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EDA in Focus

Tran defense motions echo earlier filings, cite vague summary of allegations



‘Curt’ Tran was all smiles during discussion with media during EDA board closed session on Dec. 20, 2018. However, Tran expressed distress at the fact Jennifer McDonald’s job was in jeopardy that day. The EDA announced McDonald’s resignation following re-adjournment to open session. Royal Examiner File Photos/Roger Bianchini

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.

Talk about smiles, these at the ITFederal groundbreaking – you won’t catch these two smiling at each other these days as Supervisor Tom Sayre and Jennifer McDonald are engaged in dueling civil defamation lawsuits. Social Media Courtesy Photo

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”?

This way to the Promised Land of commercial investment and high-dollar tech jobs in your community, then Congressman Robert Goodlatte may have been gesturing – or he may have been pointing ‘Curt’ Tran toward the bank by way of the EDA for a little help with that investment.

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.

The lone ITFederal building on site in January 2019 – while more work has been done completing the outside façade, the one-story, 10,000 s.f. size has not expanded beyond minimum requirements to become eligible for EB-5 Visa Program funding.

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.”

File photo of EDA board meeting, circa 2016-17, with since-deceased Patty Wines holding the chairman’s seat. Empty seat to left is Jim Eastham’s, who was absent as he battled the cancer that eventually killed him. Other members from left are Ron Llewellyn and Greg Drescher, resigned effective March 23, 2019, Executive Director McDonald, Wines, long-time Treasurer Billy Biggs who resigned last October due to health issues, now Vice-Chairman Bruce Drummond and Toray’s Brendan Arbuckle who resigned when he left the area. Standing is County Administrator Doug Stanley giving an update on County business.

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?

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McDonald criminal plea hearing postponed



The anticipated entry of pleas on the initial 12 felony criminal financial charges against Jennifer McDonald did not occur on Monday, July 15, due to judicial recusal. Royal Examiner File Photo/Roger Bianchini

The entry of pleas to the 12 felony criminal charges of embezzlement or fraudulent misdirection of EDA assets by former Front Royal-Warren County Economic Development Authority Executive Director Jennifer McDonald has been put off to a yet-to-be determined date. McDonald’s plea hearing was scheduled as part of the 9 a.m. docket on the July Grand Jury-Term Day on Monday, July 15.

However newly-seated Circuit Court Judge William W. Sharpe, who is moving from Domestic Relations Court to replace Judge Clifford L. Athey Jr. who is taking a seat on the Virginia Appeals Court on September 1, entered a written recusal from EDA-related cases on Friday, July 12. In the wake of that recusal notice neither McDonald nor her criminal attorney Peter Greenspun were in court Monday. McDonald was transferred from RSW Regional Jail to the Fairfax Adult Detention Center on June 11. Greenspun’s office is in Fairfax.

In his recusal Sharpe writes, “It is necessary for this judge to recuse from all cases that may relate to the Warren County Economic Development Authority and Jennifer McDonald, in order to ensure that all parties can be confident the judge has no association with any persons who might be involved in a particular case, either as parties or a witness.”

Sharpe prefaces that statement by pointing out that, “a number of persons who are named as defendants in the pending EDA civil action against Jennifer McDonald and other parties, as well as members of the EDA Board and persons who it appears may be material witnesses in the civil action filed by the EDA, as well as other related civil actions or filed and possible criminal proceedings arising out of the same transactions, are personal friends or former clients or persons with whom the judge has otherwise had regular associations.”

In fact this reporter ran into Judge Athey outside the courthouse on Friday, July 12. During a brief conversation about the coming week’s EDA-related hearings Athey explained that he would be fazed out of the EDA hearings equation during the coming week to accommodate both his pending move to the state appeals court and the transfer of judicial authority over the EDA civil and criminal cases to other 26th Judicial District judges.

Athey was aware of Sharpe’s recusal and even commented that had he not been moving off the Warren County bench as the EDA cases progressed toward evidentiary hearings and trial he likely would also have recused for similar reasons to those stated by Sharpe, personal or professional familiarity with involved parties. He said he felt it acceptable to hear early motions prior to evidentiary testimony becoming involved in order to keep the cases moving forward in their early stages.

Athey’s primary rulings thus far have been to deny McDonald bond as a flight risk in her criminal cases and an order that EDA civil counsel produce the evidentiary basis for what is a currently a nine-defendant civil suit seeking recovery of a total of over $21-million dollars. That order led to the release into court files of public accounting firm Cherry Bekaert’s “working papers” from its contracted investigation of indicators of financial fraud in EDA operations.

