 Board meeting, is the likelihood of an inability to continue meeting monthly debt service payments and operational expenses at some point in March.

Might that date be the mid-month “Ides of March” that laid Caesar low in 44 B.C.? It would be fitting as online research indicated that March 15 “Ides” date was also notable as the ancient Roman calendar “deadline for settling debts”.

EDA Board Chairman Ed Daley, speaking, introduced Vice Chairman Jeff Browne who made the ‘Future of the FR-WC EDA’ presentation to the County Supervisors. Interested spectators included Councilman Gillespie, second row far left, Mayor Tewalt, green shirt third row, and the rest of the EDA board and their executive director, second row to Gillespie’s left. Royal Examiner Photos/Roger Bianchini. Video by Mark Williams, Royal Examiner.

However, legal variables impacting EDA operations and debt service obligations cited by County Attorney Jason Ham indicated that EDA’s cannot declare bankruptcy and must remain operational until their bond issues and debts are resolved. Other information presented at the Tuesday Supervisors work session indicated that were the EDA to remain unfunded when it hits its financial wall in March, the debt service obligation would fall to its controlling municipality, in this case, primarily at least, Warren County. The total EDA debt on past loans and credit lines on projects for the Town and County was cited at $41 million.

Parsons later told Royal Examiner that the County has already been subsidizing the EDA’s debt service payment on the Baugh Drive warehouse property. And as reported Tuesday, Truc “Curt” Tran continues to cover $42,160 monthly on the EDA’s $10 million ITFederal bank loan.

The 10,000 s.f. ITFederal building and Phase 1 of the West Main St. connector road behind EDA headquarters is currently a gated and unoccupied ‘community’ – ‘money well spent or a $10-million boondoggle, that is the question’ to maintain a Shakespearean theme.

So, it would appear the County will end up paying much of that EDA debt one way or the other. EDA Executive Director Doug Parsons later verified those net monthly expenses at $90,038.27 in unsubsidized debt service payments and approximately $40,000 in operational costs, for a total pending monthly EDA budget need of just over $130,000.

Of course, as EDA Board Vice Chairman Jeff Browne told the supervisors Tuesday evening, the above “Ides of March” EDA insolvency scenario will occur “if nothing changes” in the EDA’s financial situation.

Things that could push that financial wall back are the sale of a number of properties the EDA is currently marketing – some prospects have been cited – or the Town of Front Royal beginning to settle its unpaid and undisputed debt of nearly $8.8 million to the EDA for construction of the Front Royal Police Headquarters.

Several EDA board members, primarily Asset Committee Chairman Greg Harold, have publicly accused the Town government of acting in bad faith in withholding scheduled FRPD construction invoice payments from the EDA which oversaw and financed that project. The Town is disputing the interest rate on the FRPD project but not the amount due in principal.

In the audience Tuesday night were three Town officials, Mayor Eugene Tewalt, Councilman Gary Gillespie and Interim Town Manager Matt Tederick. Tewalt has publicly called for good faith negotiations on the Town-EDA financial situation rather than the increasingly hostile and expensive litigation the Town Council has turned to in recent months.

Mayor Eugene Tewalt chimes in during EDA discussion – Tewalt, among others, disputed Kristie Atwood’s (on cell phone behind Tewalt) assertion county public schools were being held as collateral on EDA project loans. Photo by Mark Williams, Royal Examiner.

While the Town of Front Royal withdrew from EDA board appointment authority when the County assumed its share of Town operational funding several years ago as part of its North Corridor Agreement compensation arrangement with the Town, Front Royal continues to share in debt service payment obligations regarding its EDA projects.

However, in its current budget and projected in the FY 2021 budget summary presented to the town council on Monday, annual debt service payments of about $141,000 to the EDA have been re-budgeted to pay for Town legal and auditing fees regarding its civil litigation against the EDA.

Town officials have yet to provide any documentation on the Town’s civil claim of “up to $15 million” in alleged assets lost or misdirected as part of the EDA financial scandal under previous EDA executive and board leadership.

If the Town Council’s intent toward the EDA remains hostile and litigious, newly-elected Shenandoah District Supervisor and newly-appointed Board Chairman Walter Mabe gave a glimpse into his perspective when he said, “To turn our backs on our EDA is ludicrous.”

Following the first of its newly-scheduled second Tuesday work sessions, the Board of Supervisors took the looming EDA funding needs, as well as a request for reimbursement of $36,827 in legal fees to several past and two remaining (Blanton and Patteson) EDA board members regarding dismissed misdemeanor charges related to the special grand jury investigation into the EDA financial scandal.

Flanked by his colleagues, save absent Tony Carter, and with three Town officials present Board Chair Walter Mabe said, ‘To turn our backs on our EDA is ludicrous’. Newly-elected Supervisors Mabe, Cheryl Cullers and Delores Oates have been regular attendees at recent EDA board meetings.

Several board members said they were torn on how to approach the request. It was noted that EDA board members serve without compensation. And it was observed that a precedent was indicated when the board agreed to compensate its own members served on the same now-dismissed misdemeanor misfeasance and nonfeasance charges.

