On May 2, the attorney for ITFederal and its CEO Truc “Curt” Tran followed attorneys for the other seven defendants in the EDA civil suit of March 26 in filing defense motions attacking the style and substance of the case against their clients.
In the demurrer seeking dismissal of five of the six counts (1-4 and 6) in the EDA Civil Complaint it is asserted that the filing by attorney Cullen Seltzer of the Richmond law firm of Sand-Anderson lacks the legally-required specificity and factual basis to support its oft-stated conclusion that the defendants have acted to improperly divert EDA assets based “on information and belief”.
“And many of the Plaintiff’s allegations being made solely ‘on information and belief’ is fatal under the heightened pleading requirement for fraud,” Tran/ITFederal attorney Brandon H. Elledge writes citing case history, adding of such wording, “and thus to avoid dismissal, a fraud plaintiff must supplement such allegations with ‘a statement of facts on which the belief is founded’ and also ‘must delineate at least the nature and scope of plaintiff’s efforts to obtain, before filing the complaint, the information needed to plead with particularity’.”
As to the sixth count omitted from the Tran/ITFederal request for dismissal, Count 5 – “Breach of Fiduciary Duty of Loyalty” – the demurrer notes that it “does not purport to state a claim against Mr. Tran and ITFederal” but rather asserts actual claims “only against Defendant McDonald” – which does appear to be the case as it would impact all defendants other than McDonald. See Related Story:
“As an employee of the Warren EDA, Defendant McDonald owed the Warren EDA a fiduciary loyalty,” Count 5 begins in recounting the obligations of McDonald’s role as the executive director of the EDA.
And it is in the absence of the detail of the preceding 160 paragraphs leading to the $17.6 million-plus civil suit’s call for compensation in six counts against all nine defendants upon which defense attorneys have focused their arguments for dismissal.
The six counts seeking a judgment of “not less than $17,640,446.16” against “the Defendants jointly and severally” are: 1/ Fraud and Fraud in the Inducement; 2/ Conversion; 3/ Conspiracy; 4/ Unjust Enrichment; 5/ Breach of Fiduciary Duty of Loyalty; and 6/ Ultra Vires (improper) Transactions and Agreements.
And other than that one mention of the minimum of $17.6-million-and-change of allegedly misdirected or embezzled EDA assets there is no other reference to specific amounts of money tied to any defendant in the plaintiff presentation of the resultant civil “Counts” against those defendants. In fact, only “Defendant McDonald” and “Defendant Earthright Energy LLC” are cited in the six counts – McDonald in the aforementioned Count 5 “Breach of Fiduciary Loyalty” that does appear focused on her alone; and Earthright Energy LLC in Count 6 “Ultra Vires Transactions and Agreements” related to work arrangements or contracts engaged in with Earthright Energy through McDonald without approval of the EDA Board of Directors “in the manner required by law.”
However as alluded to above and noted in previous stories on the EDA complaint and defense motions against it, there is detail concerning specific amounts of money involved in specific transactions involving specific defendants throughout the first 160 paragraphs of the complaint. Those 160 graphs appear to present the basis of fact and finance leading to the final 39 paragraphs stating of the more generalized summary of offenses described in Counts 1 through 6 of the EDA civil suit. See Related Story:
However for Tran/ITFederal attorney Elledge that detail too, is lacking.
“While the Complaint is long on allegations as to McDonald’s misconduct, it offers very little as to Defendants … Tran … and ITFederal except for conclusory recitations or vague statements made only ‘on information and belief’,” Elledge asserts, adding, “Mr. Tran and ITFederal expressly deny the meritless claims asserted against them and any alleged wrongdoing in this matter.”
Of the summary nature of the stating of the Counts against the defendants, the Tran/ITFederal defense memorandum of support of the demurrer for dismissal states, “… the group pleading method employed by the Warren EDA in its Complaint is improper and fails to fairly inform Mr. Tran and ITFederal of the nature of the claims levied against them …”
However, is that true of the first 160 paragraphs of the 199-graph complaint – well 209-graphs if you include the 10 paragraph “Prayer for Relief” seeking return of EDA assets, attorneys fees and “punitive damages (of at least one million dollars) jointly and severally against the Defendants”?
The complaint devotes many paragraphs to the securing of a $10-million bank loan for Tran/ITFederal through the EDA, citing the involvement of McDonald and then-U.S. Congressman Robert Goodlatte, R-6th, along with Tran. It is noted that loan was made at Goodlatte’s request despite repeated assertions by “Tran and Defendant McDonald …that Tran did not need the financial support of the Town and Warren EDA”.