Above, former EDA Executive Director Jennifer McDonald was arrested by Virginia State Police on May 24, making her the first person to face criminal charges stemming from the EDA fraud investigation. McDonald’s Administrative Assistant Michelle ‘Missy’ Henry, below, was the second person arrested in the case. Henry has been jailed since June 24 awaiting a once-delayed bond hearing. Photos RSW website

On Monday Assistant Commonwealth’s Attorney Bryan Layton said it was unclear how the coming judicial appointments might impact other scheduled EDA hearings this week. Motions in the EDA civil action are scheduled for the 9 a.m. docket Wednesday, July 17 and former EDA Administrative Assistant Michelle “Missy” Henry’s already once-delayed bond hearing is scheduled on the 9 a.m. docket Friday, July 19.

Henry was arrested by VSP on sealed special grand jury indictments on June 24. Retired substitute Judge Thomas Horne deferred a decision on bond for Henry on June 25, citing his unfamiliarity with the case. It now remains unclear if the ongoing judicial juggling may again delay a bond decision for Henry this week.

The Warren County Special Grand Jury empanelled to investigate potential criminality connected to the EDA civil case is also scheduled to meet through the latter part of the week.
In a not directly-related criminal case, former Front Royal Mayor Hollis Tharpe has a motions hearing scheduled Monday afternoon at 2:30 p.m. on his solicitation of prostitution misdemeanor case.

Ranking presiding 26th Judicial District Judge Bruce D. Albertson will be responsible for appointing judges to hear EDA-related cases that Sharpe has recused himself from. According to the Virginia Judicial website, active 26th District judges besides Sharpe and the soon-to-be-departed Athey, include Clark A. Ritchie, Kevin C. Black, Alexander R. Iden and Thomas J. Wilson.

However, it is possible Judge Albertson could appoint another substitute judge, including retired court officers who still help the district fill its judicial requirements when shortages and recusals occur.

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EDA Investigation Series Parts 9 – Bianchini 2nd interview



Lt Landin Waller interviews Roger Bianchini again.

In the second of two Front Royal Police interviews with yours truly, Royal Examiner reporter and editorial consultant Roger Bianchini on June 16, 2017, investigators Landin Waller and Crystal Cline revisit information given them in his initial interview around 10:45 a.m. that morning.

In the interim between the two interviews FRPD investigators have learned from the Warren County Sheriff’s Office that the rock-throwing vandalism Bianchini reported being told about by Jennifer McDonald the previous afternoon, had been reported by McDonald as occurring around 9 p.m. the previous evening. That was some five to six hours after Bianchini said the EDA executive director described the front-door vandalism of her home to him, leading him to believe the incident had occurred over the course of the previous week.

In interview two, Episode 9 of Royal Examiner’s series of FRPD investigative interview videos Bianchini returns around 3 p.m. to confirm the information given to investigators that Friday morning.

Perhaps ironically, McDonald’s lengthy FRPD interview concerning the EDA office break in, separated into three parts in this series, occurred Thursday afternoon, June 15, 2017, between 1:15 p.m. and 2:56 p.m., just prior to the meeting in her office Bianchini would to describe to FRPD the following morning.

Reference FRPD’s June 16, 2017, interview with EDA Marketing Director Marla Jones (Episode 7) in which Jones corroborates Bianchini’s story that he had a lengthy, closed door meeting with McDonald mid-afternoon, Thursday, June 15, and was not at the EDA office the morning of Friday, June 16, to be informed of the vandalism as McDonald attorney David Crump asserted he was during McDonald’s misdemeanor Filing a False Police Report trial of October 31, 2018. Jones’ interview was conducted around 1 p.m., between the two Bianchini interviews of June 16, 2017.

For some reason the prosecution did not call Jones to corroborate their main witness Bianchini’s story, though she was present to be called that Halloween Day and her FRPD interview was available to the prosecution. Also uncalled to testify at that trial that saw McDonald acquitted without having to present a defense were the FRPD officers who developed the false police report case.

As noted in the preface to Bianchini’s morning interview (Episode 8) video, in the coming year and a half the EDA executive director would come under increasing scrutiny by multiple levels of law enforcement, as well as by the Town of Front Royal, and eventually the County and her own EDA Board of Directors, culminating with her December 20, 2018 resignation; as well as apparent written acceptance of responsibility for the return of $2.7 million in misdirected EDA assets McDonald remains jailed without bond as a flight risk in the Fairfax Adult Detention Center, where she was transferred from RSW Regional Jail on June 11. She was arrested by Virginia State Police on four felony counts of fraud or embezzlement of EDA assets on May 24, 2019. She will be in court Monday, July 15, to enter pleas on those initial charges, and possibly on eight related financial felony counts she was served with on June 21.

