EDA in Focus
Warren County’s EDA financial scandal – How did it happen? Robert Goodlatte brings a $140 million fantasy to this community
Sorry to use you as the poster boy for a collective failure of due diligence, Tony – but it’s the 3 Stooges ‘See No Evil’ tie sported at a past supervisors work session. Somehow it seemed to fit. File Photos/Roger Bianchini
We closed Part Two of our series on what went wrong within the EDA and local government that allowed an alleged embezzlement-tinged scandal to fester for so long, in so many directions with a one-word question – Why?
Why not trust then U.S. Virginia Sixth District Congressman Robert Goodlatte’s 2014 assertion that ITFederal would invest $40 million dollars and create 600-plus high-paying jobs here based on a $140-million federal government contract – even though there was no evidence that contract existed?
After all, it wasn’t until two years after Goodlatte dropped Truc “Curt” Tran and his ITFederal LLC’s three-phased $40 million business plan at the vacant Avtex Brownfield/Royal Phoenix Business Park site that the congressman managed to get a raised eyebrow from newly-inaugurated President Donald Trump. That raised eyebrow reprimand came in reaction to Goodlatte’s first 2017 Congressional Session initiative that independent ethical oversight of Congress be removed.
Having just been elected on a “drain the inside-the-DC-beltway swamp” promise, I recall Trump Tweet-reacting to his own party’s congressional majority leadership with a “Don’t they have better things to do” admonishment. That presidential Tweet scold – a sign of things to come – resulted in an abrupt about face by congressional Republicans.
A scowling Bob Goodlatte on a ‘Missing’ poster made by disgruntled Warren County constituents used to seeing the congressman’s staff but never the congressman in this part of his district to field legislative questions. Maybe they should have joined the Front Royal Rotary …
But as for “Why not trust” the congressman on his assertions and promises about ITFederal, perhaps as we suggested in Part Two it was the high degree of familiarity on multiple fronts, in this case political with the overwhelming majority of elected county and town officials, and to a lesser extent organizationally and socially.
Because if Goodlatte was oft-criticized for his unwillingness to appear in this part of his district to face constituents at odds with some of his political initiatives, stances and votes, he appeared here to speak to a much less critical audience at the Front Royal Rotary Club on multiple occasions over the years, likely even during Jennifer McDonald’s Front Royal Rotary presidency term, circa 2016-17.
… Where the congressman would occasionally drop by for lunch and remarks among like-minded constituents, including 2016-17 club President Jennifer McDonald
And let’s make one thing clear, the references to the interconnectivity of the local business and political community is not an indictment of Rotary as an entity. In the end Rotary, like any organization, is the sum total of what its membership brings to it. That can be, and often is, an altruistic sense of sharing with those less fortunate by those more successful in the socio-economic sphere. However for those less altruistic by nature Rotary could, like any networking group including political parties, be used as a cover for less altruistic and more personal profiteering ends.
And as we noted in Part 2 of our exploration, one thing the camaraderie and familiarity of Rotary can lead to, much like within a philosophically like-minded political network, is too much of a sense of trust. It is that too easily granted trust borne of familiarity that can cause the absence of the sense of responsibility necessary to look and verify to assure that someone is not playing the system to their advantage in less than ethical, and perhaps even illegal, ways.
There are simple question we ask our elected officials and the Fourth Estate news agencies to ask on the public’s behalf:
1/ is what we have been told true?
2/ to what publicly-beneficial end are these projects being promoted?
And what remains astonishing to this day is the collective degree of institutional hostility that met the one elected municipal official who did initially exhibit the due diligence to ask for such basic verification about EDA projects, particularly ITFederal, in 2016 at the same time the Royal Examiner news staff was seeking answers to the same questions.
Jennifer McDonald’s staunchest supporter on the town council and fellow Rotarian Bret Hrbek warned in late 2016 that the questions being raised about ITFederal from his colleague Bébhinn Egger and the media were threatening to undermine economic redevelopment, particularly the ITFederal project, here.
Bret Hrbek warns of the pending departure of ITFederal and its CEO on Nov. 28, 2016, if his colleague two seat to his left and the media kept asking questions about the validity of claims the company could accomplish what was being promised in the way of investment and job creation here. They continued to ask, it’s still here – more or less.
Or as Royal Examiner reported Hrbek stating in the above linked story on the November 28, 2016 Front Royal Town Council meeting: “It has come to my attention, as well as several members of Council’s attention over the past week, it seems that ITFederal, specifically the owner, Mr. Curt Tran, has become highly offended by the hostility that he feels is directed toward him, and the accusations that have been made in his direction, to the point where Ms. McDonald, if she wasn’t dealing with an emergency right now, would be here telling us … (that) she has been scrambling all week trying to appease him and keep him within the Town, if not at least the County. And they’re ready to pull up roots and walk away.”
It appears Tran was able to maneuver that threat to “walk away” from his 30-acre, behind closed doors one-dollar gifted property publicly valued at $2 million into another even sweeter deal on his $10 million loan. That deal was an apparently never publicly discussed EDA arrangement that requires the ITFederal CEO to do nothing more than spend perhaps a fifth of that loan here building a 10,000 square foot building that must have an occupancy permit in place by mid-2020; and to stay current on his loan payments to the EDA over a 30-year payback term.
It is a loan term due circa 2045, 23 years after the EDA’s balloon payoff to First Bank & Trust comes due seven years down the road in 2022.