However that “unnecessary” $10 million dollars of financial support was acquired, along with the gift of a 30-acre parcel at the Royal Phoenix site publicly valued by the EDA at $2 million for a one dollar price. Conditions were attached to that gift, including completion of the project by an eventually extended completion date of mid-2020; and a reduction of the scope of the project from an approximate 40,000 s.f. in a three-building complex alleged by Goodlatte to produce over 600 high-paying tech jobs through ITFederal to the community, to a 10,000 square-foot building producing at least 10 jobs of indeterminate wage.
And while the complaint notes that far less than $10 million appears to have been spent to date on the ITFederal Project here, the Tran/ITFederal motion for dismissal asserts Tran did nothing wrong and has worked within the parameters of his agreement with the EDA, both on the loan and a Memorandum of Understanding (MOU) regarding nearly $1.5 million in what is described as “Subsequent Payments to ITFederal” alleged to have been unauthorized by the EDA.
Regarding the Count of “Conversion” of EDA assets to Tran’s personal benefit, Elledge writes on behalf of his clients, “The only Warren EDA funds allegedly retained by ITFederal are a $10 million loan pursuant to a promissory note and a deed of trust and some $1.5 million pursuant to a Memorandum of Understanding. Thus, ITFederal received those funds in accordance with such agreements. Plaintiff does not – and cannot – allege a breach of such agreements, and it, therefore, alleges no right to immediate possession of the funds. Rather, it lawfully controls them subject to the terms of the loan documents and the MOU …
“The only payments due to Plaintiff is the repayment terms of the promissory note, and it has not – and cannot – allege that ITFederal has breached or defaulted on any of its contractual obligations,” the Tran/ITFederal filing in support of its motion for dismissal states.
But at issue for the EDA as plaintiff is an alleged fraud perpetrated by Tran in conjunction with McDonald in her role as EDA executive director and possibly others, to acquire the loan, gift of property and “Subsequent Payments to ITFederal”. That fraud is alleged to involve a $140 million in purported ITFederal government contract the plaintiff found no evidence exists – though Elledge asserts it does – as well as websites said to create a false impression of financial viability of Tran companies the plaintiff asserts there is no discovered substantive support of, and false representations of Tran’s personal worth and intentions of investment in this community.
“Plaintiff does not allege any cohesive fraudulent scheme here, but rather a series of independent transactions connected only by the involvement of Defendant McDonald … In the portions of the Complaint referencing Mr. Tran and ITFederal, Plaintiff obscures who actually made what representations at issue by repeating the phrase ‘Tran and Defendant McDonald represented, through McDonald (emphasis in context) … Such vague construction fails to establish Mr. Tran’s connection to the alleged misrepresentations by omitting how Mr. Tran managed to represent anything ‘through McDonald’,” the Tran/ITF filing states, adding, “By lumping Mr. Tran together with Defendant McDonald and referencing ‘multiple occasions,’ Plaintiff unsuccessfully tries to create an impression of wrongdoing without articulating who made what statement to whom on which occasion.”
From a different angle, Tran/ITFederal attorney Elledge echoes Jennifer McDonald attorney Lee Berlik’s argument that his client is being villainized for the alleged actions of other defendants and/or bad decisions by past EDA boards.
“Plaintiff suggests every statement by every counterparty it now regrets crediting was a false statement by Ms. McDonald … instead of a false statement to Ms. McDonald (emphasis in context),” Berlik wrote in his April 16 filing on his client’s behalf, adding, “The Warren EDA is looking for someone to blame for every decision it now regrets since new leadership has taken over – and Ms. McDonald is it.”
From Tran’s legal perspective he has simply taken advantage of a series of sweetheart deals offered by the EDA Board of Directors at the urging of friends in high places, including Congressman Goodlatte and the EDA’s then executive director.
What could possibly be wrong with that?
At issue in the wake of the filing of the series of defense demurrers for dismissal of the cases against their clients is will that question in regard to all defendants ever be argued in front of a jury in a Warren County or any other courtroom?
EDA Board Chairman Jeff Browne reacts to July civil litigation results ordering total of over $13.35 million paid to the County Economic Development Authority
As noted in our lead story on the “Warren Economic Development Authority” (EDA) versus Truc “Curt” Tran and his ITFederal LLC company civil liability case result (See: Jury awards WC EDA $11.9 million-plus in civil compensatory claims against ITFederal and Truc ‘Curt’ Tran), involved players on the plaintiff’s side deferred to current EDA Board Chairman Jeff Browne for a reaction, not only to the Tran/ITFederal result, but a month in which four civil liability cases went the EDA’s way. After a day of reflection on this month’s civil liability trials, much of which he watched in the courtroom, often with other EDA board members, this is what Browne told Royal Examiner:
“As part of the Jennifer McDonald lawsuits, the EDA successfully sued six defendants this month in four civil jury trials and was awarded about $13 million in compensatory damages, $400,000 in punitive damages, and $75,000 in damages for statutory conspiracy. There will be additional civil trials in March 2023.
