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EDA in Focus

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

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‘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:

Sheriff, ITFed principal Tran, Donnie Poe named with McDonald in EDA civil suit

“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:

Defendant attorneys cite vagaries, legal conflicts in EDA civil suit

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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EDA in Focus

EDA Reform Committee receives audit update; reviews properties

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Fork District Supervisor and EDA Reform Committee Chairman Archie Fox mulls the Sept. 12 committee agenda while Town Council Clerk Jennifer Berry preps for the start of the meeting. Photo by Kim Riley. Video by Mark Williams, Royal Examiner.

FRONT ROYAL — The Reform Committee of the Front Royal-Warren County Economic Development Authority (EDA) learned during its September 12 meeting that the Fiscal Year (FY) 2018 audit of the authority’s financials — which currently are at the center of a major fraud and embezzlement scandal — should be ready by year’s end.

EDA Executive Director Doug Parsons told committee members that in-house accountants are finished reviewing the proposed adjusted journal entries on the asset side of the balance sheet done by investigative public accounting firm Cherry Bekaert, and now are working to finish the adjusted entries for debt on the capital side of the balance sheet.

“It’s going to be their best effort to represent what has happened,” Parsons said. “We are hopeful by September 27 that they’ll have everything ready to go … for the audit,” which will be completed by the EDA’s auditing firm, Yount Hyde and Barbour (YHB).

The EDA Board of Directors first will need to sign off on what gets submitted by the accountants to YHB, which will conduct the audit and inform the EDA about its current financial standing.
Fork District Supervisor and EDA Reform Committee Chairman Archie Fox asked whether, at the end of the audit, the members would know if the EDA was solvent. “Is that a fair question?” he asked.

“We have cash,” answered EDA Board Chairman Ed Daley, “but we’re like the federal government. If somebody called the federal government and said, ‘We want you to pay all of your bills today,’ the federal government’s in trouble; they can’t do it. We’re in that type of a position where what we owe, our liabilities, exceed our assets, but we have cash.”

In fact, according to Parsons, the EDA is $41.9 million in debt with roughly $1.8 million in the bank.

Front Royal Town Councilman Jacob Meza, another reform committee member, asked what the plan is for getting the EDA back to a normal operating level.

Parsons said EDA properties will be sold in order to recover as much taxpayer money as possible, and funds should be recouped through lawsuits. He said most of the EDA’s debt is covered.

“The First Bank and Trust IT Federal Loan, for example, is covered by Mr. Tran’s payment. From cash flow we’re covered on that loan and that’s big; that’s a pretty good-sized loan and that’s a huge payment. Thank goodness he’s making his payments faithfully,” said Parsons.

Going forward, Daley said that one of the future conversations to be had by the EDA Reform Committee must regard the role the EDA should play in the acquisition of properties “and how speculative, if you will, we should be.”

He suggested that the EDA, Town Council and Warren County Board of Supervisors come up with a recommendation around that idea.

During his updates, Parsons also provided committee members the status of several EDA properties, including 404 Fairground Road.

“We’ve been marketing that property and we have a fully signed and executed letter of intent to sell that property and we’re working with the client on a sales contract,” Parsons said, adding that the buyer wishes to remain anonymous until the contract and subsequent sale are finalized.

A potential buyer also exists for the EDA’s warehouse at 426 Baugh Drive, where Parsons said, “We have a very interested party that we are in negotiations with at this time.”

It’s an entirely different situation for the EDA’s properties at 506 and 514 E. Main Street, which are the old Stokes Mart and nearby apartment building, which remain on the market.

“We thought we had a buyer, but they backed out,” said Parsons. “We will continue to market those two properties.”

Meza asked if there’s a strategy that the EDA has adopted to select certain properties for sale and for what reasons.

“If I had a magic wand,” Parsons said, “the ones I’d want to sell first and foremost would be Stokes Mart and the apartment building, which the EDA has no business owning, in my opinion.”

And while 404 Fairground Road is a fine property, Parsons explained it also isn’t in the realm “of what EDA should be owning and marketing in an effort to create new jobs and bring in a new tax base.”

Comparatively, Parsons said that the EDA’s 426 Baugh Drive is “exactly the kind of property the EDA should own and I’m glad that we do; of course the idea there is to bring in a major employer to make a significant contribution to the tax base so we’re actively marketing that property. We have the ability to be a little discerning about who we sell it to and make sure we get the most bang for our buck.”