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EDA in Focus

2017 EDA Investigation Part 8: FRPD questions Royal Examiner Reporter Roger Bianchini



Roger Bianchini is interviewed by FRPD Lt Landin Waller

FRONT ROYAL – Following the May 18, 2017 reported break-in at the Front Royal-Warren County EDA office located at 400-D Kendrick Lane, the Front Royal Police Department’s investigative division immediately began scrambling for clues, working to learn who would be angry enough to leave behind the scene that responding officers found in EDA Executive Director Jennifer McDonald’s office suite.

There were photographs of McDonald with the face scratched out on the board meeting room table, another photo of McDonald’s face with a knife stuck through the forehead in the seat she normally occupied during board meetings, as well as some defaced family photos, also on the meeting room table. One photo even had a racial epithet scrawled across the face of one of McDonald’s relatives.

According to the Front Royal Police Department investigative file, obtained through a Royal Examiner Freedom of Information Act (FOIA) request, McDonald also told police that May 18th morning, that a week earlier, on May 11, 2017, she arrived at work to find a knife lying in her desk chair. There was no signed of forced entry, nor was a call made to police.

Police said there was also no sign of forced or unauthorized entry a week later on May 18, nothing was initially reported missing, and the case remains unsolved.

McDonald told investigators that she wanted to keep news about the incident “quiet”. The FRPD did not issue a press release regarding the alleged break-in and began working the case.

Around 10:30 a.m. the morning of Friday, June 16, 2017, Royal Examiner Reporter Roger Bianchini was asked to come to the Criminal Investigation Division (CID) of the Front Royal Police Department, to discuss his knowledge of the alleged break-in at the EDA and McDonald, someone he had long covered as a local reporter.

As the interview opens, Bianchini explains how through online research Royal Examiner Editor Norma Jean Shaw and he first began to suspect that Truc “Curt” Tran was tied to the proposed regional justice academy and was likely the benefactor who had offered up a no-strings-attached $6 million gift to build the facility in Warren County.

Over the course of the interview, he would clue Investigators Landin Waller and Crystal Cline into the fact that McDonald had informed him, sometimes through texts, of a series of alleged trespass events at her home, including a stone-throwing vandalism through a front door glass window reported to him during a closed-door discussion the previous afternoon in her EDA office between 3 p.m. and 4 p.m., Thursday, June 15.

In Part 2 of this interview, investigators invite Bianchini back around 3 p.m. that afternoon to confirm information he provided in the first interview after a stunning call from the Warren County Sheriff’s Office. That call notified FRPD investigators that the sheriff’s office had responded to the vandalism described by Bianchini shortly after 9 p.m. the previous evening when it was reported by McDonald as occurring some five hours after the reporter said he was told about it.

Through a series of events that would take over a year to unravel, the EDA executive director would come under increasing scrutiny by multiple levels of law enforcement, as well as by the Town of Front Royal, and eventually the County and her own EDA Board of Directors, culminating with her December 20, 2018 resignation, as well as apparent written acceptance of responsibility for the return of $2.7 million in misdirected EDA assets.

Next in the series:

Investigators invite Bianchini back in to confirm information he provided in the first interview after a stunning call from the Warren County Sheriff’s Department.

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EDA moves to improve financial accountability, communications & legality



The new-look EDA includes from left, Dan Whitten’s tie, Greg Harold, Tom Patteson, Doug Parsons, Gray Blanton, Bruce Drummond, Ed Daley, Jeff Browne and Gretchen Henderson’s hand. Royal Examiner Photos/Roger Bianchini. Video by Mark Williams.

On the job for under two months himself, Executive Director Doug Parsons greeted Greg Harold and Jeff Browne to their first meeting as members of the Front Royal-Warren County Economic Development Authority Board of Directors shortly after 8 a.m., Friday morning, June 28.

And it didn’t take long for the new members to get their feet wet as the newly-tooled EDA – Executive Director Parsons (on the job since May 8; his Administrative Assistant Gretchen Henderson (May 6); Harold and Browne (appointments announced June 18) – attempts to right itself in the wake of a $21 million financial scandal that has seen criminal charges brought against both former Executive Director Jennifer McDonald and her Administrative Assistant Missy Henry, both of whom remain jailed without bond.

