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.
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.
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.
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.
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.”
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.
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.
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.
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.
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?
Town Announces Withdrawal of its Civil Litigation Against the FR-WC EDA
At 2:12 p.m., Wednesday, November 15, the Front Royal Town Council Clerk’s office issued a press release announcing the dropping of the Town’s civil litigation against the Front Royal-Warren County Economic Development Authority (EDA, FR-WC EDA). The release portrays the withdrawn litigation as a good faith effort to reduce EDA “financial scandal”-related legal expenses ultimately falling on the shoulders of town and county taxpaying citizens. The fifth paragraph of the six-paragraph release, opening with a reference to former EDA Executive Director Jennifer McDonald, recently convicted on 34 criminal counts related to the EDA “financial scandal” in the 10th Western District of Virginia federal court, reads:
“The legal proceedings flowing from McDonald’s misdeeds have been ongoing for several years. The local community, as both town residents and county taxpayers, has already shouldered substantial legal costs. In order to prevent further financial strain on the citizens and in recognition of the actual amounts remaining in dispute between the Town of Front Royal and the EDA, the Town of Front Royal has decided to non-suit its lawsuit against the EDA. This move is intended to save public funds and reflects our commitment to the community’s welfare. We hope this gesture will be met with a similar commitment from the EDA.”
It might be noted that after the Town filed its civil litigation against and withdrew from future involvement with the jointly created EDA, the now unilaterally County-overseen EDA filed a countersuit, citing financial obligations of the Town related to the EDA “financial scandal” and projects, including funding the construction of a new town police station, done on behalf of the Town during that time-frame.
One familiar with the dueling litigations and a portion of the Town’s justification framed around the fact that town officials no longer appointed EDA board members (a voluntarily given up authority*), thus had no EDA oversight responsibilities, might wonder if a reassessment of the strength or weakness of Town’s legal position in the now-abandoned litigation might have also factored into the decision to abandon the civil suit.
But whatever the driving factor, let’s celebrate what seems a positive move toward improved County-Town relations.
* FOOTNOTE: The Town-County compromise on withdrawing the Town’s responsibility for EDA operational funding may be recalled as part of the effort to end the double-taxation of town citizens for joint Town-County operations, since town citizens are also county citizens and ended up paying taxes twice for jointly overseen operations. The EDA funding agreement was part of a move that put operational funding of jointly beneficial operations totally on the County side. As we recall, other departments where similar agreements were reached to stop town citizens from being double taxed included Fire & Rescue, Parks & Recreation, and Samuels Public Library.
McDonald Found Guilty on All 34 Criminal Counts in EDA ‘Financial Scandal’ Prosecution
Just after 1 p.m. on Wednesday, November 1, slightly over four hours after beginning deliberations on the 34 criminal counts against former Front Royal-Warren County Economic Development Authority Executive Director Jennifer Rae McDonald regarding allegedly embezzled or misdirected EDA assets, the six-man, six-woman 10th Western District of Virginia federal jury returned guilty verdicts on all 34 counts. McDonald and her two federal court-appointed attorneys sat quietly at the defense table as each charge, and each verdict was read into the court record consecutively by a court clerk.
Over the objection of lead prosecutor Sean Welsh, Judge Elizabeth K. Dillon allowed McDonald to remain free on bond under the existing guidelines under which she has been free since the 34 federal criminal indictments were handed down by a federal grand jury on August 25, 2021. As has been reported, federal prosecutors inherited the case from two state prosecutors offices, Warren County (recusal due to staff work familiarity with some defendants) and Rockingham County (complexity, time involvement). After her arrests at the state level in mid-2019, McDonald was also free on bond or home arrest for the bulk of the time since she was initially charged at the state level.
Judge Dillon cautioned McDonald, as she said she would any defendant, against violating the terms of her bond, including showing up for her sentencing hearing at an as-yet undetermined point of time, or risk facing additional criminal charges carrying as much as 10 years imprisonment and $250,000 in fines. The judge noted a common 90-day time-frame between conviction and sentencing. She gave the defense 30 days to file any post-conviction motions.