Several options were discussed, including covering a portion of the request or making the County’s contribution to those EDA legal fees a loan, that the EDA would pay back when able.

See these discussions and public comments about the EDA in the exclusive Royal Examiner video:

Share the News:
Continue Reading

Crime/Court

McDonald has bad day in civil court – how bad remains to be seen

Published

on

Former Front Royal-Warren County Economic Development Director Jennifer McDonald remains free on bond.

On Friday afternoon, January 10, former Front Royal-Warren County Economic Development Director Jennifer McDonald was found guilty of civil contempt regarding the movement of a piece of property frozen by the court during earlier EDA civil litigation hearings; and had a default judgment regarding a failure to respond to civil court orders for information on her two real estate companies, go against her as well.

McDonald was fined $375 to cover County-EDA legal costs pursuing the civil contempt judgement, and ordered not to repeat what she and her sister Gail Addison into whose name the frozen real estate parcel was moved, testified was a simple mistake. Those two sanctions were all EDA attorneys were seeking in the way of punishment on the civil contempt ruling.

As for the default judgement for failing to heed court-requested documentation on her two real estate companies, DaBoyz and MoveOn8 named along with her as three of 14 defendants in the amended EDA civil litigation, a date of April 17 was set for attorneys to argue McDonald’s liability on that ruling.

Judge Bruce D. Albertson will hear, not only those civil case arguments on April 17, but further motions arguments from a number of EDA-related criminal case defendants who were in court on the 1 p.m. docket.

On Friday afternoon Judge Albertson also granted the Commonwealth’s request to nolle prossed (drop) all current EDA-related criminal charges against Earth Right Energy principal Donald F. Poe.

Prosecutor Michael Parker restated the reasons cited in his written submission of the previous day, regarding the amount of material recently received concerning the Poe prosecutions and gaps in that material and a lack of time available with Poe’s first criminal trial on a count of perjury slated to begin January 22.

Poe attorney William Ashwell did not object to the prosecution’s request.

“We could jump up and down and say we want (the charges) out altogether now … but functionally this is a great example of the State acting as gatekeeper (of legal processes),” Ashwell told the court.

The amount of material involved in the EDA civil and criminal litigation – cited as approaching a million pages – played into many of the motions arguments heard Friday. Like Special Prosecutor Parker of the Harrisonburg Commonwealth’s Attorney’s Office before him, EDA civil counsel Cullen Seltzer told the court that the amount of involved material and documentation was in issue in their respective cases.

Seltzer said the volume of material made it impractical and prohibitive cost-wise to reproduce traditionally in hard copy. He said a data base was being created with portions flagged to different defendants’ names to ease the online search process.

In arguing against the civil contempt charge against his client, McDonald attorney Peter Greenspun, pushed into dual criminal and civil case duties due to McDonald’s financial problems that led her initial civil case attorneys to withdraw, pointed out once the real estate movement mistake was discovered, the sisters’ corrected their mistake.

“When the attorney said, ‘wait, can we do this,’ she did everything to restore the situation without court intervention,” Greenspun told the court.

Greenspun argued that the involvement of local attorney David Crump in the transaction indicated it was, in fact, a mistake rather than an act of contempt of a court order installed by initial EDA Judge Clifford “Clay” Athey Jr.

“This was not done in a parking lot or a jail cell – her conduct was not contemptuous; it was a mistake that was corrected,” Greenspun told the court.

However, EDA co-counsel Lee Byrd pointed to Addison’s own testimony to argue that deceit was a motivation in the transfer. Addison said the move was made so she, a former real estate agent, could market the parcel in her name rather than her sister’s due to “the bad name” McDonald had developed as a result of the EDA litigation.

And while Greenspun pointed out the jailed McDonald was not present for any of the three-day hearing at the end of which Athey froze some McDonald real estate assets, EDA counsel pointed to the courthouse documentation on the court order freezing McDonald assets and scoffed at the idea the experienced real estate agent wouldn’t know how to find out which of her assets had been frozen by the court.

“Their only excuse is ‘I wasn’t aware’ – they can’t say the order didn’t exist,” Byrd told the court.

And it was the plaintiff argument that held sway with the judge.

Share the News:
Continue Reading

EDA in Focus

EDA faces looming cash-flow crisis as Town treads water on $8-million debt

Published

on

A summary of the Front Royal-Warren County Economic Development Authority’s financial situation was presented by its Finance Committee Chairman Marjorie “Jorie” Martin at the Authority’s Friday, January 10, board meeting.

That situation includes a net of $481,995 in cash assets in banks when coming debt service and operating payments are deducted, with five months left in Fiscal Year 2019/2020. Martin told her board the EDA’s monthly operating expenses was $45,000 – a number she called “not bad”.

However, with all debt service variables considered Martin said the EDA faced running “out of money in the middle of March”. That projection would appear to assume the Town of Front Royal will not have paid the $8.77 million dollars it owes the EDA in undisputed, but thus far withheld principal payments on construction of the Front Royal Police Headquarters now in use across Kendrick Lane from EDA headquarters.