Daley added that it’s very important to the EDA Board that the Baugh Drive property is bought for its intended use, which should be “some type that’s going to develop jobs and the tax base.”

Meza said it seems that the EDA has put its properties into two categories — to get rid of the ones that it shouldn’t hold on to and to identify the most strategic properties to market to companies. He also asked if there’s another category, like one that’s designed to maintain EDA solvency by just selling off properties and keeping the monies.

While that is part of the overall strategy, Parsons said “it’s not a desperate fire sale for all of the properties.” Instead, there’s a “sliding scale” of priorities or more of a willingness to be more discerning about who buys the properties. “You can only sell them once,” he said.

Other EDA Reform Committee members present Thursday were Town Attorney Doug Napier, County and EDA Attorney Dan Whitten, County Administrator Doug Stanley and Council Clerk Jennifer Berry.

Watch the Royal Examiner video to hear the discussion between Whitten and Meza about whether the EDA can be dissolved or file for bankruptcy. Hint: Bankruptcy for such an authority as the EDA isn’t legally permitted, according to Whitten.

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EDA in Focus

Exploring Warren County’s EDA financial scandal – How did it happen?

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The Warren County Courthouse continues to be ground zero for legal consequences of the EDA financial fraud investigation. Royal Examiner File Photos/Roger Bianchini

As the final weeks of the summer of 2019 arrive in the northwestern Shenandoah Valley, one small-town, rural community remains conflicted, perhaps even collectively traumatized by a financial scandal that has carried the names Front Royal and Warren County across Virginia and occasionally beyond into major media markets across the country.

In September, less than six months after civil litigation was filed seeking recovery of millions of dollars of allegedly misdirected economic development assets there have been:
– forty-one criminal indictments served against five defendants related to alleged financial fraud within the local Economic Development Authority;

– four surviving EDA civil defendants and their companies have been sued for the return of up to $21 million dollars of those economic development assets;
– a long-time, generally well-thought-of sheriff is dead, possibly on the eve of himself being criminally indicted after being named one of the EDA civil suit defendants;
– the Town of Front Royal has filed a civil suit against the EDA and its former executive director that has climbed from an initial $3 million figure to as much as $15 million;
– a Special Grand Jury looking into potential criminality surrounding all of this has asked for a six-month extension to March 31, 2020, to continue its work begun in early April.

We must remember that everyone who has been charged civilly and/or criminally will have their day in court with an opportunity to give their side of the story and claim misunderstanding or innocence. But human nature being what it is, fingers have been pointed – sometimes rationally, sometimes not – and an ongoing, collective query remains on the lips of a community – whoever and however, how and why did it happen?

“We’re here tonight because there was a catastrophic failure that allowed criminal embezzlement and rampant mismanagement to flourish,” recently-elected EDA Board of Directors Vice-Chairman Jeff Browne said on behalf of the EDA to open the August 27 joint meeting of County, Town and EDA boards and staffs.

That is the short answer.

“None of us ever want to see that happen again. The failures can be grouped into two categories … failed procedures and failed oversight,” Browne added of the outline for a path forward.

EDA Vice Chairman Jeff Browne, at far right end of the not-quite-round-table meeting of County, Town and EDA officials on Aug. 27 – Browne’s opening statement outlined the primary institutional failures that facilitated what has developed into a multi-million dollar municipal and economic development scandal.

What led to those catastrophic failures of people and processes will take a bit longer to unravel.

While ultimate legal responsibility will be the province of the civil and criminal court systems, likely even at the federal level on the criminal side, there can be little doubt that large amounts of money designated for public use related to economic development in Front Royal and Warren County were moved haphazardly with little, if any consideration to due diligence. LINK-Criminal and non-criminal dereliction of public duty: Where might they apply in the EDA financial scandal?

One can only wonder where the pertinent question that might have prevented it all was from a total of 19 elected and appointed board members from the Town, County and EDA over the past five-plus years. It wasn’t a difficult question – “Is what I’ve been told to justify a large investment of public funding, let’s say $10 million, verifiably true?”

Oh, that’s right – that question WAS asked three years ago.