In fact legal consultation regarding the EDA’s nine-defendant civil litigation and Front Royal’s recently-filed lawsuit seeking recovery of an estimated $3 million in Town assets from the EDA, as well as ongoing accounting, loan and debt service issues were two of four topics of a closed session that lasted just short of four hours.

And while there were no announcements about EDA litigation following the closed session’s re-adjournment to open session at 12:42 p.m. there were a series of Resolutions and motions approved designed to increase financial accountability and oversight and to begin marketing some EDA properties seen as financial Albatrosses. Those properties include the vacant warehouse at 426 Baugh Drive, a property at 404 Fairgrounds Road and the former Stokes Mart property now housing the Main Street Market at 506 East Main Street and a currently damaged and un-occupiable three-unit residential apartment building.

In fact the legal tightrope the EDA is walking regarding State Codes that prohibit EDA’s from running businesses or acting as residential landlords was a topic of discussion during the initial open session that began at 8 a.m. Following Parsons’ Executive Report reference to the EDA’s payment of temporary motel housing for the three displaced tenants of the residential apartments in the wake of a tenant vehicle accident resulting in a crash into the building, board member Ed Daley noted the State Code prohibition on certain activities that would place EDA’s in direct competition with the private sector.

Daley worried that the EDA’s initial funding of those three tenants temporary housing gave the appearance the EDA was the residential landlord of the Main Street Market apartment building. However EDA Attorney Dan Whitten explained that the Main Street Market owners, Jeff and Ginny Lesser, were actually the residential building landlords. The EDA leases the entire property to the Lessers with an option to buy, and the Lessers’ lease includes their control of the residential building at the corner of the property. However it was also noted that the Lessers pay the EDA that collected rent, further muddying an already murky business arrangement.

Parsons also said the insurance company of the tenant whose brakes failed causing the crash into the building had agreed to reimburse the EDA for the temporary housing costs at the nearby Quality Inn. Those costs are $1100 dollars per month.

Doug Parsons, left, addresses questions during his executive director’s report Friday morning, June 28.

Responding to a board question, Parsons said that while he did not have a signed agreement to that effect, he did have an email from Progressive expressing its intention to cover those temporary housing costs. It was suggested a signed agreement might firm up that commitment legally.

Also during the afternoon portion of the open meeting the EDA board minus absent Mark Baker, by a 6-0 vote approved Daley’s motion to schedule a special EDA board meeting to prepare for a joint meeting with the Warren County Board of Supervisors and Front Royal Town Council. A date for the three-way joint meeting has yet to be set.

See the above-cited discussions and your new-look EDA at work on a variety of fronts in the linked Royal Examiner video:

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McDonald draft statement goes public – another side of the EDA story



Jennifer McDonald planned to make one more public appearance to tell her side of the story to municipal government – her May 24 arrest derailed that plan. But now we have a public release of what she planned to say. Royal Examiner File Photos/Roger Bianchini

A draft of comments former EDA Executive Director Jennifer McDonald planned to deliver at a municipal meeting, likely the Warren County Board of Supervisors, outlines her side of the story regarding multiple allegations at the base of the EDA civil litigation filed March 26. McDonald is the pivotal figure in the nine-defendant lawsuit seeking recovery of what has climbed to over $21 million dollars in allegedly misdirected EDA assets.

McDonald’s May 24 arrest by Virginia State Police on four felony financial fraud and embezzlement charges aborted that planned public defense in front of one of the boards now being criticized for a lack of oversight of EDA operations and McDonald’s role in those operations.

The McDonald draft statement was published June 20th on Kristie Atwood’s “One Mad Mother” Facebook page. For some time Atwood has been publishing materials on her Facebook page that would seem most likely to have been leaked to her from McDonald. Atwood would appear to have a common cause with McDonald – to make the Warren County Administration and Board of Supervisors look bad – if for differing reasons: Atwood has threatened a multi-million dollar lawsuit against the County over building permitting issues with her home, while McDonald asserts many of her actions now cited as fraudulent in nature were, in fact, approved and/or known to EDA and County officials and allowed to proceed.

Kristie Atwood has been a vocal critic of county government in the wake of county permitting of unsatisfactory work on the home she was having built. On June 20 she published the draft of McDonald’s planned statement to public officials telling her side of the EDA story.