“The EDA’s main responsibility in these lawsuits is to recover assets that rightfully belong to the EDA and ultimately to the residents of Warren County. It’s a work in progress, but I’m pleased with the outcomes. Every defendant was found liable on multiple charges. Every defendant has to pay. A jury found that the EDA Board of Directors with oversight responsibility of Jennifer McDonald wasn’t negligent in retaining her as it took immediate steps after finding solid evidence of her misbehavior.
“But that isn’t the whole story. Members of the EDA Board were present on every day of every trial. We were impressed with the juries and Judge Albertson. Jury members listened attentively, took notes, and showed in their verdicts that they had a command of the facts in each case. Judge Albertson was fair to both sides of each case and did a good job of managing each trial. Prior members of the EDA Board, prior staff EDA members, a former county administrator, and former members of the Warren County Board of Supervisors all stepped up to testify and do their civic duty. We can be proud that our judicial system still works.
“The criminal process moves forward in other venues. In the meantime, some measure of justice is present in the jury verdicts in Warren County this month. For that, we are grateful.”
Coupled with the out-of-court “no-fault” settlement agreement with McDonald for an estimated $9 million in real estate assets, the courts have now ordered the return of $22 million to $23 million in assets to the EDA. At various points in the investigation into alleged embezzlement and misdirection of EDA assets between 2014 and 2018, the total involved amount has been cited from $21 million to $26 million. There have been significant legal fees involved, perhaps $6 million or more. But in the wake of this month’s results, it appears the EDA’s contracted civil counsel from the Sands Anderson law firm of Richmond are earning that money.
Asked for a reaction to the verdict, Tran and his attorney Gregory Melus declined comment. As noted in the above linked story on the verdict, Melus notified the court of his intention to file a motion to overturn the verdict as not supported by the evidence presented at trial, as have the other three involved civil case defense attorneys.
Jury awards WC EDA $11.9 million-plus in civil compensatory claims against ITFederal and Truc ‘Curt’ Tran
After five hours of deliberation beginning shortly after 9 a.m., at 3:30 p.m. Thursday afternoon, July 28, a Warren County Circuit Court civil case jury awarded the “Warren Economic Development Authority” (aka EDA, WC EDA, FR-WC EDA) a total of $11,919,313.38, plus some interest payments from defendants Truc “Curt” Tran and his ITFederal LLC company. The finding of liability against the defendants related to exchanges of money for Tran and ITFederals’ plan to develop a 30-acre parcel at the 148-acre Royal Phoenix Business Park portion of the former Avtex Superfund site in Front Royal. That seven-person civil case jury also dismissed all counterclaims by co-defendants Tran and ITFederal related to breach of contract and surrounding claims against the EDA.
However, the jury did not find the defendants liable on claims of Conspiracy and Fraud that could have led to significant punitive damages up to $350,000, or as high as triple the compensatory claim of $11.9 million if found guilty of statutory conspiracy indicating malice against the plaintiff. Tran was found liable on claims of Conversion, Unjust Enrichment, and Ultra Vires, the latter actions outside the authority of involved officials. ITFederal was found liable on claims Conversion, Unjust Enrichment, Ultra Vires, and Breach of Contract.
The breakdown of liability of the defendants was $1,499,986 against Tran, plus 3-1/4 years of interest on that amount accumulated since the March 2019 filing of the EDA civil actions against defendants alleged to have worked with former EDA Executive Director Jennifer McDonald between 2014 and 2018 to defraud the EDA out of an estimated $21-million. The $11.9-million claim of compensatory damages against Tran and ITFederal was the largest single portion of the EDA civil liability actions for recovery of lost assets. With approval of a bankruptcy court judge, McDonald settled EDA claims against her in an out-of-court “no-fault” settlement for what was cited as $9 million in real estate assets.
From testimony over four days of trial in the Tran/ITFederal liability case that $1.499-million finding against Tran related to EDA payments made to Tran under the pretense it was front money that would be reimbursed to the EDA by a $1.5 million Virginia Economic Development Partnership (VEDP) grant that was never acquired, or even applied for.