In October 2016 Bébhinn Egger, far right, confronted EDA Executive Director Jennifer McDonald about claims being made about the business model of ITFederal and its contract base, as well as the apparent presence of an EB-5 Visa funding stream to ITFederal. McDonald was sparse on detail in response to those questions. However, Egger’s colleagues seemed uninterested in answers.

However when first posed in mid-2016 by a lone municipal voice, Town Councilwoman Bébhinn Egger, as well as the Royal Examiner news staff, it was initially ignored and/or vilified by every other involved public official.

The vilification was that “negative press” was threatening the successful conduct of EDA business, particularly ITFederal business. It is a business now asserted in court filings as having fraudulently received the largest single chunk, $10 million, of EDA assets being sought for recovery in the EDA civil litigation.

But three years ago then Councilman Bret Hrbek, a recent if unsuccessful applicant for a seat on the EDA board of directors, seemed to speak for a distinct town council majority of five and the mayor when he suggested that the question about the truth of what was being presented to this community about ITFederal was counterproductive.

Why?

Because that “negative press” being generated by Bébhinn Egger and Royal Examiner about the ability of Truc “Curt” Tran and his ITFederal LLC to live up to the promised $40 million investment creating 600 high-paying tech industry jobs in this community had led the ITFed CEO to consider taking his ball and going home – or rather to take his LLC trumpeted as the first commercial redevelopment client at the Avtex Brownfield site, and go elsewhere.

Councilman warns ITFederal CEO may bail over questions

But would that have been such a tragedy – particularly before the Town offered its initial one-month, twice-extended $10-million “bridge loan” that enabled the EDA to finalize its $10-million
loan to ITFederal through First Bank & Trust?

From left, Bret Hrbek, Gene Tewalt and Bébhinn Egger at late November 2016 council meeting; Hrbek was the harshest council critic of Egger’s or media questions about the ITFederal project, warning at that meeting that those questions might cost the town and community the ITFederal project.

According to documentation in the Cherry Bekaert EDA financial fraud investigation, Tran listed ITFederal assets of $2,020,000 as collateral for the $10-million bank loan facilitated through the EDA. But $2,000,000 of that amount was the value of the 30-acre property at the Avtex site/Royal Phoenix Business Park which the EDA “gifted” behind closed doors to Tran for $1 – yes, one dollar American – after public discussion of a $2-million dollar sale price.

Red Flag?

Royal Examiner thought so in its first month of existence when it broke the news of that one-dollar, 30-acre gift to ITFederal leading to a year’s delay in approving the transaction by federal oversight authorities.

Feds OK ‘Dollar Special’ on first Avtex property sale

As noted in the linked October 27, 2016, Royal Examiner story, approval from the U.S. Justice Department to remove the ITFederal parcel from a bankruptcy court-ordered $2.06 million lien on the Royal Phoenix/Avtex property came on September 23, 2016. That was just over a year after the request to allow the one-dollar sale was sent out by then EDA/County Attorney Blair Mitchell on September 18, 2015. The stated rationale was that facilitating the ITFederal project with a give-away of land valued at $67,000 an acre would jump start other full-price purchases at the site.

“This 30 acres has been sold for $1.00 in order to get a developer to come in and begin the process of other buyers,” Mitchell wrote, adding, “The EDA already has a buyer for a 3-acre parcel to sell at $67,000 per acre, so selling this parcel as a way of breaking the ice will pay off in the long run. While the $1 will not be used to pay down the $2,060,000 lien, sales proceeds from future sales will be applied toward the paydown of the secured debt.”

Three years later we see how that plan worked out:
1/ no three-acre sale to CBM Mortgage at Royal Phoenix;
2/ no other land sales at Royal Phoenix;
3/ no $40 million investment or any jobs created by ITFed at the Royal Phoenix site.

Well ITFederal remains on the 30 Royal Phoenix acres gifted to it by the EDA for a dollar, but the $40 million investment and 600 jobs seem to have hit the highway, along with our Sixth District Congressional representative credited with bringing the project here.

In fact per the ongoing sweetheart agreements he was dealt by the EDA, it appears Tran may invest about $2 million to create an unoccupied 10,000 s.f. building at his “get the redevelopment ball rolling” gifted acreage with no further obligations other than that he have a certificate of occupancy issued by the middle of 2020 and continue to make monthly payments for the balance of 30 years on that $10 million bank loan through the EDA.