Why, INDEED?
The essential question about ITFederal had been asked in 2016 – Is what we are being told about this company’s financial status true?
The Perfect Storm of Silence, Part 2: a cattle ranch, $10-mil & …
The answer put forth in the EDA fraud investigation three years later, as it appeared to have been in 2016 for anyone willing to listen, was “No” – what this community was being told about the financial underpinning upon which the ITFederal project would be built did not exist.
Rather than a $140 million federal contract, what ITFederal and its sister company VDN Systems Inc. had was one $5,000 federal contract in 2014. What Royal Examiner also found online then was a five-year history of annual revenues for ITFederal in the range of $35,000 to $50,000 per year, mostly in private sector contracts. Prior to that ITFederal/VDN Systems did have significant federal contracts in the hundreds of thousands of dollars range, one even at $1.2 million. But by 2014 those contracts appeared to have long since vanished.
At the time McDonald disputed that the websites showing this information were legitimate. However three years later financial fraud investigator Cherry Bekaert would reference those sites as an indicator there was no evidence a $140 million federal government contract with ITFederal existed in 2014 or since.
Then EDA Executive Director Jennifer McDonald was questioned by Cherry Bekaert in October 2018 about due diligence regarding ITFederal and the claims brought here by its CEO and Congressional sponsor Robert Goodlatte. The financial fraud investigator’s description of McDonald’s reply remains astonishing to this day:
“MCDONALD stated that the EDA was not allowed to retain any due diligence documentation provided by TRAN, nor did the EDA perform any other due diligence regarding TRAN’s other businesses or ITFederal’s credit worthiness, such as obtaining financial statements, bank records, or research regarding TRAN, ITFederal, or other entities controlled by TRAN.”
So the only substantiation was provided by the company CEO, and that documentation was immediately withdrawn from the EDA’s possession.
‘Curt’ Tran on site on Dec. 20, 2018 – he expressed distress at the investigative scrutiny Jennifer McDonald was under during closed session after which her resignation was announced.
Red flag?
One would think so, but apparently not if as McDonald reported two months before her December 2018 resignation, the EDA chose to perform no further due diligence investigation of its own. And if that’s not enough to get law enforcement or a grand jury’s attention, the report adds:
“In addition, the EDA did not require any collateral for the $10,000,000 apart from a security interest in the aforementioned 30.11 acre parcel the EDA sold to ITFederal for $1.00. However, the EDA was required to provide a security interest in approximately 147 acres of land known as the Avtex site in order to secure the $10,000,000 loan from FB&T (First Bank & Trust), the EDA source of funds for the ITFederal promissory note …”
Again one must ask WHY?
Why would an EDA Board of Directors and its chief executive accept such loan conditions and offer such sweetheart financial arrangements to a company so close to the vest about its financial condition; and then choose not to perform its own due diligence investigation prior to “selling the 30-acre farm” for a dollar and facilitating a long-term $10 million loan with minimal on-site benefits?
The Cherry Bekaert report continues to explore the alleged impetus for the $10 million loan to ITFederal:
“Per witness statements, TRAN was introduced to the Town and the EDA on or about 06-27-2014, by former Congressman Robert William (Bob) Goodlatte (GOODLATTE), representing Tran as a successful businessman that had secured a business contract with the Federal government and was willing to invest and develop his business in the community. Further, TRAN had represented that ITFederal had obtained a $140,000,000 government contract with the Nuclear Regulatory Commission as evidenced in a business plan (the ‘Business Plan’) presented to the EDA.”
If indeed false as it appears to be, in 2015 that federal contractual pretense was represented in concert by a trio of players: ITFederal CEO Truc “Curt” Tran, his U.S. Congressional sponsor Robert Goodlatte and former EDA Executive Director Jennifer McDonald. Two of those three, Tran and McDonald, are now named as defendants in the EDA civil litigation seeking recovery of as much as $21 million, including the $10 million ITFederal bank loan facilitated through the EDA.
McDonald has thus far been served 28 sealed felony indictments by the Special Grand Jury investigating potential criminality stemming from the EDA civil litigation and financial fraud investigation at its base. And the $10 million loan to ITFederal is being sought for recovery in civil litigation, according to former EDA and County Attorney Dan Whitten because it was acquired “under false pretenses”.
Thus far only Goodlatte has skated through the EDA/ITFederal quagmire unscathed. (Attempts to contact Goodlatte for comment on his 2014/15 assertions about ITFederal through his Congressional successor Ben Cline’s office; his former Chief of Staff Pete Larkin whom Cline’s Communications Director Matthew Hanrahan pointed us to; and Roanoke area telephone information have been unsuccessful for approximately a month prior to publication.)
Whether the $140 million federal contract lie/mistake/misspeak originated with Tran alone is really a moot point. One thing is apparent, that Robert Goodlatte, Jennifer McDonald and Truc “Curt” Tran were of a joint mind in selling the idea of ITFederal as an almost descended from Heaven economic redevelopment Messiah to the elected officials of the Town of Front Royal and Warren County. And those municipal officials, save one, were more than ready to worship at the foot of that alleged economic redevelopment savior.
The sky’s the limit at Royal Phoenix – but on Dec. 20, 2018 those skies were becoming cloudy.
Another thing is also apparent, that if Truc Tran was the source of the assertion about a $140 million federal contract with some Department of Defense sub-agency, U.S. House Judiciary Chairman Robert Goodlatte and his staff were in a position to easily verify such a contract’s existence and pass that information on to this community’s EDA and municipal officials.