McDonald’s draft comments were also hand delivered to this reporter “off the record” by McDonald during a meeting at Samuels Public Library the month prior to her arrest. However, with Atwood’s social media publication of the identical draft statement, though my copy had a sexually-tinged paragraph posted by Atwood crossed out for deletion, Royal Examiner sees an “on the record” opportunity to explore portions the former EDA executive director’s explanation of some of her actions cited as fraudulent by her former employer based on the Cherry Bekaert “working papers” report on indicators of fraud in EDA finances and related real estate transactions.

This initial look will summarize an overview of the five-page statement and then focus on its ITFederal references.

The Blame Game

The gist of McDonald’s draft statement echoes with some specificity her civil attorney Lee Berlik’s written response to the Complaint against his client in the EDA civil litigation:

“The Warren EDA … is engaged in an attempt to smear Ms. McDonald by blaming her for every bad decision made by the Warren EDA board over the last several years and turning business deals the Warren EDA now regrets into implausible conspiracies,” Berlik wrote.

While McDonald does not directly address the $52,000 or more in credit card payments made under the auspices of Afton Inn contractual work that appears to have initially landed her in jail, she does comment on social media references to related allegations in the EDA civil litigation.

“Now I get to read the Facebook comments about how my house, credit cards, and essentially all my bills are paid off and that is simply not true. I still have a mortgage that I have held since 2004 when I built my house, I have a mortgage on rental properties, I have credit card bills, I have all of the bills a normal person has and then some,” McDonald wrote, adding of the social media frenzy she was initially exposed to in the wake of the EDA civil litigation filing of March 26, “This is all based on one-sided opinions, not facts. I continue to be harassed by the Internet crowd, threatened by folks in local stores, and stalked by the crazies and for what?”

From the perspective of an EDA board that continued to support her through November 2018, the “what” is an orchestrated, years-long conspiracy going on under their noses involving multiple projects they, at least in some cases like ITFederal and Workforce Housing, as a board approved the expenditure of EDA resources on.

Why were these people laughing? On April 27, 2017, then-EDA Board Chairman Greg Drescher and Jennifer McDonald find mirth in a motion approving a $445,000 purchase of the 3.5 acre Workforce Housing parcel that was supposed to be a $10 gift. The EDA civil suit cites the property as a $650,000 loss achieved with the Nov. 28, 2018 EDA sale of the property to believed Aikens Group affiliate Cornerstone LLC for $10 – ironically the price the EDA was initially supposed to pay for the property as a ‘gift’ from McDonald relatives in September 2014.

McDonald calls some of these allegations against her, including but not limited to the ITFederal project and other Truc “Curt” Tran-related land moves and the Workforce Housing fiasco and its ever-fluid developmental and cost scenarios, a result of “selective amnesia” on the part of EDA board members and county officials. As noted above, from her perspective that amnesia revolves around the fact that many projects cited as evidence against her, were approved by the EDA Board of Directors with the support of the Warren County Board of Supervisors and/or Front Royal Town Council.

In its civil filing the EDA counters that many of its worst decisions were based on misinformation presented to it by McDonald. But no one from McDonald to her EDA Board of Directors to County or Town officials who gave the okay to various aspects of these projects, explains why virtually no one involved at the EDA or municipal levels did due diligence to get at the truth of what was being presented to them about various projects they were being asked to support with hundreds of thousands and even millions of dollars in investments – whoever it was that was doing that presenting.

McDonald civil cases attorney Lee Berlik wrote on the first page of a defense motions filing of April 16, emphasis in context, “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.”

Enter the Dragon

In the ITFederal case the lack of due diligence appears to be at least in part the source of origin bringing the company forward – Sixth District Congressman Robert Goodlatte – that absolved ALL involved, from McDonald to her EDA board, to the town council and county board of supervisors save one former councilwoman, from any semblance of due diligence before handing, not only the Royal Phoenix Business Park (the remaining 117 acres were used as collateral on the $10 million dollar EDA/ITFed loan from First Bank & Trust), but also the “farm” over to Tran essentially for one dollar, American, AND the Goodlatte-suggested $10 million dollars for ITFederal operational expenses.

This way to prosperity then-Congressman Robert Goodlatte promised of ITFederal landing at the Avtex Brownfield site as early as September 2014, when the 147-acre Royal Phoenix site was released for development by the Environmental Protection Agency.

“At the ceremony for the release of the Avtex site (September 2014), Goodlatte (then-U.S. Congressman, R-6th) mentioned to several of my Board members what a great opportunity ITFederal would be for the Avtex site,” McDonald wrote in her draft statement, adding, “We started work immediately to make sure we were doing everything in our power to get this business to Front Royal that we thought would create 600 jobs and a $40 million investment in this community. Everyone was ecstatic that we had finally landed what we thought to be the best project that had come our way in over 20 years,” McDonald writes in her draft statement.