In challenging the continuation of McDonald’s bond, prosecutor Welsh pointed to conflicting stories told by two of the defense witnesses the previous day as an indicator the defendant was continuing a pattern of deception to the court to justify her actions in moving EDA assets she now stands convicted of moving fraudulently. Those witnesses were former prosecution witness and former EDA Board of Directors member Ron Llewellyn, and former post-EDA financial scandal-era McDonald employer Justin Simmons. They told conflicting stories about an incident the defense asserts happened this October 22, involving McDonald and Simmons encountering Llewellyn at a church parking lot, leading to an unpleasant verbal exchange. Llewellyn denied the encounter occurred, citing that he was out of town that day at a football game in Salem. The prosecutor asserted certain evidence about a law enforcement search of McDonald’s home property when she wasn’t there and descriptions of her state of mind from a live-stream viewing of it on her phone indicated the church parking lot incident could not have occurred that day.
Defense counsel Andrea Harris countered that the incident time-frames were not mutually exclusive of both possibly having occurred. She said there was no evidence her client posed a threat to her community or to herself, and asserted that her track record of compliance with bond conditions and court appearances with all the charges facing her, indicated she was not a flight risk.
In the wake of defense counsel Harris recounting McDonald’s track record of appearing for scheduled hearing and trial dates, other than when she was being treated medically, as noted above Judge Dillon extended McDonald’s bond conditions pending sentencing.
As previously reported, after inheriting the case from two state prosecutors offices, Warren County (recusal due to staff work familiarity with some defendants) and Rockingham County (complexity, time involvement), on August 25, 2021, a 10th Western District of Virginia Federal Grand Jury handed down 34 federal criminal indictments against McDonald on charges including bank fraud (10 counts), wire fraud (7), aggravated identity theft (1), and money laundering (16). While total EDA “financial scandal” losses have been estimated at $26-million, including $12 million in the ITFederal loan and related EDA investment, evidence presented at trial indicated McDonald moved over $5 million, perhaps as much as $6.5 million, to her personal benefit. She was initially arrested and charged criminally at the state level in mid-2019.
After a Spooky Courthouse Halloween McDonald Criminal Trial Goes to the Jury
After over four hours of closing arguments (prosecution 2:33; defense 1:32; prosecution rebuttal:21-minutes) in the wake of presentation of the defense case in less than an hour with the calling of just three witnesses, the 34-count federal criminal case against former Front Royal-Warren County Economic Development Authority Executive Director Jennifer McDonald went to the jury at 5:45 p.m. Tuesday afternoon, October 31.
But that wasn’t until after court was delayed for nearly a half hour by an alarm and recorded message: “Fire Emergency reported in the building. Please evacuate the building by the nearest exit. Do not use the elevators,” that went off repetitively for nearly a half hour after beginning at 4:45 p.m. To our knowledge, Fire and Rescue first responders found no fire in the building this Halloween day. But it was a pretty spooky interlude on the final day of the off-again, on-again trial that began on August 21 and saw two delays, the second one of a month, due to various involved party health issues.
Perhaps the most interesting legal development of the day was defense counsel Abigail Thibeault’s closing argument focus on what the prosecution had dismissed as one of the more unbelievable defendant explanations of her movement of EDA money to her own use. That was the defense-alleged secret “Voluntary Settlement Agreement” between the EDA Board of Directors and McDonald to assure her silence and non-suit over what she claimed were sexual harassment and sexual assaults by County officials, including former County Administrator Doug Stanley, among other high-profile local officials. The price of that silence was an alleged $6.5 million the defense contends was agreed to be secretly paid to McDonald, thus explaining some of the movements of EDA assets to her own use that the prosecution presented as evidence of fraud and criminal misdirection of EDA money.
“This is about sexual assault … This story is much bigger” than what the prosecution had presented to them, Thibeault told the jury of the notion that an economically and sexually privileged, male-dominated county elite had set McDonald up to take a fall for challenging their dominance.
Lead prosecutor Sean Welsh countered Thibeault’s assertions in rebuttal, telling the jury the Voluntary Settlement Agreement theory was countered by multiple pieces of evidence the prosecution had presented to them. He pointed to other prosecution witness-testified false allegations McDonald is alleged to have made to explain some of her financial transfers to achieve real estate and other transactions. Among those were Larry Tuttle’s alleged financing of several McDonald/Da Boyz LLC real estate deals he testified he had no financial assets to accomplish. Why lie about such things if there was a simple explanation, such as the EDA Board of Directors authorizing the transfer of assets to McDonald? Welsh asked the jury.
After the 10th Western District of Virginia federal courthouse building was evacuated and cleared of any fire and the prosecution’s closing rebuttal was completed, a final round of procedural instructions from Judge Elizabeth K. Dillon was given to the jury. The jury was then sent out to select a foreman and determine whether they wanted to begin deliberations immediately or return the following day. After 10 minutes, the court was informed the jury had decided to return on Wednesday to begin the final chapter of this trial. Questioned about a preferred starting time by the judge, they opted for a 9 a.m. start Wednesday morning.
