FRONT ROYAL – The ever-wise “they” say “follow the money” and you’ll get to the bottom of any story.
On Monday night, November 26, a resolution commending town staff for uncovering financial irregularities totaling hundreds of thousands of dollars in Town over-payments past, present and apparently future in its dealing with the Front Royal-Warren County Economic Development Authority was presented to the town’s elected officials.
And by a 4-2 margin, the Front Royal Town Council approved that resolution titled “Resolution Regarding Town’s Finances with EDA”. Approval of the resolution appears to put, if not a period, at least a semicolon on months of closed meetings on the subject of past, present and future Town loans or debt service payments to the EDA.
The two dissenting votes were Vice-Mayor Eugene Tewalt and Councilman William Sealock. Both prefaced their negative votes with explanations that lauded transparency while criticizing either the resolution’s form or content as incomplete.
Sealock was particularly critical of the release of what has thus far been discovered, but without all the facts – as in every penny the Town has overpaid the EDA over the past nine years, as well as a clear-cut explanation of exactly how the accounting mistakes happened. Elected to council two years ago from a seat on the EDA board of directors, Sealock wondered at what junctures town staff may have failed in the past to uncover the accounting errors.
Jacob Meza countered those arguments from the majority perspective. He said the three-plus page resolution’s accounting of what has been discovered by Town Finance Director B. J. Wilson and contracted auditor Jeff Mitchell of Mitchell & Company was both factual and an outline of what has thus far been discovered.
While details may remain to be determined, Meza reasoned that release of a factual, Town staff-assembled summary of the step-by-step accounting of the nearly six-month discovery process was preferable to portions leaking out to the public in a piecemeal fashion.
That “piecemeal” fashion began with Royal Examiner Editor Norma Jean Shaw’s October 31 – trick or treat – published story revealing that the EDA could owe the town government $291,278.64 due to over-billings beginning in 2009. The factual basis for that story was acquired by a Royal Examiner Freedom of Information Act (FOIA) request.
Piecemeal as either that initial public revelation by Royal Examiner or Monday’s approved “Resolution Regarding Town’s Finances with EDA” may be, as Meza said of the resolution – the content is all factual.
And from an accounting standpoint, the content of Monday’s resolution is troubling, even if the primary fault, cause and source of that trouble has yet to be fully determined.
Of the accounting discrepancies, EDA Executive Director Jennifer McDonald told Royal Examiner on Tuesday, “We have acknowledged the issue and are working on it and are committed to making it right.”
According to the resolution, Town Finance Director B. J. Wilson came across EDA billing irregularities as a result of council’s request that he examine the feasibility of financing recent departmental purchase requests through internal loans that would be free of interest payments.
The three-plus page resolution documents a series of meetings and communications beginning in May that led, first Wilson, and then contracted auditor Jeff Mitchell, to question the EDA’s billing of the town government on a number of fronts.
Discovered were: the EDA “mistakenly billed the Town for a portion of a $1.9 Million Virginia Department of Transportation performance bond related to Leach Run Park Parkway; further, the EDA had mistakenly billed the Town for an agreement related to debt service on the Avtex Administration Building …”
Also uncovered was another reported EDA inaccuracy the resolution states is likely to continue to cost the town hundreds of thousands of dollars per year over the lifespan of recently approved capital improvement projects like the new $11-million police station. That failure involved the New Market Tax Credit Program.
Of that issue the resolution states, “and further, the EDA had not closed on a more than $24 Million New Market Tax Credit Program low interest loan to finance a number of very important Town major capital improvement projects even though the EDA had previously represented multiple times to the Town that the New Market Tax Credit Program loan had been closed and the EDA already had that money in its bank accounts.”
If the Town Finance Director’s assessment was that for years the Town had been overpaying the EDA “by approximately $87,000 annually for projects listed on (previous) invoices” the assessment of the New Market Tax Credit problem resonates into the town government – and its taxpayers – futures: “As a result of the EDA not having closed on the New Market Tax Credit Program loan, the resultant increase in interest rates now likely will cost the Town hundreds of thousands of dollars per years in additional borrowing payment amounts over what Town Council had allocated in its annual budget.”