And the Cherry Bekaert investigation verifies what Royal Examiner and Bébhinn Egger were saying at the time – that there was no evidence the $140-million dollar federal government contract ballyhooed by Tran, his D.C. political sponsor Robert Goodlatte and EDA Executive Director Jennifer McDonald as the basis for ITFederal’s investment here ever existed.

A ‘Perfect Storm’ of silence raises questions about 1st Avtex client

The Perfect Storm of Silence, Part 2: a cattle ranch, $10-mil & …

How did it happen – not just the ITFederal and Workforce Housing debacles that first attracted this media outlet and Councilwoman Egger’s attention – but all of it, the 16 specific project allegations cited in the Cherry Bekaert working papers report and summary?

Work on Afton Inn redevelopment across the street from Town Hall stopped after the project was cited as a means of embezzling EDA assets in the March 26 EDA civil suit. Town officials have reported the 2 E. Main St. development group unnamed in the financial scandal, as anxious to get the project going again.

Those projects in order of their listing in the Cherry Bekaert summary are: Workforce Housing Project/Royal Lane Property; Afton Inn Property Improvements; Criminal Justice Training Academy; Bargain Land Sale and Issuance of $10,000,000 Loan to ITFederal; Payments to or on Behalf of ITFederal; Payments to Earth Right Energy; New Market Tax Credit Projects; Leach Run Parkway Easements; Wetland Credits; New Hope Bible Church; 999 Shenandoah Shores Road; Payments to (McDonald) Relatives; USDA Intermediary Relending Program; Stokes Mart/B&G Goods; Payments to Known and Suspected (McDonald) Business Partners; USDA Rural Business Enterprise Loans.

How could personal and procedural checks and balances collapse so catastrophically for such a length of time, in so many directions?

“I had no reason not to trust her,”

If Jennifer McDonald’s late January 2018 story to Royal Examiner about a 3-year run of luck at Charles Town’s Hollywood Casino slots didn’t raise alarm bells with EDA and municipal colleagues, it did among those in the community with some background in the gambling industry. Rather than win about $2 million over 3 years by spending a maximum of around $6,000 annually, Virginia State Police say she netted a three quarters of a million dollar loss.

“I had no reason not to trust her,” is a comment offered by more than one EDA or municipal official in explanation of the lack of due diligence performed on project proposals and financing or the purchase and sale of properties through the EDA on the word of its former executive director. LINK-Hitting it BIG at Charles Town’s Hollywood Casino – a local success story
Perhaps it is that personal comfort and familiarity – “I had no reason not to trust her” – born of long-time social, professional and organizational ties that gives us a clue at a root cause of that “catastrophic failure” of procedures and oversight cited at this story’s outset.

It is a familiarity born of business and legal transactions, organizational memberships, not to mention in many cases political party affiliations. In Warren County those political affiliations are almost exclusively on the Republican side of the political aisle, from local to state and federal levels. And that is not to point a finger at one party or the other, but rather just to acknowledge the local political landscape.

Were there to be only Democrats in electoral and judicial office here, the situation would be the same – “I know you; we have common interest and cause, why would I not trust you?”

McDonald did double duty as Front Royal Rotary Club President, circa 2016-17.

It is such personal or professional familiarity that has forced the eventual recusal of all the county’s circuit court judges from hearing EDA legal matters at an evidentiary level. Chief 26th Judicial District Judge Bruce D. Albertson, now hearing EDA civil and criminal cases in place of Judge Clifford L. Athey Jr., has indicated he will soon appoint another judge from outside the county to take over the EDA Special Grand Jury bench as Athey heads to the Virginia State Appeals Court.

It is that small town “everyone knows everyone” personally, organizationally, professionally and politically that can contribute to that apathy toward fundamental organizational due diligence, if not worse.

From left, South River Supervisor Linda Glavis, School Board Chairman Cathy Bower, Warren County Middle School Principal Amy Gubler and School Superintendent and EDA Board Chairman Greg Drescher listen as Robert Goodlatte speaks at the July 31, 2017 WCMS ribbon cutting.