McDonald told this reporter in 2016 that Goodlatte was the impetus for ITFederal’s arrival at the Avtex Brownfield site. It was a site put under the EDA’s control for marketing for redevelopment in 2014 after decades of federally-overseen Superfund clean up and remediation.
Could there have been some anxiety about seeing the site’s marketing show signs of success after a 25-year process aimed at economic revitalization for the community, specifically the Town of Front Royal? – Certainly.
But is that an excuse for a community’s entire involved elected and appointed official base to go collectively brain dead, save one, in a manner that has raised suspicions of complicity in something fundamentally deceitful, perhaps illegal?
As of Sept. 24, 2019, the Front Royal Town Council, pictured here on Nov. 28, 2016 with then Town Manager Steve Burke, has escaped scrutiny as a player in the absence of municipal oversight of EDA finances, despite its enabling 2015, 3-month $10 million bridge loan that was instrumental in the EDA acquiring bank financing for the ITFederal project.
Goodlatte ballyhooed the ITFederal arrival in press releases and according to McDonald even pushed for the ceremonial October 2015 ribbon cutting/groundbreaking months prior to any contractual arrangement between ITFederal and the EDA having been agreed upon.
If as Royal Examiner’s editorial staff discovered along with Councilman Bébhinn Egger in 2016, and Cherry Bekaert confirmed in its 2018-19 EDA financial fraud investigation, that there is NO evidence a $140 million federal contract ever existed, one of two things appears most likely regarding our Congressional representation at the time:
1/ In 2014 Robert Goodlatte failed to perform his due diligence as Virginia’s Sixth District U.S. Congressional representative in verifying a private-sector contractual basis for the promises he was about to make to his constituents in the Town of Front Royal and Warren County, or;
2/ Goodlatte was an active participant in selling a $140 million hoax to this community.
If the latter, why would a long-tenured U.S. congressman do such a thing?
Could it simply have been to present a rationale for that sweetheart, $10-million EDA facilitated bank loan with the 30-year payback term with little in the way of assurances to the community that much of that money would ever be spent here? (Hypothetical: Yea Curt, tell them you’re pulling up stakes because that councilwoman and the press are being mean to you, see what that gets you.)
What was gotten from a complaint EDA Board of Directors, as previously referenced, was a commitment to spend about $2 million to build a 10,000 s.f. building with an occupancy permit in place by mid-2020; and stay current with the loan payments over the next 30 years.
Or was it a mistake or misrepresentation the congressman thought would be irrelevant in the long run because another source of funding would soon be available to prop up the multiple-phased $40 million ITFederal business plan brought to this community?
Enter the EB-5 Visa Program, or as Councilwoman Bébhinn Egger asked Jennifer McDonald on November 7, 2016, regarding the potential of EB-5 Visa funds being at play in the ITFederal Project:
“There have been some things in the media about certain politicians using EB-5 companies as a front, where the companies don’t actually produce anything,” Egger pressed McDonald on
ITFederal’s potential connection to a federally-controlled foreign funding stream.
Pointing to the Immigrant Investor Program’s troubled history of failed or misrepresented projects nationwide, Egger asked McDonald, “So, I guess if there’s any way you could give Council some concrete evidence that ITFederal is not a money laundering system for this EB-5 visa program – maybe money laundering is the wrong term – but you know what I mean, there is a front … that they invest in … and get their visa.”
What’s this about EB-5 Visa funding for ITFederal, Bébhinn Egger asked Jennifer McDonald in late October 2016. That promised funding fell through, as it seems has a $40-million ITFederal investment here.
Egger’s reference was to a funding program in which wealthy foreigners invest in local economic development in the U.S. in exchange for visas and green cards for their families to among other things come to the U.S. to study. The program is notorious across the nation for projects that seldom come to fruition, at least as originally presented, if at all.
A ‘Perfect Storm’ of silence raises questions about 1st Avtex client
Right into 2017 and 2018 there appeared confusion on the EDA board as to whether EB-5 Visa funding was at play in the ITFederal project. However Cherry Bekaert reported McDonald writing to potential ITFederal project investors in August 2015 mentioning potential “tax incentives for investors” through an EB-5 funding stream:
“… we noted a letter dated 08-19-2015; signed by McDonald, addressed to Kwang Chul ‘KC’ Whang, President and Principal Broker of The W Group Commercial Real Estate, explaining to him the EDA is in the process of seeking a $10,000,000 loan to help with the construction of a company that has been recruited to the AVTEX site located in Front Royal Virginia, ‘In conjunction with Congressman Bob Goodlatte’s Office we are trying to provide a low-interest financing option to the company … They will be obtaining financing through the EB-5 program which also offers some tax incentives to investors.
“Per WHITTEN, he had never seen the letters, but could not otherwise confirm whether MCDONALD presented these letters to the EDA BOD in closed session,” Cherry Bekaert reported.
The best years of our lives: above, Dan Whitten as assistant county attorney, circa March 2011; below at his final FR-WC EDA meeting on Sept. 10, 2019. Little did he know what his first full-time job out of law school would bring in the way of experience – maybe they didn’t tell him about the EDA part of it.