The revelation of the VDOT/Leach Run Parkway, Avtex Administration Building and New Market Tax Credit mistakes are dated to an August 23 meeting regarding a Town FOIA request attended “by the Town’s Mayor, another Town Council Member, the Town Manager, the Town’s Finance Director, the Town’s Auditor, and the Town Attorney” on one side and “the EDA’s Executive Director, the EDA’s Chairman of its Board of Directors (Greg Drescher), and the EDA’s attorney (County Attorney Dan Whitten).
The following day after an August 24 closed session at an EDA board meeting, Drescher announced he would step down as chairman of the EDA board of directors. He cited conflicting work schedules with his “real job” as superintendent of Warren County Public Schools. Other recent turnovers at the EDA include the resignation of 76-year-old Board Treasurer William “Billy” Biggs on October 8 – citing health issues after 30 years on the board, 28 as Treasurer; and the announced retirement of bookkeeper Josie Rickard effective in December. Following Rickard’s announcement, in October the EDA announced the hiring of the accounting firm of Hottel & Willis.
The council resolution of November 26 also points to what are perceived as accounting irregularities and inconsistencies in the EDA’s response to requests, including FOIA requests from the town finance department and auditor.
Referencing a June 25 EDA reply to a request for clarification on earlier explanations of how the miss-billings occurred, the resolution states, “… in the June 25 correspondence, the EDA sent several amortization schedules that appeared to have been created by the EDA itself, and not by the originating bank, and copies of various bank coupon payments for loans.
“Based on previous correspondence the Town had been informed by the EDA that all of the EDA’s debt was refinanced into one loan. Upon receiving copies of multiple bank coupon payments, the Town requested an explanation for the multiple coupons and the response received from the EDA’s Executive Director was ‘I am just sending you everything we have.’ ”
And “everything we have” is now being scrutinized by the town finance director and auditor seeking additional clarification for nine years of miss-billings and the Town’s belief it had been assured by EDA Executive Director Jennifer McDonald that a $24-million New Market Tax Credit Program capital improvement loan had been closed on and its 9 years of interest-free payback would be available to the Town for projects including the new Front Royal Police Station under construction across Kendrick Lane from the EDA office.
The resolution concludes by trying to assure town taxpayers that their money will be protected and utilized only per approved projects, stating: “the Town will continue to pursue this matter, and will continue to carefully monitor all future financial transactions between the Town and the EDA, between the Town and all other government agencies, and between the Town and all other entities … so that the hard earned tax dollars of the taxpayers of the Town of Front Royal are protected and paid wisely and in the manner for which they are voted upon by Town Council.”
Through the resolution council also commended “Its Finance Director and the Town’s Auditor for their vigilance and their tireless pursuit of the true status of the historic amounts the Town should have paid the EDA.”
Norma Jean Shaw contributed to this story.
Warren County EDA reaches bank agreement on McDonald parcel, moves C-CAP rental forward among other actions in final meeting of 2021
The Board of Directors of the Front Royal and Warren County Economic Development Authority (EDA) held the combined November and December meeting via Zoom. All Board members attended the meeting.
The Board adopted two resolutions. One resolution to approve C-CAP using Suite C located at the EDA office building to store food for distribution. The use of Suite C is at no cost to the organization while it transitions to a lease in Suite B and C-CAP will provide evidence of an insurance policy to cover the use of Suite C. The EDA and C-CAP will negotiate the terms of a lease on Suite B and possibly Suite C at the Kendrick office location at an agreed rental rate.
The second resolution authorizes the EDA Chair and Treasurer to finalize details of an agreement with Atlantic Union Bank where it gives up its claim in the Jennifer McDonald bankruptcy and the EDA will release its claim on the property formerly owned by “Little Rugratz” on Virginia Avenue. The existing bank loan is more than the value of the property and the release of the EDA claim allows the bank to sell the property. In return, by the bank releasing its claim in the bankruptcy, the EDA can recover a higher percentage of the recovery from the McDonald bankruptcy and save money in attorneys’ fees.
The Board is working with Public Works to address the maintenance issues at the Kendrick Lane building including HVAC repairs and installation of water shut-off valves.
The EDA and County are working on soliciting bids for appraising all the EDA properties. The first priority is the Baugh Drive building.
Chair Jeff Browne updated the board on Nature’s Touch and the VDOT grant. Scott Jenkins stated all the marketing material for the Commonwealth is updated and was approved by VEDP (Virginia Economic Development Partnership).