The finding of liability for $10,419,327.38 against ITFederal revolved around the $8,419,327.38 balance of a $10-million loan/promissory note the EDA gave the company to begin development of the ITFederal parcel behind the EDA offices in the old Avtex Administration building off Kendrick Lane. As noted in previous stories (see LINKS at end of story) on testimony and evidence presented during the trial, ITFederal was presented to the EDA Board of Directors in 2015-16 by then Sixth District Congressman Robert Goodlatte as not really needing the loan. Past EDA board members Greg Drescher and Ron Llewellyn testified that Goodlatte suggested the loan as a public relations move to illustrate Virginia’s positive work with the private sector to redevelop a former federal Superfund “brownfield” site.
Consequently, despite the written-in 30-year payback loan term, EDA officials believed it was actually being done as a short-term public relations effort, and would be paid back in a matter of months when what they believed was an existing $140-million ITFederal contract with the Nuclear Regulatory Commission (NRC) kicked in. A McDonald representation to her board that Tran would become an “anonymous donor” of $8-million to a proposed Criminal Justice Academy project then being worked on by the EDA, was seen as the start of that early repayment, the former EDA board members testified.
It appears this civil case jury, as three before it this month, have rejected a defense theory of the case asserting that the defendants were unwitting victims of McDonald’s alleged lies concerning the movement of EDA assets, just as the EDA was victimized. Plaintiff attorneys from the Sands Anderson law firm of Richmond, Va., countered those arguments by asking the jury to “follow the money” to see who benefited from the misinformation they allege McDonald was giving the EDA board, as well as EDA auditors.
During the previous morning session on Wednesday, the two sides presented their final witnesses: for the defense Mark Viola, proprietor of Viola Engineering, who did geo-technical work for Tran on the ITFederal site regarding construction delays related to underground discoveries of old utility piping and substances; and in plaintiff rebuttal to some of the previous day’s defense assertions, former County and EDA attorney Dan Whitten.
Late Wednesday, the court heard motions from both sides to strike the opposition claims against their clients. After listening to extensive arguments from both sides, Judge Albertson denied all motions to strike claims by either side, preferring as he has reviewing similar motions in earlier EDA civil liability cases this month, to allow the jury to make the decision on the substance of each sides’ claims against the other. After adjourning to dinner of pizza ordered to the courthouse for them around 7 p.m., the jury returned at 7:25 p.m. to say they preferred to go home and begin deliberations Thursday morning, which Judge Albertson agreed to.
As the three previous defense attorneys have following findings in the EDA’s favor this month, Tran/ITFederal counsel Gregory Melus notified the court he would file a motion to overturn the jury verdict. Those motions appear based on a defense contention evidence produced at trial was inadequate to justify conviction. A 30/30/10 day filing and response time schedule was set, though plaintiff counsel indicated if Melus needed additional time due to scheduling conflicts, that would not be a problem.
With motions to overturn on the table, counsel for both sides declined comment following Thursday’s verdict. Current EDA Board Chairman Jeff Browne, who observed much of the trial along with board members Jim Wolfe, Scott Jenkins, and Greg Harold, indicated that after speaking with counsel and some consideration he might have a response for the media shortly. See that EDA response in related story posted when available.
EDA civil liability defendant ‘Curt’ Tran on witness stand for over 4-1/2 hours as trial heads into final day
Tuesday, July 26, the third day of the “Warren Economic Development Authority” versus Truc “Curt” Tran and ITFederal LLC civil liability and counter-suit case was highlighted by the defendant’s 4-hours-and-37-minutes on the witness stand. That time started with a 2-hour-25-minute near monologue on direct examination, followed by 1-hour-58-minutes of sometimes contentious cross-examination by EDA co-counsel Lee Byrd and a fortuitously briefer 14 minutes of redirect examination by defense attorney Gregory Melus. On direct examination, Tran recounted his life story, beginning as an 11-to-12-year-old refugee to America in the wake of the Vietnam War and the fall of Saigon, leading into his work in data storage with the federal government and private sector, culminating with his efforts to develop a federally funded data center and import/export business in Front Royal and Warren County.
During that direct examination, Tran managed to recount a series of circumstances involving not only former EDA Executive Director Jennifer McDonald and a lack of supervisory EDA Board of Directors oversight of McDonald, but also shifting federal program guidelines, former President Barack Obama, and failed 2016 presidential candidate Hillary Clinton among reasons his projects here failed. The latter two involved a failure of the federal government during Obama’s presidential tenure to sign into law the Trans-Pacific Partnership (TPP), an international trade agreement that might have helped facilitate the import-export business Tran had hoped to create with his ITFederal company involving the cattle farm production of beef on acreage purchased off Happy Creek Road.