And it was not McDonald, but rather the EDA Board of Directors that authorized a 30-year payback term for Tran to the EDA when the Town “Bridge Loan” was extended to Tran from September to November 2015; while the EDA has a seven-year balloon payback in full arrangement with First Bank & Trust achieved in December 2015. The latter is an arrangement, which as we have reported previously, EDA/County Attorney Dan Whitten explains the EDA hopes to refinance at the seven-year mark allowing it to have Tran continue to cover its bank payments over the life of its 30-year ITFederal loan – a loan McDonald attorneys have pointed out Tran remains current on and within reduced benchmarks approved by the EDA Board of Directors.

What McDonald continues to describe in her defense is a virtually blank check given the ITFederal CEO for every idea that might pop into his, or someone’s, head – like the above-referenced “farm”.

“In fact, the Board not only agreed to give Mr. Tran the land (reporter’s note: 30 acres publicly valued by the EDA at $2 million dollars) for $1 if he met certain milestones, but they agreed to help in the purchase of a farm for Mr. Tran, extend a $10 million loan to Mr. Tran, an incentive package to Mr. Tran, and breaks on utility tie ins. All of this in an effort to make sure the community kept the 600 jobs and the $40 million investment as promised,” McDonald wrote.

An aerial view of the believed ‘Front Royal Farms’ property below the treeline in middle of photo that was purchased by ‘Curt’ Tran, just west of the FRLP property. The Tran ‘farms’ parcel comprises about 80-plus acres in the lower, central portion of photo stretching from Happy Creek Road and the RR tracks to the left. Royal Examiner File Photo/Roger Bianchini Courtesy of CassAviation

Now this is my favorite part of McDonald’s statement – her description of how certain reduced benchmarks on the ITFederal $10-million loan were agreed upon – kill the messenger, aka blame the media (they might be telling the truth):

“When Mr. Tran was being bashed in the local news he came to Mr. Drescher (EDA vice chair) and Mrs. Wines (EDA chair) with a letter in hand stating he was ready to move on to a different community because of the bashing UNLESS (EMPHASIS in context) the EDA considered reducing the scope of his obligation. Mr. Drescher and Mrs. Wines took his letter and concerns to the Board and they ALL agreed to reduce the scope of his project,” McDonald writes (why wasn’t I playing poker with these people back then?!?)

The result of that EDA board-approved reduced project obligation is the thus far empty one-story, 10,000 square foot building standing in lieu of the promised three-building 50,000-plus s.f. complex promised to be the foundation of a $40 million dollar investment resulting in 600-plus high-paying tech industry jobs first promised in a press release from Congressman Goodlatte’s office; not to mention ITFederal principal Truc “Curt” Tran sitting on the bulk of a $10 million dollar loan he has about 27 years left to pay off, with only the apparent necessity he spend about $2 million of it here, and provide 10 jobs of indeterminate wage in the 10,000 s.f. building within the next year.

As late as Dec. 20, 2018, even McDonald critic Tom Sayre, 3 months into civil defamation litigation with the EDA executive director, was proud to pose with ‘Curt’ Tran on site behind EDA headquarters.

In her statement McDonald aggressively counters the EDA civil litigation inclusion of that $10 million at the financial center of fraud allegations revolving around her.

“Now here we stand several years later and the Board has changed, the project has not been completed, and everyone wants to point the fingers at yours truly. I have kept my mouth shut for many years now with all of the bashing, hatred, and down-right bullying that I have endured because of the decisions made, not by me, but by the EDA Board, Town Council and Board of Supervisors. My role as Director was to take the beating for everyone and the decisions that had been made and I did just that UNTIL the accusations of embezzlement, malfeasance, moral turpitude, etc started to role.”

Of the inclusion of that $10 million EDA loan to Tran being part of an alleged, far-reaching conspiracy to enrich herself and her family, McDonald writes, “Not a penny of that money came to me or anyone in my family. 100% of the money went to ITFederal at the closing. All documents were signed by Patty Wines (not Jennifer McDonald). The mere fact that anyone sitting on the EDA Board, Town Council, or Board of Supervisors would even suggest otherwise is pathetic and absurd.”