Greg Harold presented the final draft of three Standard Operating Procedures (SOP) that will be used as guides for EDA and prospective purchasers of EDA property. He stated the documents were not “static”, but are “living” documents that will be modified as needed. The three SOPs approved are Letters of Intent, Contract Management, and Property Disposition Due Diligence. The documents will be posted on the website by December 15.
The EDA and Warren County are working on a Memorandum of Understanding (MOU) to govern the transition of EDA’s staff moving to the County payroll and EDA’s role in future economic development in the county. One change beginning immediately is the County will permanently take over receiving and coding EDA bills prior to the EDA Chair and Treasurer approving the expenses.
The EDA Board approved the meeting schedule for 2022 and future meetings will be in person. The next EDA meeting will be on Friday, January 14th at 9 a.m. The location will be posted on the website as well as the remaining dates for 2022.
(From an EDA Press Release of December 5th)
Little civil consequence of more criminal prosecution delays in EDA case
Contacted about the new dates in late 2022 of trials in the now federal prosecutor-handled criminal indictments against former Front Royal-Warren County Economic Development Authority (EDA) Executive Director Jennifer McDonald, current EDA Board of Directors Chairman Jeff Browne said while it has little, if any, impact on the EDA’s civil litigation seeking recovery of assets, he understands public frustration from continued delays on the criminal side of the EDA financial scandal.
“I don’t believe the delay in the criminal case impacts our civil case. We have no control over the criminal case, but it is frustrating that Warren County residents must wait so long for justice to be served. I understand the reasons for the delay, but it still is frustrating,” Browne told Royal Examiner.
The reason for the delay continues to be, as it has been from the outset for the most part, the volume of evidentiary documentation in the case, as well as the introduction of new attorneys into the legal equation who must absorb the information in that documentation estimated at well over a million pages.
Most recently, federal Judge Elizabeth Dillon granted McDonald’s newest attorney, court-appointed Andrea Harris’s request for a continuance of McDonald’s criminal trials slated for the first week of this month. The federal prosecutor from the Western District of Virginia did not object to the continuance. Consequently, new trial dates between October 11 and November 18, 2022, are now on federal docket. Since the delay came at the request of the defense, speedy trial guidelines will not come into play.
As Royal Examiner previously reported, on August 31 McDonald was re-arrested on a 34-count indictment handed down by the Western District of Virginia Federal Prosecutor’s Office in Harrisonburg.
Of those 34 counts, 16 were for money laundering, 10 for bank fraud, 7 for wire fraud, and 1 count of aggravated identity theft regarding someone identified as “T.T.” – our best guess representing ITFederal principal Truc “Curt” Tran. The 40-paragraph True Bill elaborating on the charges to a Harrisonburg Grand Jury is dated August 25, and signed by then-Acting U.S. Attorney Daniel P. Bubar. McDonald was once again released on bond.
The charges and outline of the case in support of them echo earlier criminal indictments filed at the state level before the State Special Prosecutor’s Office in Harrisonburg turned the case over to federal authorities in late 2019. The state special prosecutor had dropped the indictments it had filed to avoid speedy trial issues due to the volume of evidentiary material – estimated at 800,000 to over a million pages at the time. Failure to meet speedy trial deadlines could have led to defense motions for dismissal of charges on the criminal side of the EDA financial scandal case.
EDA emerges from lengthy Closed Session to consider assistance to Angel Tree Program and C-CAP winter food storage
(Editor’s note: The Salvation Army notified Royal Examiner that their holiday toy collection/distribution program is known as Angel Tree, as opposed to the Marine Corps Toys for Tots effort. We in turn notified the EDA Board Chairman and received permission to make the correction to this press release.)
The EDA Board of Directors met today for their regular monthly meeting. All board members were present along with legal counsel. The Board went into closed session for approximately two and half hours to discuss transition, personnel, loan restructure, and disposition of property. The Board returned to open session at approximately 11:30.
The Board discussed the transition and how the county and the EDA were working well together. Taryn Logan, Assistant County Administrator, is also the Interim EDA Executive Director working on new prospects and marketing of EDA property. Ed Daley, County Administrator will work with the EDA on current projects. The County and EDA are actively recruiting a new Executive Director and administrative assistant. Jeff Browne thanked board members for stepping up to keep the EDA operation running smoothly.