Why would anyone in local elected or appointed office here not trust then-U.S. Sixth District of Virginia Republican Congressman Robert Goodlatte’s 2014-15 assertion that ITFederal would invest $40 million dollars and create 600-plus high-paying jobs here based on a $140-million federal government contract there was no evidence existed?

Why?

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EDA in Focus

Town vs. EDA civil case motions arguments pushed to October 9

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The Warren County Courthouse has become a familiar stop for EDA business in recent months. Royal Examiner File Photos/Roger Bianchini

Town of Front Royal Attorney Doug Napier and legal counsel for the Front Royal-Warren County Economic Development Authority were in Warren County Circuit Court Thursday morning to argue motions filings in the Town’s civil suit against the EDA. The Town initially filed for recovery $3 million in Town assets on June 21 and amended that amount up to as much as $15 million on July 12.

Former EDA Executive Director Jennifer McDonald is also named as a defendant in the Town litigation; however, she was not present and not represented by counsel at Tuesday’s hearing.

Sheriff, ITFed principal Tran, Donnie Poe named with McDonald in EDA civil suit

The fluidity of the litigation due to a constantly changing legal landscape impacting both civil and criminal sides of the equation were a primary point of discussion between the town attorney and Rosalie Fessier of the TimberlakeSmith law firm of Staunton, representing the EDA.

“This case is a very fluid one – players are added almost weekly as to who did what. We’ve put together a bare-boned complaint …that we’re going to continue to amend,” Napier told Judge Bruce D. Albertson.

Fessier countered that her client was the EDA, not individuals tied to the EDA. So, she told the court, the fluidity Napier addressed was irrelevant to the defense claim of sovereign immunity for the EDA as a public body created by legislative order for specific public functions.

“The issue is not how individual actors functioned or performed, the public body is still immune – though individuals could still be on the hook,” Fessier told the court in seeking a ruling on the defense’s sovereign immunity claim.

“I am concerned about ruling on a moving target … I find it premature to rule on the Demurrer … though I feel I have a handle on where everyone is going on this,” Albertson told the attorneys of the EDA’s claim of sovereign immunity. And well he might have that handle as both sides’ written arguments spell their positions out.

Town Attorney Doug Napier is at the point of Front Royal’s attempt to recover misdirected Town assets under the EDA’s control.

The EDA Demurrer states that as a legislatively-created entity that carries out a public governmental function, specifically facilitating the financing of land development for involved municipalities, the EDA itself carries that sovereign immunity designation.

“Plaintiff argues … that the EDA is not entitled to sovereign immunity because it vested the management of the EDA to the executive director,” Fessier wrote in response to Napier’s opposition filing to the EDA sovereign immunity claim. The EDA attorney then added, “However, a determination of whether an entity is a municipal corporation is governed by the enabling statutes, not on the actions of the entity in a particular case,” citing a “Richmond vs. Richmond Metropolitan Authority case from 1970.

After checking with his Harrisonburg Court Clerk’s Office by phone for his schedule about 30 days out to give attorneys time to submit further briefs on their motions or amendments to those motions, Judge Albertson set arguments for October 9, at 2 p.m. Both counsels said they were comfortable filing additional briefs by email to facilitate preparation for that hearing.

So sports fans, mark the afternoon of Wednesday, October 9, on your calendars as attorneys for both sides will come out “punching” for a favorable court determination on exactly where the legal liability for whatever happened to who knows how much Town managed, EDA handled, public funding lies.

Town files suit against EDA, McDonald to recover $3 million of Town assets

Town ups lost assets claim resulting from ‘sophisticated’ fraud scheme

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EDA in Focus

Sayre awarded $20,000 in defamation suit against former EDA director

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Tom Sayre, left, and attorney Tim Bosson outside the courthouse following awarding of $20,000 in his $25,000 defamation suit against Jennifer McDonald. Photo/Roger Bianchini

After three and a half hours of sometimes contention testimony Wednesday afternoon, shortly after 5 p.m. Judge Ian Williams awarded Shenandoah District Supervisor Tom Sayre a total of $20,000 in damages in his civil defamation lawsuit against former Front Royal-Warren County Economic Development Executive Director Jennifer McDonald. Sayre was seeking the General District Court civil litigation cap of $25,000.

In addition to damages of $5,000 and punitive damages of $15,000, the judge also awarded Sayre $676 in court filing costs.