Marjorie “Jorie” Martin said the EDA faced running “out of money in the middle of March”Photos and video by Mark Williams, Royal Examiner.

A copy of a letter sent to Town Finance Director B. J. Wilson detailing that Town debt to the EDA was also included in Martin’s Finance Committee Report.

“I would have thought the police department situation would have been settled long before now, but at the rate we’re going I left it in (as bad debt) till they (the Town of Front Royal) figure out what they’re doing,” Martin explained during her presentation of an FY 2020/2021 draft EDA budget to the board.

Interested observers at Friday morning’s meeting were newly-installed Warren County Board of Supervisors Chairman Walt Mabe and North River District Supervisor Delores Oates. No one from the Town of Front Royal was present.

The EDA adjourned to closed session after an hour-and-10-minute open meeting. Mabe and Oates were invited to stay and remained to attend the closed session. EDA staff said the only anticipated action after the closed session was approval of a motion to present a summary of the EDA’s financial situation and proposed FY 2021 Budget to the full County Board at the Supervisors’ upcoming, January 21 meeting.

While the County and Town pay their respective shares of the EDA’s debt service accumulated on their behalf, the County alone now funds the EDA’s operational budget. That arrangement was reached several years ago as part of the County’s continued negotiation on compensation to the Town for central water sewer extension into the Route 522/340 North Corridor.

BOS Chairman Walt Mabe listens to the discussion.

So, it appears the operational fate of the existing Town-County EDA after March will rest in the board of supervisors’ fiscal hands. Unless the Front Royal Town Council agrees to make good on at least portions of its $8.77-million debt to the EDA on the FRPD construction project.

Other EDA-Town finances
Two interesting asides to EDA-Town finances were also discussed during Friday’s meeting. One was the discovery that the EDA has been billed and paid for Town sewer service to its building at 404 Fairgrounds Road since 2002. EDA Executive Director Doug Parsons told the board during his Executive Director’s Update that it has been discovered the building is not, and apparently has never been connected to the Town sewer system extension into the North Corridor. A $4,000 adjustment to a pending purchase contract on the building was suggested to account for the condition and anticipated repairs to the property’s septic system.

During discussion of what the EDA has paid for that unprovided sewer service it was not receiving over an 18-year period, Harold asked, “Does anyone know what the (banking) interest rate was during those years?” to which it was replied, “Pretty high,” drawing some laughter. The question-answer appeared to be a reference to the Town claim it was promised a 1.5% interest rate on construction of the FRPD headquarters, a rate never achieved. The EDA is currently paying 4%, down from an initial 4.75% rate.

During discussion of what the EDA has paid for that unprovided sewer service it was not receiving over an 18-year period, Harold asked, “Does anyone know what the (banking) interest rate was during those years?” to which it was replied, “Pretty high,” drawing some laughter.

Afton winterization
And the EDA has informed the Town of winterization costs for the Afton Inn building as a resolution to that redevelopment situation is explored. Harold told his board that the Memorandum of Understanding (MOU) between the EDA and Town of Front Royal on the EDA marketing and redevelopment of the Afton Inn property for the Town includes the Town’s agreement to be responsible for such necessary expenses. Harold told the board the winterization bid was $15,700.

It was also noted during the Asset Committee Report that a response from Afton Inn developer 2 East Main Street LLC was expected within days on whether it hopes to continue with the project or file a Notice of Intent to Terminate its redevelopment agreement with the EDA, current owner of the property on behalf of the Town.

The Afton Inn, across Crescent St. from Town Hall, is awaiting ‘winterization’ and a determinization on its redevelopment future or demolition. Royal Examiner File Photo/Roger Bianchini.

Workforce Housing parcel
A positive Asset Committee development is a scheduled meeting with the Cornerstone LLC group which somehow purchased the 3.5-acre Royal Lane Workforce Housing property from the EDA in late November 2018 for $10. The property was originally “gifted” to the EDA for $10 by former EDA Executive Director Jennifer McDonald’s aunt and uncle, Mr. and Mrs. Walter Campbell in 2014-15. However, due to unmet developmental deadlines qualifying the Campbells for tax credits for their gift, the parcel was eventually purchased from them by the EDA at a cost of $445,000 in 2017. Due to forensic audit questioned post-purchase expenditures it is written off as a $640,000 loss in the Cherry Bekaert Report on EDA finances during McDonald’s executive tenure.

Asset Committee Chairman Greg Harold told his board he was optimistic about the upcoming meeting with Cornerstone LLC representatives to determine an equitable resolution to the Royal Lane property situation. That situation arose when the Deed of Sale was sent to Cornerstone as the buyer with no price on it after then-Chairman Gray Blanton’s signature was acquired on the deed’s signature page. Local Real Estate attorney Joe Silek Jr. was filling in on the transaction for then-EDA attorney Dan Whitten. Whitten had recused himself from the transaction due to a perceived conflict of interest as County Attorney.

See details of these EDA Board discussions and all Friday’s business in this exclusive Royal Examiner video:

Share the News:
Continue Reading