During a sometimes explosive cross-examination, Tran conditionally insinuated that several previous witnesses may have perjured themselves during testimony regarding circumstances of his agreements on the ITFederal project. Those witnesses in the defendant’s crosshairs of scrutiny included former EDA and County Attorney Dan Whitten, former EDA board member Ron Llewellyn, and Virginia Economic Development Partnership (VEDP) official Debbie Melvin.
In fact, Tran appeared to flirt with accusing former U.S. 6th District of Virginia Congressman Robert Goodlatte of, if not perjury, since he was not called as a witness for either side, but potential past lying were testimony from other witnesses, including Whitten, Llewellyn, and Greg Drescher, to be proven true regarding Goodlatte’s lobbying for Tran/ITFederal to receive the $10-million EDA loan for the Avtex site ITFederal project on a short-term basis as a positive public relations initiative for Virginia.
“I never say short-term, I didn’t say that – did he say that?” Tran wondered of multiple witnesses saying Goodlatte presented the $10-million dollar loan for the ITFederal project as a public relations effort to attract more business interest in Virginia rather than a loan Tran and his company actually needed to achieve their planned Avtex site federal data center development. With one defense witness remaining to be called Wednesday, one might wish Goodlatte was that witness to address that question, though he has not appeared on a prospective witness list.
Prior to sending the jury home at 7:02 p.m. Tuesday, Judge Bruce D. Albertson told that jury he anticipated deliberations to be handed over to them no later than early-to-mid-afternoon on Wednesday. Those deliberations involve an EDA base compensatory damage claim of over $ 11 million against Tran/ITFederal, as well as potential punitive damages up to $300,000 or more were the jury to find Tran and his company guilty of statutory conspiracy to defraud the EDA out of assets obtained under alleged fraudulent circumstances. Testimony indicated the defendants’ counterclaim at a base of approximately $4 million, with more at stake punitively as well.
EDA vs. Tran/ITFederal civil liability and counterclaim trial heads into third day with defense poised to call final series of witnesses
On Monday, July 25, the plaintiff “Warren Economic Development Authority” (aka EDA, WC EDA, FR-WC EDA) completed presentation of its case for liability for both compensatory and punitive damages during the morning session of its case against Truc “Curt” Tran and his ITFederal LLC company. Plaintiff counsel from the Sands Anderson law firm of Richmond, Virginia, called one witness after opening the day’s evidence with edited video of portions of two depositions they took from Tran, the first on October 8, 2021, the second three weeks later on November 1, 2021.
Both Tran’s responses to questions by plaintiff counsel at deposition and the testimony of the fourth and final plaintiff witness, former EDA Board of Directors member, Chairman, and Warren County Public Schools Superintendent Greg Drescher were presented to further the EDA contention Tran was an active participant and co-conspirator with former EDA Executive Director Jennifer McDonald in an effort to defraud the EDA into believing he had the means for follow through on promised development of 30 acres at the 147-acre Royal Phoenix portion of the former Avtex Superfund site. Primary among that fraudulent behavior according to the EDA theory of the case was the assertion ITFederal had secured a $140-million contract with the federal Nuclear Regulatory Commission (NRC), as well as accessing a Virginia Economic Development Partnership (VEDP) grant related to job creation. Evidence indicated neither was true.
Drescher reiterated testimony from former EDA attorney Dan Whitten on the trial’s first day last Friday concerning former U.S. Virginia Sixth District Representative Robert “Bob” Goodlatte’s efforts to justify a $10-million loan to Tran and ITFederal as a positive public relations move, despite his assertion that Tran and his company didn’t really need the loan. Drescher added that due to the nature of how the loan was presented as a show of cooperation between Virginia EDA’s and the private sector, he had believed the money would be returned to the EDA in a number of months, rather than years. That belief led to acceptance of the idea brought to the EDA board by its executive director that Tran would be an “anonymous donor” in development of a police training academy to the tune of $8 million dollars that then-Sheriff Daniel McEathron was interested in developing here.
However, defense counsel Gregory Melus pointed out to Drescher on cross examination that the terms of the EDA-financed $10-million loan to Tran clearly states that the loan had a 30-year payback term written into it. During a 55-minute cross examination, Melus repeatedly pressed Drescher on the lack of oversight provided by the EDA Board of Directors that he claims made his client a victim, rather than a player in any conspiracy alleged by the EDA regarding the failed promises of development creating as many as 600 quality jobs related to a government contracted data center on the 30-acre ITFederal parcel at Avtex.