But again, what McDonald fails to explain, as has everyone else she lists as involved on the EDA, County and Town side (other than Bébhinn Egger), is whether ITFederal and its CEO were EVER in a position to achieve what was being promised, initially by the aforementioned and since-retired Sixth District Congressman Robert Goodlatte. For a small amount of online research, as done by this reporter and Norma Jean Shaw in 2016 would reveal a company, not with a $140-million dollar Defense Department contract ballyhooed by Goodlatte and McDonald, but rather a company struggling for at least five years to realize $35,000 to $50,000 in private sector contracts, among other issues.

Above, an early architectural drawing of the first planned ITFederal building at the Royal Phoenix site totaling about 27,000 s.f. – the reality, below, is a one-story, 10,000 s.f. building with phase one of a nice ‘Western Bypass’ connector road built by the Town headed its way.

Cherry Bekaert details what Royal Examiner’s news staff discovered in 2016**:

“Our research of ITFederal and other associated entities from the Business Plan (ITFederal’s for Royal Phoenix site) indicates the companies are very small (likely less than 10 employees). They maintained unsophisticated websites with little to no physical office locations and TRAN’s home residence appears to be the main headquarters of ITFederal and VDN (a second Tran company, VDN Systems). ITFederal, VDN and ACRC (a third Tran company, American Commonwealth Regional Center) appear to be shell companies with little to no invested capital and questionable customer base representations e.g. spouses and/or near relatives (“Katrina Tran” and “Tran CPA”) holding executive positions,” page 40 of the Cherry Bekaert summary states.

In fact, the EDA fraud investigator reports that “startup capital” for ACRC’s Virginia Information Technology Project, LLC – apparently the ITFederal Royal Phoenix project – was listed as $2,022,000, $2 million of which was the publicly-stated value of the 30 acres gifted to ITFederal behind closed doors by the EDA for one dollar.

“Hence, the startup capital represented by TRAN in the Business Plan appears to be little more than $2,000 cash and $20,000 in other current assets, both of which were unverified,” Cherry Bekaert reports.

And of that much-ballyhooed $140 million federal contract with the Nuclear Regulatory Commission that was to be the basis for ITFederal’s $40 million dollar, 600 high-paying tech jobs investment in this community, Cherry Bekaert observes, “… our research indicates ITFederal LLC and VDN Systems, Inc, both controlled by TRAN, were listed … with one award from the Nuclear Regulatory Commission for approximately $5,000 in 2014, not the $140,000,000 represented in the Business Plan.”

SURE, let’s give him ALL the money he wants, or doesn’t want – Congressman Bob-a-lot and Jennifer said it’s a GOOD idea!

So while there may be plenty of blame to go around; and McDonald may have developed her own “selective amnesia” as to what unauthorized or self-serving financial or real estate moves ostensibly on behalf of the EDA she may have made, it is McDonald who until June 24 sat alone in jail without bond. And now that there has been a second arrest, it is one downward on the EDA/Municipal hierarchy, rather than up as McDonald seems to assert she believes the case should be.

“Based on suspicion and belief” from public comments at County and Town meetings in the wake of the March 26 filing of the EDA civil litigation, it is an opinion a significant number of people in this community share.

** FOOTNOTE: Evidence within the EDA financial investigative report notes that Goodlatte’s office called McDonald in an effort to silence the 2016 media “bashing” of ITFederal. It reports a consequent call from McDonald to WZRV owner Andrew Shearer about the matter, which perhaps coincidentally, almost immediately was followed by the termination of Norma Jean Shaw as station news director – Shaw was on the Goodlatte side of the WZRV news team exploration of ITFederal – and a terse email from Shearer shutting down this then-WZRV new team member’s inquiry to ITFederal officials about the company’s contract base. So the year after his sudden lockout from the paper he helped create, Bianchini was released from the WZRV news team about a month or so after Shaw.

The then out-of-work investigative news team was soon reunited at the newly created Royal Examiner online newspaper. As this reporter wrote in one of his first stories for Royal Examiner (October 27, 2016) revealing the one dollar giveaway of the 30-acre ITFederal parcel: “One of the best-kept secrets in Front Royal and Warren County seems to be the cause of a year-long delay in federal approval of the FIRST commercial property sale at the remediated Avtex Superfund site in Front Royal. In fact, we had to start a new online news source just to get that reason published and into the public conversation – just kidding, sort of …

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Decision on former EDA Administrative Assistant bond deferred to mid-July



In a devastating decision for at least 12 family members and friends present for her first court appearance since being arrested the previous day on two felony charges related to the EDA financial scandal, a decision on bond for former EDA Administrative Assistant Michelle “Missy” Henry was deferred by retired substitute Judge Thomas Horne on Tuesday morning (June 25).
Consequently Henry could remain jailed until mid-July though Horne left open the option of expediting a bond hearing if Judge Clifford L. Athey Jr., who has thus far handled the other civil and criminal cases related to the EDA investigation, sees fit to.