In response to a recent FOIA request to the EDA about any public record of the process of the above-described series of deals offered to ITFederal by the EDA Board of Directors and its chief executive officer we received minutes from several EDA board meetings between 2015 and 2017 during which the ITFederal loan and construction project were discussed and/or voted on. Here is the EDA staff summary of its FOIA response:
“I believe the first appearance is in the minutes of July, 2015. Both the $10 million and $2 million Avtex property/construction project are addressed (Note that they are separate transactions). Also included in the attachment is a public record Deed of Trust of September 2015, which outlined the terms of the $2 million project. The December 2015 minutes show that the Board approved going through First Bank & Trust for the $10 million loan. In February, 2017 the Board approved an Amended Deed of Trust modifying the terms of the $2 million Avtex property/construction project. According to the minutes, no discussions were reported in Open Session.”
Why is that not a surprise?
One question jumps out – if you are discussing a $2 million construction project with a company sitting in $140 million federal contract “Fat City” why are you loaning that company $10 million to prop up a Congressionally promised $40 million investment in your community?
Finally we leave this exploration of what went wrong, with a question about what went right – by accident.
Isolated municipal and media questions aside, one wonders if the Town Finance Director hadn’t stumbled upon eight years of Town debt service overpayments totaling almost $300,000 to the EDA during exploration of an internal loan in May of 2018, would the EDA financial scandal story have broken to this day?
However in the wake of B. J. Wilson’s debt service payment discovery in May of last year, break it did. What would develop into a $20 million-plus financial scandal began unfolding with an apparently volatile August 23, 2018 confrontation between Town auditors and officials in which the word “fraud” was broached to McDonald, then EDA board Chairman Greg Drescher and EDA Attorney Dan Whitten.
Drescher resigned the EDA board chairmanship the following day and within a month investigative public accounting firm Cherry Bekaert was contracted by the County on behalf of the EDA to investigate financial fraud within EDA operations.
And as Royal Examiner reported in a related September 24 story on multiple misdemeanor indictments alleging dereliction of municipal duty by the Warren County Board of Supervisors, staff and multiple past and present members of the EDA Board of Directors, it was also in August 2018 that the Front Royal Police Department requested the Virginia State Police to pick up an investigation of EDA finances.
Grand Jury indicts 14 County and EDA officials for lack of EDA oversight
That request came about a year after FRPD’s investigation of an alleged May 2017 break in, vandalism and theft at the EDA’s Kendrick Lane office was halted at the request of EDA Board Chairman Greg Drescher.
And the rest is legal and municipal history – yet to be written …
It’s all just nerve racking, even more so as of Sept. 24 when, not only the county administrator and former county attorney, but their five bosses were among 14 booked on misdemeanor criminal charges related to a lapse of EDA financial oversight.
Crime/Court
47-Year-Old Jennifer McDonald Will Hear 6 to 24 Years in Prison Argued at Her Sentencing Hearing
According to court documents filed in the run up to the April 9 sentencing hearing of former Front Royal-Warren County Economic Development Authority Executive Director Jennifer McDonald a sentencing range of from 6 years to 24 years will be argued between defense and prosecution counsels in Harrisonburg’s 10th Western District of Virginia courthouse this Tuesday. Both sides will present witnesses to bolster their sentencing requests. It might be noted that McDonald is 47 years old.
According to the prosecution’s filing of its Sentencing Memorandum to the court: “The Government recommends a total sentence of 22 years, or 240 months (20 years) for the fraud and money laundering counts, to be followed by 24 months (2 years) for aggravated identity theft, to satisfy the factors enumerated in 18 U.S.C. § 3553(a). The Government further requests the Court order restitution to the EDA in the amount of $3,544,268.60 and enter a forfeiture money judgment in the amount of $5,201,329. The Government further recommends a period of supervised release of three years and that no fine be imposed.”
As to their prison time recommendation federal prosecutors note that: “The United States Sentencing Guidelines, as calculated in McDonald’s Pre-sentence Investigation Report (“PSR”), ECF No. 248, call for a range of imprisonment of 235 (19.7 years) to 293 months (24.5 years), to be followed by a consecutive 24-month (2 year) term of imprisonment for Count 18, Aggravated Identify Theft.”
On Tuesday, April 9, the federal courthouse in Harrisonburg will see the end of the long and winding road of criminal prosecution in the Jennifer McDonald chapter of the 2014-2018 FR-WC EDA “financial scandal”.
The additional two years on the aggravated identity theft charge involves another EDA “financial scandal” figure, ITFederal principal Truc “Curt” Tran. Tran is on the prosecution’s list of sentencing witnesses to testify to damage done to his reputation locally by McDonald’s, citing him as an interested party in a real estate transaction he said he had no knowledge of. It was one of the transactions cited by the prosecution as ways McDonald used, or attempted to use, to move money to her own, or other alleged co-conspirator’s, benefit.
Prosecution Point
In seeking a harsh sentence at the upper end of sentencing guideline recommendations the prosecution writes to the court: “For more than four years, Jennifer McDonald used the bank accounts and credit facilities of the Warren County Economic Development Authority (“EDA”) as her personal piggy bank, diverting public funds to purchase real estate and to pay her personal expenses. She falsified documents to fool the EDA’s Board of Directors, external auditors, and Warren County (“County”) and Front Royal (“Town”) government officials so she could continue and grow her scheme, reaping ever-growing payoffs. She employed elaborate ruses, including pretending to act as Truc Tran, to obscure her blatant theft of taxpayer dollars. Instead of acting for the general good of Warren County, McDonald pilfered the EDA’s bank accounts. In the end, her actions crippled the EDA. Due to Jennifer McDonald, a public agency designed to improve Warren County is now saddled with debt, and it is the taxpayers of Warren County who are now directly paying for her crimes.”