That fact, among other shortcomings he cited in direct evidence against his client, led Melus to move to strike the plaintiff’s case on the majority of claims against Tran and his company following the resting of the EDA case. However, after hearing both sides arguments in that regard, Judge Bruce D. Albertson overruled the defense motion to strike the plaintiff claims against Tran and his company. As it has in this month’s previous EDA civil liability trials, the court expressed the opinion that the plaintiff evidence presented was sufficient to let the jury decide on its weight, rather than the court midway thru the trial.
With the case thrown to it, the defense opened its witness testimony with a financial investor in ITFederal’s parent company American Commonwealth Regional Center (ACRC). Quincy Zhao testified that he invested $100,000 in ACRC due to its economic development plans related to the EB-5 Visa Program. The program, as previously noted, encourages foreign nationals investment in economic development in the U.S. in exchange for green cards for investor’s families. Zhao explained that wealthy investors from the four primary nations invested in the program, China, Vietnam, India, and Korea (he did not note a north or south), among others, often used the program to educate their children in America’s school system, particularly at the higher educational levels. Zhao noted that eventually Front Royal-Warren County were ruled ineligible to qualify for the EB-5 Visa Program, creating issues with ACRC and ITFederal being able to fund the project. The EB-5 Visa funding was believed still on the table when Goodlatte made his initial assertions to the EDA board about the viability of ITFederal to be a major job creator for this community.
Former County and EDA attorney Blair Mitchell was the defense’s second witness, first of two successive by remote hook up. Mitchell, Dan Whittens predecessor, was queried on his knowledge of difficulties in marketing redevelopment of the Avtex property as a developmentally limited, federal Superfund environmental reclamation project, compared to other EDA industrial and commercial properties. Having retired in April 2016, he was also questioned on his knowledge of McDonald’s work as EDA executive director and the EDA’s recruiting of ITFederal as the first commercial development project at the Avtex site.
In response to a question about whether McDonald or anyone with ITFederal had qualified the NRC $140-million contract as an IDIQ (Indefinite Delivery Indefinite Quantity) federal contract, Mitchell replied, “No”. As plaintiff counsel has pointed out the IDIQ contract simply qualifies a company to bid on future federal contracts, guaranteeing nothing. In Tran’s second deposition video, asked about ACRC’s actual financial benefit from the $140 million NRC IDIQ contract, Tran replied $5,000. However, defense counsel has pointed to notations of “IDIQ” in some documents related to the ITFederal proposal to the EDA on Avtex Lot 6.
The defense’s second remote hook-up witness was James I. Marasco. After reviewing records of the EDA between 2014-17/18, from his home base in Rochester, New York, Marasco supported the defense contention that during that time period the EDA had very poor financial oversight and safeguards in place to prevent the type of financial misdeeds McDonald has been accused of. Marasco’s particular field of expertise is forensic auditing, he noted during direct examination.
Before dismissing the jury shortly after 5 p.m., Judge Albertson told them to expect to be in court later on Tuesday, to 6 p.m. or longer, despite the fact the case is still proceeding ahead of schedule. Due to a trip out of state for a real estate closing, final plaintiff witness and former EDA board member Ron Llewellyn is likely to open testimony at the trial on Tuesday prior to the defense calling its last series of witnesses, including defendant Truc “Curt” Tran. Defense counsel Melus has pointed out to the jury his client is not running away from questions about his role in the aborted ITFederal project at Avtex, as McDonald did in invoking her 5th Amendment right not to respond to questions at risk of self-incrimination during earlier testimony as a plaintiff witness.
First day of $11-million EDA vs. ‘Curt’ Tran civil liability trial concludes
Following opening arguments and the start of the plaintiff’s case, including presentation of its paper trail of nearly 50 Exhibits, we counted 48, it contends will illustrate Truc “Curt” Tran was not an unwitting but active accomplice of former “Warren Economic Development Authority” Executive Director Jennifer McDonald in acquiring a total of $11,913,308 in EDA loans and payments under false pretenses, a Warren County Circuit Court civil case jury was released for the weekend at 4:23 p.m. Friday afternoon, July 22. Attorneys, the media, and a few observers followed the jury out of the courtroom and courthouse two minutes later.
The evidentiary portion of the plaintiff’s case, which included its first three witnesses, hit a snag when lead EDA attorney Cullen Seltzer announced the plaintiff’s next evidence, a video of portions of a deposition interview of defendant “Curt” Tran. Defense counsel Gregory Melus objected to the introduction of that evidence. After the jury was sent out of the courtroom, Melus told the court he had not had time to review the video, having only seen a transcript of those sections of the deposition of Tran by plaintiff counsel. He also objected to the video being introduced, as opposed to the text of the deposition which the plaintiff had originally sent him.