A hearing date of July 19 was set to revisit Henry’s bond, with an option for a July 11 date possible. Circuit Court Deputy Clerk Janice Shanks told the court that Athey would “be in the building” on July 11, but that circuit court was not scheduled that day. However, it appears Athey could convene court July 11 if he thought Henry deserved an earlier consideration of her bond request.

It appears Missy Henry will remain in jailhouse garb until the judge thus far handling EDA matters, Clifford Athey Jr., returns to the circuit court bench for one of the final times in July. Photos/RSW Jail website

Athey is in the midst of preparing for a move to the Virginia Appeals Court in September as Warren County prepares for a judicial juggling act. That juggling includes current Circuit Court Clerk Daryl Funk’s move to the bench in Juvenile and Domestic Relations Court and current J & D Court Judge William Sharpe’s move to the Circuit Court bench. However, it was noted during Tuesday’s hearing discussion that Sharpe would likely recuse himself from EDA cases because he knows involved people.

And speaking of involved people, Assistant Commonwealth’s Attorney Bryan Layton argued that like her former EDA boss Jennifer McDonald, Henry should be denied bond. Athey twice denied bond to McDonald, citing her as a possible flight risk were she to have access to even 10% of the allegedly misdirected EDA assets now cited at over $21 million.

Layton informed Judge Horne of the scope of the EDA civil litigation seeking recovery of those millions of dollars. He noted that among the 12 felony indictments McDonald has thus far been served, wire transfers were involved which he noted “Henry normally assisted in” though he did observe that Henry has not been charged related to those McDonald wire transfer-related indictments.

As indictments mount up for her role in the sometimes mysterious workings of the EDA over the past five years or so, Jennifer McDonald has seen a second related arrest, but not of anyone with decision-making or oversight authority over the EDA’s executive director. Courtesy RSW Jail

What she is charged with Layton told the court, is involvement in the handling of one property the EDA purchased and made a small business loan to in order to help finance a retail operation in. It is involvement Layton concluded was “a betrayal of the public trust” in prefacing his request that Henry continue to be held without bond on the two felony financial charges against her.

UPDATE: Second former EDA staffer arrested on embezzlement charges

“The prosecution is trying to shoehorn her on to collateral charges against the other, main defendant,” attorney Ryan Nuzzo said in rebutting Layton’s portrayal of his client.
Nuzzo noted that the dates of the charges related to the B&G Goods transactions at the base of his client’s case were between October 1 and December 30, 2016 and September 1, 2014 to December 30, 2016.

“These are very old actions …If she was a flight risk she would have fled by now,” Nuzzo told the court.

Nuzzo pointed out that one family member not present for Henry’s Tuesday morning hearing was her husband Garnett. That absence was due to medical issues with his back in the wake of a backhoe accident from which he has recurring symptoms. His client, Nuzzo told the court, was instrumental in helping her husband through the “bad spells” he encounters as a consequence of that accident. Much of that assistance comes in the home Missy and Garnett Henry built and have lived in since 1990, Nuzzo pointed out of his client’s long-time ties to this community.

Her attorney also argued that being free on bond would allow Henry to better assist in preparation of her defense against the charges. Nuzzo told the court Henry has no previous criminal record and had been cooperative whenever she had been called before the Special Grand Jury looking into the EDA matter.

Ironically it is the same Special Grand Jury that handed down the two sealed, felony indictments against her.

RSW Jail Superintendent Russ Gilkison said that following her bond hearing Tuesday, Henry was transferred to the Prince William Adult Detention Center. The move, similar to McDonald’s June 11 transfer to the Fairfax County Adult Detention Center, is called a courtesy hold and does not cost the transferring facility any additional housing costs above what would be incurred if the inmate remained housed where they were booked.

As with McDonald the move is to allow a more normalized experience of incarceration for Henry. Due to the emotionally volatile and high-profile nature of the EDA case involving the alleged misuse of public funds for personal gain, McDonald had been held in protective custody isolation from the time of her May 24 arrest until her June 11 transfer from RSW. Responding to a question, Gilkison said the fact Henry and McDonald are co-defendants in that same high-profile case factored into the decision not to transfer them into the same facility.

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