Defense Counterpoint
On the defense side, they question the cited guidelines origins and point to a lifetime of personal, financial, and professional consequences McDonald faces as a result of the 30 specific actions she was convicted of related to the FR-WC EDA financial scandal: “Jennifer McDonald submits this sentencing memorandum in support of her request for a total sentence of 72 months (48 months on Counts 1-13 and 19-34 plus 24 months on Count 18) followed by four years of supervised release. The sentence requested is sufficient but not greater than necessary to achieve the purposes of sentencing set forth in 18 U.S.C. § 3553(a)(2).
“The current guideline range provides no useful advice to the court, as it was not developed based on empirical data or national experience and it fails to satisfy any purpose of sentencing. It recommends a sentencing range that is far greater than necessary to punish Ms. McDonald because she poses an extraordinarily low risk of recidivism and has been destroyed personally, financially, and professionally because of her convictions. The collateral consequences already felt by Ms. McDonald vastly exceed that of an ordinary case and weigh in favor of a sentence of 72 months (6 years).”
Defense counsel, on behalf of their client, further describe McDonald’s roots here and the lifetime consequences of the actions she has been convicted of: “Front Royal is Jennifer McDonald’s hometown. She has lived in Front Royal for her entire life, except for the four years she went to college in North Carolina. Her family’s roots in Front Royal go back generations, and Jennifer has devoted her adult career to working for and on behalf of the people of Front Royal and Warren County. But now she is a pariah in the town she loves because of her offenses.”
Also submitted on McDonald’s behalf is a letter to Judge Elizabeth K. Dillon from a woman describing a 30-year friendship with McDonald that began when the woman moved to the area with her family when a high school junior. “I know that Jennifer is charged with a serious offense, but I would like to give you additional information about her for your consideration,” she begins.
She then traces the personal difficulty of making friends in a tightly knit, small-town community environment at that age, continuing, “However, Jennifer went out of her way to make me feel welcome and that I wasn’t going to spend my last two years as a high schooler friendless. Jennifer has been my friend since then,” she observes, adding, “When my father passed away suddenly, she was the first person I called and she came immediately to help me as I dealt with the sadness and grief. Jennifer is my best friend. Thank you for your consideration,” the woman says in conclusion of another side of defendant Jennifer McDonald not presented as evidence in her criminal trial.
How may Judge Dillon balance what she hears in support of prosecution and defense arguments and witness testimony about community and personal repercussions of the acts Jennifer McDonald was convicted of by a federal court jury on November 1st? Will we find out this Tuesday, April 9. Stay tuned.
After Tuesday, Jennifer McDonald will once again be sporting incarceration clothing. The question remains, for how long for the 47-year-old. An answer at some point between 6 and 24 years is pending according to pre-sentencing defense and prosecution filings.
EDA in Focus
EDA Acknowledges Failure of Attempted 158 Faith Way $350,000 Deed Buy-Back – What Happened?
On the morning of Tuesday, April 2, a press release from Warren County Director of Economic Development Joe Petty announced the failure of the previously announced Economic Development Authority (EDA, FR-WC EDA) acceptance of a deed buy-back offer of $350,000 by Jennifer McDonald and her husband, Samuel North, on their home property at 158 Faith Way. This reporter found that press release somewhat vague on exactly why the buy-back arrangement had failed. Readers will recall from our below-referenced story that the McDonald/North deed buy-back would have likely netted the EDA, and indirectly the County, at least $150,000 more than a resale effort after maintaining the earlier-announced property seizure.
The center of attention in the now-failed attempt to gain maximum profit for the EDA and County through a deed sell-back of the McDonald/North home property. Below, County Director of Economic Development and the County’s chief liaison to their now unilaterally overseen EDA, Joe Petty, addresses EDA budget variables at the March 26 supervisors meeting. Royal Examiner File Photos
The opening paragraph of the April 2 release offered a hint about unmet terms: “On March 22, 2024, the Front Royal-Warren County Economic Development Authority (EDA) Board of Directors held a regularly scheduled meeting during which it approved a settlement offer with Jennifer McDonald and Samuel North regarding property located at 158 Faith Way. McDonald and North had deeded title to the EDA on February 5, 2024, but not vacated, thus requiring ongoing significant and costly EDA and Warren County litigation. As the terms of that offer were not met by McDonald/North, on March 28, 2024, the EDA Board of Directors held a special meeting and voted to rescind its March 22nd resolution and withdraw the offer.”
“Not met” in what way we wondered, and decided to ask EDA Board Chairman Jd Walter. He replied to our emailed inquiry, explaining: “Almost immediately upon EDA approval, their (McDonald/North) counsel advised EDA counsel that they would not be able to meet the payment schedule. Subsequently, North did not withdraw his appeal of the order of possession, which was another term of the settlement offer. As such, the EDA considered the offer not accepted, thus voted to rescind its previous resolution and withdraw the offer.”
The EDA Board of Directors has been busy trying to attain maximum value from, initially, a property seizure, then a deed sell-back to EDA ‘financial scandal’ central figure Jennifer McDonald and her husband Samuel North’s home property. The latest announcement was not good for achieving maximum value, as the couple did not meet deed buy-back conditions.