After hearing from both sides, Judge Bruce D. Albertson overruled the defense objection to introduction of the video, but offered to recess the trial to Monday to allow Tran’s attorney to review the estimated hour-long video. Subsequent discussion with counsel indicated the plaintiff may complete presentation of its case Monday. Asked by the court if he was able to open his case at some point Monday, could he complete it by Wednesday, Melus replied in the affirmative. With that positive time-frame looming, if possibly with some longer days to achieve it early in the week, Judge Albertson allowed the perhaps unexpectedly early adjournment on the trials opening day. With the jury dismissed with instructions to avoid discussion, media or social media accounts of the case, and no further matters for consideration by the attorneys, court was recessed at 4:25 p.m. until 9 a.m. Monday.
Prior to that adjournment, in addition to introduction of its paper trail, EDA attorneys called three witnesses. They were in order of appearance, former Warren County and EDA attorney Dan Whitten, Virginia Economic Development Partnership (VEDP) Assistant Director of Accounts Solutions Debbie Melvin, and Jennifer McDonald. Whitten was on the stand for over three hours, 1-hour-38-minutes on direct, and 1-hour-43-minutes on cross examination as counsel for both sides attempted to paint their contrasting evidentiary “roadmaps” of the case.
And as in the three earlier EDA civil liability trials this month, those contrasting “roadmaps”, or theories of the case, revolve around whether defendants were, pick one:
1 – Like the EDA itself, lied to and taken in by McDonald misrepresentations, and victimized themselves due to the EDA’s inability to provide adequate oversight of the alleged criminal actions of its executive director, or:
2 – Were willing participants in individual portions of the series of schemes McDonald is alleged to have hatched between 2014 and 2018 to defraud the EDA out of as much as $21 million dollars in assets to her own, and the benefit of others willing to provide needed “outside” the EDA co-conspirators.
The base compensatory claim of $11.9-plus million against Tran and his ITFederal LLC company is the largest in the EDA’s series of civil liability cases; and Tran has also filed a counterclaim for damages from a lack of EDA oversight of their former executive director. That former director McDonald made an out-of-court “no-fault” settlement for about $9 million in largely real estate assets in the EDA civil claim case against her in the wake of her bankruptcy filing. The only other million-dollar-plus jury award came last week when Donald Poe and his Earthright Energy Solar (ERE) were found liable for a base compensatory claim of $945,000, coupled with combined punitive damages against the two defendants totaling about another $300,000. All attorneys in the earlier civil trial cases have indicated they will file motions to overturn the verdicts based on a contention of inefficient evidence to convict.
Testimony by former EDA and County counsel Dan Whitten in the plaintiff’s case Friday noted former U.S. Sixth District of Virginia Congressman Robert Goodlatte’s championing of Tran and ITFederal as an economic development opportunity here at the former Avtex Superfund environmental remediation site. Whitten testified that both McDonald and Goodlatte presented Tran as a successful Northern Virginia businessman, with a $140-million federal government contract with the Nuclear Regulatory Commission as the basis for his planned Data Center development based out of a 28,000 square foot building on a 30-acre parcel at the Avtex/Royal Phoenix Business Park. However, it turned out that federal contract was an “IDIQ” (Indefinite Demand Indefinite Quantity) that essentially puts one in a position to bid on coming government contracts, rather than any guarantee of a contract.
The Goodlatte-championed ITFederal project also suffered financially when it didn’t qualify as an EB-5 Visa project. Whitten noted the EB-5 program was utilized nationally to encourage foreign investment in the millions in local economic development projects in the U.S. in return for “green cards” and family access to U.S. citizenship. Not testified to was the fact that the program has a rather notorious reputation for not usually realizing exactly what was promised in the way of financial support at the outset.
Whitten testified that Goodlatte had suggested the $10-million loan to ITFederal and Tran to illustrate to the media and public a working cooperative relationship between a local municipal EDA and the private sector. Whitten said that Goodlatte even said that Tran didn’t really “need” the loan, but that it would be a good public relations effort. Whitten testified that the EDA had anticipated that the loan would be short-term as more of a public relations effort, than an actual business loan. That helped explain the EDA board’s acceptance of McDonald’s representation that Tran was going to be an “anonymous investor” to the tune of $8 million in a planned Criminal Justice Academy project.
Responding to a question, Whitten also said Tran had never come to an EDA Board of Directors meeting during the ITFederal recruitment, proposal, loan acquisition, and planning process. In fact, he said he, as EDA counsel, had never previously met Tran.