Jeff Browne discussed the use of a portion the EDA administrative building through December 22nd for the Salvation Army Angel Tree holiday toy collection and distribution campaign. The EDA will also assist C-CAP in finding proper storage for needed food through the winter.
Jeff Browne and Scott Jenkins discussed the use of interns beginning in January to assist with EDA research and future projects. Scott Jenkins reviewed the “job description”. Taryn Logan stated the use of interns by the county has been a very successful venture in the past. Ed Daley, County Administrator, also supported the proposed program.
Marjorie Martin (Jorie) will assume the duties to update the website working with Queen Consulting. Meeting dates, and updated site information will posted.
The Board is working with vendors to clean the air conditioning ducts in the EDA administration building.
Next EDA Board Meeting: Combined meeting for November and December, December 3, 2021: The meeting will be held via zoom at 9:00 AM
County Supervisors change November meeting date – stay mum on Closed Session EDA litigation discussion
The only open session action taking by the Warren County Board of Supervisors at a Special Meeting of Tuesday, October 26, was authorization to change the date of a November Supervisors meeting from the 16th to the 18th. That item was a late addition to the agenda made and acted on prior to a scheduled closed session.
The bulk of the 5 p.m. meeting, about an hour-and-a-quarter, was taken up by a Closed/Executive Session to discuss Economic Development Authority litigation. As Royal Examiner readers know, that is an oft-behind closed doors topic over the last two-plus years in the wake of the $26-million to $62 million FR-WC EDA financial scandal that began unravelling in mid-2018. No announcement or action regarding that litigation was offered during the brief open session to adjournment shortly after 6:20 p.m.
As has been previously reported, the EDA financial scandal involves civil and criminal cases, the latter now handled at the federal level by the U.S. Attorney’s Office in the Western District of Virginia headquartered in Harrisonburg. Before criminal indictments were dropped by the Special Prosecutor at the state level due to speedy trial concerns surrounding the mountain of documented evidence, estimated at over a million pages, there were as many as 23 co-defendants alleged as co-conspirators of former EDA Executive Director Jennifer McDonald. The federal prosecutor launched action on August 31, filing a 34-count indictment against McDonald, including 16 counts of money laundering, 10 for bank fraud, 7 for wire fraud, and 1 count of aggravated identity theft regarding someone identified as “T.T.” (ITFederal principal Truc Tran perhaps?)
In related civil litigation, McDonald and the EDA reached an agreement in which $9-million-dollars of assets were ruled out of McDonald’s bankruptcy court filing as owed to the EDA, though without any admission of fault by McDonald. As part of that agreement the EDA recently announced assumption of ownership of McDonald Real Estate LLC MoveOn8’s undeveloped 41-acre Happy Creek parcel valued at over a million dollars.
The EDA and Town of Front Royal are also engaged in dueling civil countersuits initiated by the Town, claiming disputed lost assets related to the financial scandal. During the tenure of Interim Town Manager Matt Tederick, other than then-Mayor Eugene Tewalt, the town council chose to ignore EDA offers to sit down in a non-litigious, good faith effort to determine exactly what was owed to the Town related to the alleged misdirected EDA assets involved in Town and County capital improvement and economic development projects financed through the EDA. The Town has since initiated an effort to create its own unilateral Front Royal EDA (FREDA) operating independently of the over half-century-old Town-County EDA, which technically the Town is still a legal, if now silent, partner in.
That independent EDA effort has become a political hot potato in the coming Town Special Election to fill resigned member Jacob Meza’s seat. In recent years the County had fully funded EDA operational costs, with each municipality covering its own debt service related to EDA financing of projects. Independent conservative council candidate Bruce Rappaport has made the unilateral Front Royal EDA a major target of his campaign, citing it as a waste of town taxpayer money and destructive wrench in the cog of Town-County relations.