So, what is the status of the McDonald-North home property at this point? “The EDA is awaiting a hearing in Circuit Court on the North appeal to the order of possession. Until that hearing is concluded, the EDA cannot take physical possession of the property,” Chairman Walter explained.
So, it appears that the EDA is back to taking possession of the property with all its negative financial implications regarding legal fees, liens filed against the property by third parties, an unpaid $250,000 mortgage equal to half the value of the property, not to mention closing costs on any prospective sale.
Well, based on their comments against the deed resale effort at the March 26 supervisors meeting it would seem that at least the five elected members of the Warren County Board of Supervisors are happy — though this reporter remains baffled as to exactly why.
(See LINKED Royal Examiner story: “EDA Plan to return McDonald-North Home Property Deed for $350,000 Cash Raises Ire of Supervisors – But What Do the Numbers say?”)
Below is the full April 2nd Press Release on the canceled Faith Way deed resale effort:
On March 22, 2024, the Front Royal-Warren County Economic Development Authority (EDA) Board of Directors held a regularly scheduled meeting during which it approved a settlement offer with Jennifer McDonald and Samuel North regarding property located at 158 Faith Way. McDonald and North had deeded title to the EDA on February 5, 2024, but not vacated, thus requiring ongoing significant and costly EDA and Warren County litigation. As the terms of that offer were not met by McDonald/North, on March 28, 2024, the EDA Board of Directors held a special meeting and voted to rescind its March 22nd resolution and withdraw the offer.
The proposed settlement terms were for McDonald/North to pay the EDA, by certified check a cash settlement of $350,000.00 and to withdraw North’s appeal of an order of possession of the Faith Way property granted to the EDA on March 6, 2024, by the Warren County Circuit Court. For these terms, the EDA would have deeded the property back to McDonald/North. In such a case, the multiple liens against the property by parties outside of the EDA would have remained the responsibility of McDonald/North, and not been a deduction from the proceeds to the EDA if the EDA sold the property.
As noted, the EDA received an order of possession for the 158 Faith Way property on March 6th. However, because North has appealed that decision the EDA cannot yet take physical possession of the property in order to sell it for fair market value. Upon sale of the property, the EDA will be required to satisfy the multiple liens against the property and cover closing costs.
The EDA takes very seriously the perspectives of the community as it relates to matters associated with McDonald and her actions as former Executive Director of the EDA. The EDA Board’s decision of March 22nd made sound financial sense. It was not accepted. The EDA wants to make clear because of their serious, negative impacts on the community, McDonald/North are not entitled to the positive consideration of being allowed to stay in their home when their size-able debt to the EDA, County and community remains unpaid.
The next regular monthly EDA Board meeting will be held on Friday, April 26, 2024, at 8:00 AM, at the Warren County Government Center.
EDA in Focus
In-Town Business Owners Urged to Respond to Coming Town Business Development Board Survey
At its regular meeting of Monday, April 1, the Front Royal Economic Development Authority (FREDA), also now operating under the title Front Royal’s Business Development Board (BDB), continued to fine tune what Town Director of Community Development and Tourism “Lizi” Lewis called on March 18 the “working, living draft” of a survey of existing in-town businesses. Central to that fine tuning process was stressing the importance of encouraging the largest possible return rate of the survey designed to give the BDB/FREDA board a working outline of the best path forward in assisting existing businesses within the town limits to maximize their potential profitability and business models.
And reaching them with an understanding that a response to the survey is in their best interest was stressed Monday. That is because the content of that collective response will help Front Royal’s Business Development Board establish its priorities in making recommendations to the Town’s elected officials and involved departments on infrastructure and other priorities designed to make the Town as business friendly to the specific needs of existing businesses as it can be.
The Town’s Business Development Board and staff study wall projections for the draft of the Existing Business Survey. Royal Examiner Photos Roger Bianchini
And to that end the bulk of the noon meeting was propelled by Lewis’s presentation of her most recent draft of the survey drawn up in the wake of the March 18 meeting discussion and input from FREDA board members. As readers may recall, strategies developed two weeks earlier included not annoying busy business owners with too lengthy of a questionnaire requiring a great deal of detail, as well as utilizing the community’s two existing Rotary clubs and the Chamber of Commerce to reach the broadest possible number of existing business owners.
So, maintaining a balance in seeking both the above-referenced “quantitative” response, as well as the additional more detailed “qualitative” replies from those willing to spend a little more time — 20 minutes was estimated as an average response time to the existing draft — was a driving force in Monday’s discussion. And Lewis listened as Business Development Board members suggested combining some questions, dropping or relocating others. And Lewis explained that there would be additional space available for expanded responses for those desiring to elaborate on various responses on their existing business model or desired changes or fixes to existing Town infrastructure or workforce availability.
Town Director of Community Development and Tourism Lizi Lewis, standing, fields questions on optimum wording and number of questions to be included in the crucial coming Existing Businesses Survey.
Asked if the survey would be distributed by email, Lewis responded that it would be distributed multiple ways. A target time-frame of mid-April was cited for a final board-approved draft to be sent out to the existing in-town business community.
On one front related to existing or future business development, under “Old Business” regarding workforce development and employee recruitment, Lewis reported that a date of April 18 had been confirmed for the board’s visit to Laurel Ridge Community College in Middletown. However, due to Spring Break the board’s visit to the Blue Ridge Technical Center here in town has yet to be nailed down. April 15 had been targeted for that Blue Ridge Tech Center visit during discussion on March 18.