As previously reported, after inheriting the case from two state prosecutors offices, Warren County (recusal due to staff work familiarity with some defendants) and Rockingham County (complexity, time involvement), on August 25, 2021, a 10th Western District of Virginia Federal Grand Jury handed down 34 federal criminal indictments against McDonald on charges including bank fraud, wire fraud, aggravated identity theft, and money laundering. Those charges are related to the alleged misdirection of an estimated $ 26 million in municipal and EDA assets to personal use and enrichment of McDonald and alleged co-conspirators.
Judge Denies ‘Renewed’ McDonald Defense Mistrial Motion – Defense Case to Open Tuesday, October 31
Following a closed evidentiary hearing Thursday afternoon, October 27, Judge Elizabeth K. Dillon denied a “renewed” defense motion for a mistrial due to repeated delays in the federal criminal prosecution of former Front Royal-Warren County Economic Development Authority Executive Director Jennifer Rae McDonald. The defense initially called for a mistrial on September 26. While taking that motion under advisement, Judge Dillon expressed a preference for the alternative of “briefly suspending the trial” to accommodate apparent health issues with the defendant and resuming it as an alternative to a mistrial. The trial is now scheduled to resume at 8 a.m. Tuesday morning, October 31, with the anticipated opening of the defense case. November 1 has also been set aside to accommodate the defense presentation, any motions, closing arguments, and jury instructions before the case is handed over to the jury for deliberations.
The scheduled start of what is expected to be a brief defense presentation, perhaps taking less than a full day with three or less witnesses being called, was again delayed on Friday, October 27. The scheduled 10th Western District of Virginia federal court starting time of 8:30 a.m. was adjusted late Thursday to a 3 p.m. Friday start. And shortly after that late Friday start and the beginning of the remote connection of several witnesses to be called during the hearing, Judge Dillon asked if either counsel wanted to request that the hearing be closed to the public.
“Yes, your honor,” was the reply from the court-appointed defense team of Andrea Harris and Abigail Thibeault. It might be noted that defendant McDonald was again not present at the defense table, as she had not been after lunch break the previous day. A clue as to that absence and the defense request for a closed hearing may have been heard during the beginning of the remote witness connection process. One of those witnesses was referred to as “doctor” and a comment concerning “the name of the patient you’ll be discussing” was made. According to the PACER court website, a total of five people testified during the closed hearing of October 27, all of them cited as doctors: “1. Dr. Miklos Szentirmai – via Zoom 2. Dr. David Saenz – via Zoom 3. Dr. John Craig Henry – via Zoom 4. Dr. Anne Bagley 5. Dr. Melanie Matson – via Zoom …”
As noted in yesterday’s story on the closing of the prosecution case and delay in opening the defense case, defense counsel told the court that their client had a cardiac pacemaker installed recently in the wake of health issues leading to a recurring elevated heart rate and blood pressure that led to a delay of a month, Sept. 26 to Oct. 26, in the trial.
As previously reported, after inheriting the case from two state prosecutors’ offices, Warren County (recusal due to staff work familiarity with some defendants) and Rockingham County (complexity, time involvement), on August 25, 2021, a 10th Western District of Virginia Federal Grand Jury handed down 34 federal criminal indictments against Jennifer McDonald on charges including bank fraud, wire fraud, money laundering, and aggravated identity theft. Those charges are related to the alleged misdirection of an estimated $ 26 million in municipal and EDA assets to personal use and enrichment of McDonald and alleged co-conspirators. The latter are yet to be indicted criminally at the federal level, likely due to speedy trial issues. A number of alleged co-conspirators were charged criminally at the state level, with charges then dropped by Warren County prosecutors to prevent defense motions for dismissal due to looming speedy trial statute violations. The case has been defined as “complex” due to the amount of evidentiary material involved, cited at well over a million pages of doc
Prosecution Rests in McDonald Trial – Recent Health Procedure of Defendant Revealed as Start of Defense Case Delayed After Lunch Break
The prosecution in the federal criminal trial of former Front Royal-Warren County Economic Development Authority (FR-WC EDA, EDA) Executive Director Jennifer McDonald rested after the testimony of the final of its 57 witnesses Thursday morning, October 26. That witness was Kevin Nicholson, a Federal Bureau of Investigation (FBI) forensic accountant. In direct examination, Nicholson testified about the path of funds originating with the EDA to McDonald, as well as her husband Samuel North, that were used in a series of personal real estate and other transactions, including the paying off of various personal bills, as well as the use of ITFederal principal Truc “Curt” Tran’s name in one of those real estate transactions on property located at 2890 Buck Mountain Road.