‘Ghosts of EDA Loans Past’ come back to haunt county supervisors
The most interesting part of Tuesday evening’s Warren County Board of Supervisors meeting was likely behind closed doors after the board adjourned to Closed/Executive Session for a legal-based answer to North River Supervisor Delores Oates question as to what benefit to the County and its taxpayers there was in approval of a Resolution admitting a “moral obligation” to continue to pay the debt service on bank loans made by the EDA during its developing financial scandal, circa 2016 or so. There was one of three loans at issue of particular interest – the $10-million-dollar loan to Truc “Curt” Tran’s ITFederal company poised to jumpstart commercial redevelopment at the 149-acre portion of the former Avtex Superfund site known as the Royal Phoenix Business Park.
Of particular interest, because the “moral obligation” for that loan was initially believed covered by the Town of Front Royal, whose elected officials agreed to provide a $10-million-dollar “bridge loan” requested by then EDA Executive Director Jennifer McDonald to indicate to First Bank and Trust that “the community” stood behind the loan and proposed project it supported. That request for and Town show of financial support for the ITFed project came despite the fact the company showed virtually no assets other than the three acres at the Royal Phoenix/Avtex site valued at slightly over $2-million-dollars that was “gifted” to the company by the EDA behind closed doors for one dollar.
A clue to what the county supervisors heard over about 15 minutes in Closed Session may have been offered by the board’s action out of it. After some hesitancy in response to the Chair’s call for a motion on the Resolution, Oates’ motion for approval of the “EDA First Bank and Trust Support Agreement”, seconded by Walt Mabe, passed by a unanimous roll call vote. The vote commits the County to continue to absorb those “moral obligation” payments through the Fiscal Year 2021-22 at an estimated cost of $214,000.
In open session, responding to questions about the Resolution in support of the “EDA First Bank and Trust Support Agreement”, County Administrator Ed Daley mentioned consolidation of three loans, including the above-mentioned ITFederal loan (at $9,551,500), as well as a First Bank and Trust Line of Credit ($8,691,600), and a First Bank of Strasburg loan ($3,450,000). Contacted later, Daley cited one condition that would bring the EDA’s payments to the bank on the ITFederal loan in line with what ITFederal pays the EDA monthly at about $42,000. Before the EDA payments fluctuated to more or less than the ITFed payments, sometimes as much as $7,000 a month more.
Despite the commitment to an estimated $214,000 in payments through this fiscal year, the board’s unanimous vote in support of its moral obligation payments likely reflects negative consequences were the County to bail on covering an EDA debt mid-fiscal year. But again, the agreement is only to the end of the current fiscal year, June 30, 2022. What might the future of “moral obligations” related to the “Ghost of EDA Loans Past” bring in FY-2022-23? – Stay tuned for another seasonal episode of “A Front Royal-Warren County EDA Carol”.
Thermal Shelter bathrooms
County Administrator Daley was also prominent in responding to another matter raised by three speakers during Public Comments about things, not on the meeting agenda. That was the elimination of two bathrooms in the Health and Human Services Complex at the old 15th Street middle school utilized by the County and involved churches and civic organizations to house the community’s homeless indoors at night during the winter. Opening that discussion was First Baptist Church Pastor Christy McMillin-Goodwin, followed by Aneita Bryant and Jim Bunce.
That trio said an alternate plan for mobile outdoor restrooms was unadvisable due to security and additional personnel to monitor out-of-building night trips, as well as potential severe weather issues. Noting a replacement plan that would not have new indoor facilities in place in time for this winter’s thermal shelter setup, these speakers wondered how the removal plan had been initiated without notice to those involved in helping the County operate the thermal shelter. Bryant suggested allowing access to the next closest indoor facilities.
In responding, Daley said he had been at point for the County in initiating the bathroom removal due to failing pipes that caused toilet backup issues. He said he had envisioned a much quicker turnaround in replacing the removed indoor facilities in that section of the building than ended up being the case. He promised to work proactively with those involved to see that an adequate alternate overnight option was available when the thermal shelter opens as winter arrives.
Also Tuesday following public hearings, the board unanimously approved three Conditional Use Permit applications, two for short-term tourist rentals and one for a private use campground. Following application summaries by Planning Department Deputy Director Matt Wendling the first two CUP applications, Charles and Lou Ann Dotson’s for the Private Use Campground on their property on Burma Road in the Man-Da-Lay Subdivision; and Jacob W. Lott Jr. and Sandra J. Kiepfer for a short-term tourist rental on their 1.6-acre lot on Little Indian Road in the Blue Mountain Subdivision in Linden went to a vote with no public hearing speakers. Wendling did note that a letter from the chairman of the Blue Mountain Property Owners Association had been received, expressing “no problem” with Lott and Kiepfer’s short-term tourist rental application.