McDonald was on the stand a rather brief time compared to her previous EDA case appearances, three minutes for direct, and two minutes for cross examination. Asked about her interactions with Tran, and a false claim of VEDP grants for the ITFederal project at Avtex by EDA counsel, McDonald invoked her 5th Amendment right not respond at risk of self-incrimination a total of eight times. She added two 5th Amendment replies to cross examination questions, before defense attorney Melus cut his questioning off.
Plaintiff second witness Debbie Melvin testified that after one meeting with Tran in 2016, the Virginia Economic Development Partnership never received follow-up information sought from Tran about his company to verify its eligibility for a Virginia Jobs Investment Program grant, and that VEDP never authorized any grant funding for the ITFederal Avtex project or any Tran project in Warren County. Earlier Whitten testified that the EDA didn’t find out that paperwork indicating that grant was achieved had been forged, apparently by McDonald, until the EDA financial scandal investigation was underway in 2018-19.
Lambert found liable to EDA for $183,562 in compensatory and punitive damages
After hearing an hour-and-45 minutes of direct and cross-examination of defendant William Lambert, as well as two hours of combined closing arguments by plaintiff and defense counsel Wednesday, July 20, a seven-person Warren County Circuit Court civil case jury took less than an hour, 45 minutes to be precise, to reach a verdict in Lambert’s civil liability case related to the “Warren Economic Development Authority” (EDA, WC EDA, FR-WC EDA) financial scandal.
That verdict was for the plaintiff EDA on all five claims of Fraud, Conversion, Conspiracy, Unjust Enrichment, and Ultra Vires; the latter, as regular readers now know after three EDA civil liability trials this month, a legal term for a public or business official overstepping their legal authority. The EDA was seeking $345,000 in compensatory damages, the total amount moved out of an EDA credit line account by former EDA Executive Director Jennifer McDonald in a 2014-15 home purchase and sale in which Lambert acted as a straw man in the purchase and sale of the 400 Craig Drive, Stephens City parcel. Two past EDA officials, former Administrative Assistant Gretchen Henderson and past board member Ron Llewellyn, both testified that there was no record of and no vote by the EDA Board of Directors to approve EDA involvement in the Stephens City home sale.
However, the jury awarded the EDA only $11,062.49 in compensatory damages. That was the total amount of three payments made directly to Lambert during the August 2014 to February 2015 purchase and resale of the Stephens City property done in his name as the initial purchaser and then owner-seller. Plaintiff attorney Cullen Seltzer pointed out that that purchase was made in Lambert’s name in 2014 for $320,000 and sold six months later for $270,000, a $50,000 loss.
“Who doesn’t care about a $50,000 loss in six months,” Seltzer asked rhetorically in closing arguments, suggesting an answer to the jury – someone consciously involved in a fraudulent transaction. During his testimony beginning shortly after 9:00 a.m. Wednesday morning, Lambert said his then-girlfriend, Kathy Butler, Jennifer McDonald’s sister, brought the proposition on the use of his name in her sister’s home sale transaction to him as an effort by McDonald to help an old college friend, Michele Bower, and her husband, sell a home she and her husband were “saddled with” after purchasing a home in Rockland in Warren County.
Lambert denied any knowledge that something untoward might be transpiring with McDonald illegally accessing EDA assets. However, as juries have been in the two earlier cases this month against defendants April Petty and Donald Poe, this jury appears to have found the paper trail presented by the plaintiff counsel convincing enough for a finding of liability. And with that finding, the jury imposed punitive damages of $172,500, particular to the claim of statutory conspiracy.
Following Judge Bruce D. Albertsons’ polling of the jury to determine a unanimous consensus and their dismissal by the court with thanks for their two days of attention and work, defense counsel Philip Griffin II told the court he would file a motion to set aside the verdict, particularly as to the punitive claim of statutory conspiracy and fraud. Griffin said he felt there had been no hard evidence presented indicating defendant’s actions related to “ill will, hatred, or spite,” as stated in the statute.
In fact, speaking to the media outside the courtroom, Griffin pointed to his client, noting he had previously had virtually no relationship with the EDA other than cutting some trees down on properties for them. During his time on the stand, Lambert noted one of his jobs was as a “logger.”
As he has in the earlier EDA civil liability trials, Judge Albertson set a time frame for motions related to setting the verdict aside. This one was for a 30/30/10-day turnaround, with 30 days for the defense motion filing, 30 days for a plaintiff response, and 10 days for filing of any additional material.
And next comes jury selection Thursday in the EDA versus Truc “Curt” Tran and ITFederal case, with that civil liability trial involving a compensatory claim of around $9 million slated to begin Friday morning, July 22, and continue through the following week.