During Monday’s hearing announcing the two-day delay of the trial to Thursday due to technical evidentiary issues, the prosecution had estimated Nicholson being on the stand for 90 minutes to two hours. After an hour and 20 minutes of direct examination tracing those multiple financial transactions the prosecution asserts were evidence of the various levels of fraud and the one aggravated identity theft charge involving Tran that McDonald is accused of, Nicholson was cross-examined for five minutes by the defense, with another two minutes of re-direct examination. During cross and re-direct examination defense and prosecution counsel sparred over the exclusion of some transactions in Nicholson’s chart references and the terminology of “loan” or “line of credit” used by Nicholson during his testimony. The defense also elicited an admission by Nicholson that he had worked with the prosecution in the assembly of some of the evidence presented in support of the prosecution’s case.
Following Nicholson’s hour and 20 minutes on the stand, the prosecution rested at 10:35 a.m. However, rather than moving directly to the opening of the defense case, the jury was dismissed as the defense filed motions for dismissal of several of the charges against their client as unproved by the prosecution evidence presented. Those dismissals involved several cases of bank and wire fraud, as well as the aggravated identity theft involving the use of Tran’s name in the Buck Mountain Road transaction. After an involved defense presentation, the prosecution argued against the standards cited by the defense, asserting that they had proved not only fraud but the use of Tran’s name to facilitate a real estate transaction they believe the bank would not have approved with only McDonald’s name attached to it.
Judge Elizabeth K. Dillon said she would need time to review some of the evidence cited in the dueling arguments, and she would reserve a decision on the defense motions for dismissal of some counts — 8 thru 10 and 14 thru 17 — “at this time.” Judge Dillon then asked if the defense was ready to present evidence in their case. This led to a brief consultation with their client, after which the defense team of Andria Harris and Abigail Thibeault asked for five minutes to consult with their client. At that point, at 10 minutes of noon, Judge Dillon called the jury back in and released them for lunch. Following the five-minute break, the judge noted that defense counsel had told her that McDonald would invoke her Fifth Amendment Constitutional right against self-incrimination, declining to testify. Judge Dillon then queried McDonald on her decision, asking if it was, in fact, her decision alone not to testify.
“Yes, mam,” McDonald responded.
The judge then overruled a prosecution objection to the calling or recalling of certain witnesses by the defense. Former EDA board member Ron Llewellyn, who had testified for the prosecution, was present in the hallway outside the courtroom as a potential defense witness. It was a situation he did not seem overly pleased about. However, Judge Dillon noted that the prosecution could object to certain lines of questioning during the disputed witness’s testimony.
Court then adjourned for lunch at 12:01 p.m. When court was reconvened at 1 p.m., the judge took both prosecution and defense counsel into chambers for discussion. The jury was brought in at 1:15 p.m. while the judge and counsel were still in chambers. Twenty minutes later, the judge and counsel returned to the courtroom. Judge Dillon then dismissed the jury, instructing them to return for an 8:30 a.m. start of the defense case the next day, adding that she anticipated the case being turned over to them for deliberations before the end of the day on Friday.
Ongoing health issues?
An unexpected piece of information was revealed by defense counsel shortly after court was convened Thursday morning at 8:30 a.m. That was that their client had recently “had a pacemaker installed” in the wake of her health issues that delayed the trial for a month, from September 26 to October 26. Those issues, according to sources, were a collapsed lung due to pneumonia and consequent raised heart rate and blood pressure that sent McDonald back to the hospital when the trial had been expected to resume in the last week of September.
McDonald was not in court with her counsel after the lunch break. One person present outside the third-floor courtroom after lunch said there had been word EMTs were present outside the courthouse. Attorneys on both sides of the aisle declined comment on whether EMTs had been summoned for the defendant. However, with her recent elevated blood pressure and heart rate issues, it might be noted that the courthouse elevator became un-operational early in the day on Thursday. While leaving for lunch break, McDonald had stepped aside to let several people following her to the stairs to pass, as she said it might take her a while to make it down. One might wonder how the long climb up those stairs after lunch might have impacted her health-wise, apparently not too long after having a pacemaker installed.