Up last were Nicole and Sean McMinn with a short-term tourist rental permit application for their 2.42-acre property on Sagar Drive in the Highland Estates Subdivision in the Fork District. Again, there were no public speakers after the applicants responded to the board chair’s offer to summarize their request. The D.C.-based couple told the board they had run into little opposition from neighbors, and what opposition there had been from neighbors was not from those closest, but with property over a thousand feet from theirs.
And while there were no public speakers, the McMinns noted a number of letters to the board from supporters of their short-term tourist rental CUP application, which they asked to be read into the meeting record. Board Clerk Emily Ciarrocchi then read nine letters of support, including one with “25 to 30” signatures. Several of the letters, including one from the owner of the Downriver Canoe Company, noted positive impacts on tourism-related businesses from short-term renters. One letter noted, “They come; they spend; they leave”.
The board then made its final unanimous vote of approval on a motion by Archie Fox in whose district the applicant’s property lies, seconded by Walt Mabe.
Following that vote, Happy Creek Supervisor Tony Carter noted a “Bless you” included in one of the letters read by the clerk that was well-timed to a sneeze by someone present in the government center meeting room.
In fact, facing a future out of the public eye politically – Carter did not file to be on the ballot for reelection to his Happy Creek seat in November – Carter appeared at times Tuesday to be auditioning for Comedy Club spots during his member report and at various other times during the meeting. In fact, his coming local election, Halloween costume advice during his member report led three of his four colleagues to decline to try and “follow that act”.
See all the fun, business, and other public perspectives, including opening Public Comments speaker Michael Williams question as to whether a recent church-sponsored candidates forum in which the moderator was shown prior to the forum to have contributed to one church-associated candidate’s campaign could threaten that church’s tax-exempt status on U.S. Constitutional separation of church and state guidelines, in the County video:
EDA gets McDonald company property as part of settlement agreement
On Wednesday, October 20, Warren County Economic Development Authority Board of Directors Chairman Jeff Browne verified the EDA’s acquisition of the 41-acre “Happy Creek Road” parcel owned by former EDA Executive Director Jennifer McDonald’s Moveon8 real estate LLC. Acquisition of the undeveloped property assessed at just over a million dollars according to county court records is part of the $9-million-dollar no-fault settlement agreement reached between the EDA, McDonald, and the Harrisonburg Bankruptcy Court handling McDonald’s 2020 bankruptcy filing. The EDA will now be able to market the property as a developable EDA asset. It is located near the intersection of Happy Creek Road and Leach Run Parkway.
Browne said that in addition to receiving full value on the Happy Creek parcel, the EDA was in line to receive a percentage of the sale price of other McDonald assets distributed through the bankruptcy court proceeding. Exactly how close those percentages might get the EDA to the $9-million-dollar settlement figure remains to be seen. It was not immediately clear as to whether the EDA will have an outright full value claim to any other McDonald-held properties or assets.
McDonald is the central figure in the EDA financial scandal that began unravelling in mid-to-late 2018. She resigned in December 2018 under mounting pressure from her board of directors. She has been accused in civil and criminal court of utilizing her EDA position to misdirect EDA assets to her and others personal benefit. Western District of Virginia federal authorities have taken over the criminal side of the EDA case after a state special prosecutor’s office in Harrisonburg dropped criminal charges against McDonald and as many as 23 co-defendants due to speedy trial concerns as it wrestled with the volume of evidentiary material – estimated at 800,000 to over a million pages at the time. With charges against some defendants originating with the county commonwealth attorney’s office that initially handled the criminal investigation during Brian Madden’s tenure heading the department, failure to meet speedy trial timelines could have led to defense motions for dismissal of criminal charges against the defendants.
On August 31, 2021, federal prosecutors made their initial move, handing down a 34-count indictment against McDonald. Of those 34 counts, 16 were for money laundering, 10 for bank fraud, 7 for wire fraud, and 1 count of aggravated identity theft regarding someone identified as “T.T.” – ITFederal principal Truc Tran perhaps?