In making his ruling the Winchester-based judge accepted the plaintiff’s argument that McDonald had orchestrated a series of alleged criminal acts in 2017 targeting the EDA offices and her home property in order to deflect attention from rising suspicions about her conduct of EDA business.

“She had a reckless disregard for truth …and motive to shift public attention from herself to another public figure,” Williams said in prefacing his decision.

McDonald resigned the EDA directorship on December 20, 2018 under increased scrutiny by her EDA Board of Directors. She is the primary defendant in a $17-million EDA civil suit filed on March 26; and has been charged with 28 felony criminal indictments related to the EDA financial fraud investigation and consequent civil litigation.

McDonald attorney Lee Berlik argued that Sayre attorney Tim Bosson had failed to prove McDonald had written the note found at the scene of a June 15, 2017, rock throwing vandalism at her home. That note included the instruction “don’t call Tom” and Sayre’s work cell phone number.
The note indicated an apparent conspiracy to harass or terrorize McDonald involving Sayre, former Town Manager Michael Graham and former Royal Examiner Editor Norma Jean Shaw. All testified during the trial’s first day last month that they knew nothing of any such conspiracy.

Berlik also argued that the plaintiff had failed to show any real damage to either his reputation or income from the note’s discovery at the scene of the June 2017 vandalism.

Berlik said he and his client would discuss their right to appeal the General District Court decision to the circuit court level. They have 10 days to file an appeal. Judge Williams posted a $20,000 cash appeal bond for the defendant.

This story will be updated with additional detail in the near future.

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EDA in Focus

EDA discusses property sales, legal rep, FRPD costs and appointment

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The EDA Board of Directors and staff get down to business in Tuesday morning’s special meeting. Royal Examiner Photo/Roger Bianchini. Video by Mark Williams, Royal Examiner.

At its Special Meeting called for Tuesday, September 10, the Front Royal-Warren County Economic Development Authority met in open session for a half hour before going into an hour and thirty-five minute closed session.

Discussion in closed session included disposition/acquisition of property; prospective business or expansion of existing business; legal advice on loans, accounting, debt service and the Afton Inn. Open session discussion of EDA Asset Committee developments indicated a two-hour meeting between committee member Greg Harold and the Afton Inn development group the previous day. Harold reported that the developer (2 East Main Street LLC) was “very anxious” to be allowed to restart work.

Work was halted when the EDA civil litigation filed March 26 alleged that former EDA Executive Director Jennifer McDonald had used the Afton Inn renovation project to embezzle or misdirect EDA assets. Thus far there has been no indication of any wrongdoing by the development group.

Following the closed session the board approved two motions by 6-0 votes (Mark Baker absent) related to the movement of properties. First, Vice Chairman Jeff Browne moved to initiate a 30-day study period on a $375,000 offer on the 404 Fairgrounds Road property; and then to obtain quotes on repairs to the damaged residential rental property at 514 East Main Street.
As part of that latter motion it was authorized to notify the misplaced East Main Street tenants that the EDA would stop paying their temporary housing costs in a nearby motel as of September 30.

EDA property records indicate the Fairgrounds Road property was bought by the EDA in 1997 for $141,000. It is currently assessed at a value of $530,000.

The Stokes Mart property was purchased by the EDA in 2014 for $530,000. Current assessments total $456,800, $370,100 for the market and $86,700 for the apartments.

Legal representation
The EDA also voted to authorize use of the Warren County Attorney being hired to replace Dan Whitten on an interim basis for a 12-day period at a cap of $10,000. Whitten’s last official day is September 13, but he indicated he will work through the weekend before departing for his new job as Prince George County Attorney.

It was observed that it was unlikely the EDA would need attorney services anywhere near the time it would take to reach the $10,000 cap on legal costs between September 16 and 27. The EDA is pursuing the hiring of its own attorney, as opposed to utilizing the county attorney to avoid future potential conflicts of interest as Whitten occasionally ran into as the EDA financial fraud investigation was proceeding and leading to civil litigation.

FRPD costs
As the brief five minute open session following Tuesday morning’s closed session was adjourned, Front Royal Town staff and two councilmen, Vice-Mayor William Sealock and Eugene Tewalt, were among those on the Town side gathering to meet with EDA staff to discuss payment on the debt service on the new Front Royal Police headquarters across Kendrick Lane at Monroe Avenue.