McDonald Trial Again Delayed on ‘Unanticipated Circumstances’ — But Only Till Thursday
After a delay four days short of a month (Sept. 26 to Oct. 23) due to “unforeseen circumstances” or “unforeseen health issues” depending on which attorney’s table you were describing that situation from last month, on Monday morning, October 23, the federal criminal trial of former Front Royal-Warren County Economic Development Authority Executive Director Jennifer Rae McDonald was again put on hold — though this time only for two days. Well, three if you count Tuesday, October 24, which was going to be lost anyway due to the Harrisonburg Federal Courtroom being committed to another case that day.
After court convened at 8:30 a.m. Monday morning (Oct. 23), Judge Elizabeth K. Dillon made the ruling to reschedule the trial to restart Thursday morning at 8:30 a.m. after hearing of an evidentiary situation delaying defense counsel’s ability to review some material that was apparently not transferred to the federal level from state prosecutors offices in a timely or usable manner. Lead prosecuting attorney Sean Welsh described “approximately 5,000 emails and 10,000 attachments” forwarded recently to McDonald’s federal court-appointed attorneys that apparently had what Judge Dillon described as “issues with the flash drive”. Those issues may have had to do with document encryption.
If this reporter heard correctly, lead prosecutor Welsh indicated the bulk of the new material did not directly involve the defendant. Despite that, and those flash drive issues being corrected as the prosecution noted, the defense still needed additional time to review the newly readable material to see if it impacted their defense case strategy in any way. The judge referenced a “status conference” held the previous day, Sunday, perhaps explaining defendant McDonald’s absence from the defense table again on Monday, as both sides appeared to know the trial would not be reconvened that day.
Judge Dillon closed the hearing convened at 8:30 a.m., to the public after five minutes of public discussion of the issue. The hearing was reopened about 15 minutes later at 8:50 a.m. After some discussion on the trial reconvening date, having earlier acknowledged the loss of Tuesday to another scheduled case being heard in the Harrisonburg federal courtroom, Judge Dillon said she was inclined to go with her first suggestion of Thursday morning, giving the defense ample time to review the newly available evidence.
With the prosecution down to the final of its 57 witnesses, estimated Monday to be on the stand two hours or less, and the defense likely to call just one or two witnesses, Judge Dillon forecast the 34-count criminal case against McDonald going to the jury by Friday after closing arguments. The jury was then called into the courtroom to explore their availability for deliberations through the coming weekend. Two of the 15 jurors and yet-to-be-named alternates were absent Monday due to health or travel issues. After polling the 13 jurors present, if the case proceeds as expected, in addition to Friday, jury deliberations were slated for Sunday, Monday, Tuesday, and Wednesday, October 29 through November 1, as necessary. Due to two jurors schedules, Monday deliberations would conclude at 2 p.m., and Tuesday’s at about 4:25 p.m.
With the jury released at 9:15 a.m. until Thursday morning following the deliberation scheduling, Monday’s hearing was recessed at 9:17 a.m. It was scheduled to reconvene at 1 p.m., with the prosecution and defense slated to discuss with the court technical issues moving forward, among those jury instructions.
As previously reported, with well over a million pages of documentation related to the EDA “financial scandal” the McDonald case has been labeled “complex” at the state level. That “complexity” contributed to its being handed over to the 10th Western District of Virginia Federal Court by the State Special Prosecutor’s Office in Harrisonburg/Rockingham County.
Consequently, after inheriting the case from two state prosecutors offices, Warren County (recusal due to staff work familiarity with some defendants) and Rockingham County (complexity, time involvement), on August 25, 2021, a 10th Western District of Virginia Federal Grand Jury handed down 34 federal criminal indictments against defendant Jennifer McDonald on charges including bank fraud, wire fraud, money laundering, and aggravated identity theft. Those charges are related to the alleged misdirection of an estimated $26-million in municipal and EDA assets to personal use and enrichment of McDonald and alleged co-conspirators. The latter are yet to be indicted criminally at the federal level, likely due to speedy trial issues. A number of alleged co-conspirators were charged criminally at the state level, with charges then dropped by Warren County prosecutors to prevent defense motions for dismissal due to looming speedy trial statute violations.
In addition to McDonald settling out of civil court in a “no-fault agreement” to give an estimated $9-million in real estate assets to the EDA, last year a number of alleged co-conspirators were successfully prosecuted in Warren County Circuit Court civil actions by FR-WC EDA contracted counsel. Several other people also settled out of court with the EDA. Total recovery or civil liability on paper was around $24+ million. However, several of those jury civil liability verdicts have been appealed.