Near the meeting’s end, Town Manager Joe Waltz told the board that one result of the town council’s recent “Retreat” was establishment of a revenue stream for BDB/FREDA operations as a main priority of council.
The noon meeting adjourned at 1:28 p.m.
EDA in Focus
EDA Plan to Return McDonald-North Home Property Deed for $350,000 Cash Raises Ire of Supervisors – But What Do the Numbers Say?
At its work session of Tuesday, March 26, the Warren County Board of Supervisors was temporarily distracted from the flood of numbers it has been pondering related to finalizing a Fiscal Year-2025 County budget, by another number — $350,000. That is the amount of money the now unilaterally County-overseen, if still legally named quasi-governmental independent entity Front Royal-Warren County Economic Development Authority (EDA, FR-WC EDA), announced the previous Friday it would accept in cash or certified check from former EDA Executive Director Jennifer McDonald and her husband Samuel North to return the deed of ownership of their home property at 158 Faith Way to them.
The WC Board of Supervisors March 26 work session opened with some staff budget variable reports. Here Child Services Act Coordinator Jessica Amankrah, at podium, with support from Finance Director Alisa Scott, reviews changes in numbers of impacted children in the mandated county program that will impact service costs. But the conversation shortly turned to a controversial McDonald/North home property deed resale initiative by the EDA. Royal Examiner Photos Roger Bianchini – 158 Faith Way Photo Online
The EDA’s recent move on acquiring deed to the property was announced February 9. It is driven as part of the effort to recover more of the estimated $6.5 million in EDA assets testimony at her criminal trial in federal court in the Autumn of last year indicated McDonald is believed to have moved to her own personal benefit as part of the EDA “financial scandal” occurring under her executive directorship of the FR-WC EDA between 2014 and 2018. As noted by staff at Tuesday’s work session, McDonald has given the EDA an estimated $1.3 million in real estate in a voluntary settlement agreement near the beginning of the EDA’s civil litigation process several years ago, leaving a referenced $9-million liability at about $7.5 million still to be recovered.
McDonald faces sentencing on 30 criminal convictions related to the unauthorized movement of EDA assets under false pretenses on April 9 in the Harrisonburg federal courthouse. Our most recent information is that McDonald and North continue to reside in the Faith Way property with a challenge of the EDA seizure of the property having been filed. The EDA contracted local attorney Nate Adams to represent the EDA regarding property rights to the Faith Way residential property.
EDA perspective
Initial information sought from the EDA board in the wake of the post-closed session announcement on Friday, March 22, indicated that the deed resale was considered the most financially productive path forward for the EDA and County to gain a maximum return on investment when all cost and value aspects of the Faith Way property are laid on the table. Those numbers as we understood are an assessed value of approximately $500,000; however, with an existing mortgage of about $250,000 to be paid off. Add legal fees projected at $30,000 to fight already filed legal actions against the property, and a potential 5% sales commission we calculate at $25,000 on the property’s full assessed value, and it would appear the EDA would be looking at a return in the neighborhood of $200,000, if not less, to follow through on the initial deed seizure and EDA-facilitated resale effort.
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The EDA Board of Directors at its Feb. 9 meeting when the McDonald-North home property deed seizure initiative was announced. But on March 22, after appearing to discover financial variables that could shave as much as $305,000 off the assessed value of $500,000, the EDA changed course, agreeing to a deed resale to McDonald-North at a cash price of $350,000. Not so fast, the supervisors said Tuesday, March 26, in unanimously seeking to stop the transaction.
But perhaps the county’s elected officials are working with a different set of numbers, or have confused some of the myriad departmental and outside agency budget request numbers they have been dealing with for several months now with the dynamics of the EDA deed return effort. County Administrator Ed Daley noted at Tuesday’s work session that it was the board’s 19th budget-season work session as Fiscal Year-2025 approaches on July 1. The work session discussion of the Faith Way property matter begins with the chairman’s introduction at the 49:48 mark of the linked County video.
County Supervisors perspective
It is a very interesting and collectively negative reaction by the supervisors as to what the EDA appears to believe will give the EDA and the County, which is helping the EDA keep its financial head above water in the aftermath of the “EDA financial scandal”, the best bang for their buck.
“That came as quite a surprise to all of us on the board of supervisors. And to say the least, none of was very happy about it,” Board Chairman Cheryl Cullers said in introducing the late-added topic of the Faith Way deed return to the work session agenda, adding, “So, I’ve been working with staff today in conversations and I’m optimistic that we have derailed that sale because that is not something this board of supervisors wanted. It is not our intention to give somebody who stole from the people of this community back, and for a lower price than what that property is worth.”
After her introductory remarks, Cullers handed off to her colleagues, each of whom added their discontent to the planned deed resale to McDonald and North beginning with Supervisor John Stanmeyer at the 52:00 video mark.
We contacted County Administrator Ed Daley about what financial information the board was working from in that previous day’s discussion. “I don’t think price was the issue for the board,” Daley replied, suggesting a call to Chairman Cullers for elaboration on her perception of the driving force for the board’s opposition to the re-sale of the deed to McDonald and her husband.
County Administrator Ed Daley suggested maximum supervisor contact with EDA board members to express their desire to stop North-McDonald deed resale initiative. Later Daley suggested to this reporter that a favorable price outcome may not have been the prime factor in the supervisors opposition. He suggested a call to board Chair Cullers to establish an alternate issue with the proposed transaction. However, the board chairman wasn’t responding to our inquiries. But from various supervisor work session comments perhaps that the property isn’t drawing the remaining estimated $7.5-million McDonald debt to the now County-overseen EDA is the problem.