Earlier discussion has indicated some areas of disagreement. The town council is balking at paying the full 3% interest rate the EDA has been paying on the approximate $8 million construction loan. Citing its pursuit of the New Market Tax Credit option which would have carried a 9-year interest free period, council is seeking to pay only 1.5% interest, leaving the EDA to cover the other 1.5%

Open session discussion appeared to indicate a balance of about $4.4 million on a project cost of $7.7 million. EDA Finance Committee member Jorie Martin noted that thus far there has been no reimbursement by the Town to the EDA for the new police station – “We need to come to terms” Martin told her EDA board colleagues.

That situation is likely complicated by the Town’s civil suit seeking recovery of as much as $15 million in allegedly misdirected Town assets as part of the EDA financial fraud investigation.

When this reporter asked to stay to observe the EDA-Town staff meeting plus two councilmen on the FRPD payment situation, legal counsel for both the Town and EDA concurred that as a “staff meeting” it was not open to the public or press.

Reform appointment
Also prior to that disappointment, the EDA board voted to appoint new Chairman Ed Daley as its representative to the EDA Reform Committee, with Vice-Chairman Browne as alternate.

It was noted that while the three-way joint meeting had approved an amendment to the EDA request for board representation on the committee allowing the EDA to select its nominee, the initial motion on the appointment of the member had been defeated on August 27.

“What’s the point of approving the amendment when you deny the underlying motion,” Daley wondered. The consensus was there was some confusion as to voting rights for only one of the two EDA reps – EDA Executive Director Doug Parsons is also a Reform Committee member – and that Daley’s EDA board nomination should be forwarded for approval by the joint Town-County-EDA committee overseeing the Reform Committee activities.

See all these discussions and more in this Royal Examiner video:

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EDA in Focus

Review of EDA property in the works

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At the special meeting of the Economic Development Authority (EDA) Board Meeting on August 30, 2019 the board directed staff to prepare a listing and summary of all the properties owned by the EDA. The Royal Examiner attempted to lookup these properties on the Warren GIS and had difficulty identifying the lots and information. Data seemed to be vague and incomplete. The Royal Examiner will continue to monitor this project.

Here is the list provided by the EDA as of September 6th:

Property Tax Map # Value
McKay Springs-Reliance Rd/ 522-340 N 12A  113  1

$717,900
404 Fairgrounds Rd. 5  12B

$530,000
Main St. Market/Apts 20A8  6  B25/

20A8  6  B24

$370,100/$86,700
Afton Inn

20A8  4  14 $243,400
426 Baugh Drive

5C  5 $5,377,800
Lot 6 Stephens Industrial Park 5C  6 $1,406,300
Lot 7 Stephens Industrial Park 5C  7 $51,300
Lot 1 Stephens Industrial Park 13  2 $2,142,800
1528 John Marshall Hwy

20A151  3  13/

20A151  3  14

$30,000
1532 John Marshall Hwy 20A151  3  15/20A151  3  16 $30,000
1546 John Marshall Hwy *19 parcels* $50,000/$10,000 each
NVA Properties 1 of 4 20A202  12A $114,300
NVA Properties 2 of 4 20A202  9A

$134,600

NVA Properties 3 of 4 20A202  8B

$50,000
NVA 4 of 4 Williamsburg Open Space 20A156

$432,800
LRP/Happy Creek Rd. Intersection 20A212  6 $200,300
Happy Creek Industrial Park (HC) Parcel 1 20A221  1B $812,500
 HC Parcel 2 20A221  1

$1,238,800
HC Parcel 3

20A221  2A1 $1,673,200
1325 Progress Drive

20A221  1B $451,200
Avtex Conservancy 20A1  3  8 plus 98 parcels of Rivermont Acres $10,216,700
Avtex Building 20A1  3  6A

$1,820,100
Royal Phoenix 20A1  3  7 $3,518,800
Avtex Parking Lot 20A1  3  7C

$272,900
Kendrick/Adams St. 20A1  3  7A

$15,000
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Sketching with Pencils @ Art in the Valley
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WomanGathering @ Middle of Main
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The Fundamentals of Oil Painting @ Art in the Valley
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