This reporter emailed Board Chairman Cullers late Wednesday afternoon with questions related to her comments at the Tuesday work session, the above-cited numbers as we understand the EDA reasons for moving toward the cash-for-deed return, and Daley’s observations that factors other than money could be involved in the supervisors collective stated desire to derail the EDA initiative. However, as of publication Cullers had not responded to the emailed questions, nor responded to a phone message left mid-afternoon Thursday.
Not hearing back from the chairman, we returned to the linked work session video at the 52-minute mark where John Stanmeyer began the other members comments on the EDA’s plan to recoup $350,000 cash in exchange for the property’s ownership as the best path forward to claim maximum attainable value from that property.
“I’ll just say I was surprised and disappointed too hear about this. And it’s hopefully not too late to have it stopped. We definitely don’t want to let her off the hook on this,” Stanmeyer said in support of the chairman’s opening remarks.
Next up was “Jay” Butler (52:19 video mark). “I feel the same way. Until Jennifer McDonald has paid restitution to the county and to the community, you know, I do not support anything that would be in favor of her at this point, especially in the sale of this property,” Butler chimed in, adding, “It came as a surprise to me, and I definitely would have said ‘No’.”
Richard Jamieson (52:58) continued with the consensus appraisal against netting $350,000 in return for the property. “Again, I’ll reiterate that I would absolutely not support this. This is a person who was convicted of crimes of embezzling money from the community,” Jamieson said, verifying a $9-million judgement against McDonald with the county administrator when various factors, perhaps including accumulated interest and conspiracy on the movement of EDA assets to her personal benefit, are included, with about $1.3 to $1.5 million in real estate thus far returned.
“So, she owes seven-and-a-half-million dollars, yet somebody thinks it’s an OK idea to sell her house back to her that we took away from her, for $350,000. If she even has $350,000 it should be ours … It’s flabbergasting to me. I completely disagree with it. And my request to Chairman Cullers was to reel it back in, no matter what,” Jamieson said of blocking the EDA deed resale initiative.
And finally it was Vicky Cook’s turn to wrap up this supervisors consensus (54:08). “Wow, I support everyone of my fellow colleagues on this board of all their statements. And I was surprised as well when I heard about the transaction. I agree with Mr. Jamieson in regard with the $9-million settlement, which was a cherry deal when considering how much we are still paying on that debt right now … and I hope we can stop the transaction, and bring the money back to the taxpayers of Warren County,” Cook concluded.
Then acknowledged by the chair (54:49), County Administrator Daley suggested each supervisor convey their perspective on the proposed transaction to as many members of the EDA Board of Directors as possible. Perhaps during such direct between-board communications the supervisors will elaborate on how they believe holding on to the Faith Way property for resale, particularly if the attached mortgage and other forecast expense numbers cited above are accurate, will help the EDA get closer to recovering the $7.5-million still owed by McDonald to it and the County.
About those budget numbers
In other work session agenda items county staff explained various budget numbers, reasons for changes, and ongoing variables that could further impact their numbers moving forward toward final budget approvals. Those items as listed in the agenda packet amended that day to include B, D, and E were:
5:00 PM March 26, 2024 – WC Board of Supervisors Work Session
- Discussion – Child Services Act (CSA) Budget (1:10 video mark, CSA Coordinator Jessica Amankrah)
- Discussion – Repeal of Erosion and Sediment Control Regulations (20:33 video, Building Official David Beahm)
- Discussion – EDA Owned Property at 158 Faith Way (introduced by chair at 49:48, with Mr. Santmeyers beginning other board member comments at 52:00)
- Discussion – EDA Budget (55:21, County Director of Economic Development Joe Petty)
Following the Faith Way home property discussion, County Director of Economic Development Joe Petty addressed the EDA’s evolving budget proposal to the County. Despite his close work with the FR-WC EDA he was not asked about reasons for the EDA’s change of course on seizure of the North-McDonald property.
- Discussion – Updated Board of Supervisors 2024 Priorities (1:08:41, Deputy County Administrator Jane Meadows)
- Discussion – FY 2024-2025 County Budget (1:10:02, County Administrator Ed Daley; discussion of consensus on advertising a tax rate for public hearing begins at 1:46:52)
- Adjournment – The work session convened at 5 p.m. adjourned at 6:55 p.m.
EDA in Focus
County EDA Non-Suits Civil Litigations Against Town of Front Royal Among Other Post-Closed Session Actions
The Front Royal-Warren County EDA (EDA) held its monthly meeting on Friday, March 22, 2024, at 8 a.m. Six board members and legal counsel were present, and Rob MacDougall and Bruce Townshend participated remotely.
The County-overseen EDA gets down to business, including with some remote hookups of the legal council and two members, one pictured here, Friday morning, March 22.
The regular meeting began with Committee and Board Reports. The Asset Committee provided an update that settlement on Stephens Industrial Park-Lot 6 is underway. The County Director of Economic Development, Joe Petty, reported on the ongoing County Fiscal Year-2025 budget meetings, recent appointments with small business loan applicants, and an increase in business prospect inquiries for Front Royal and Warren County. As part of “New Business,” the Board approved a motion to authorize the current Chair, Jd Walter, as the registered name on the EDA’s PO Box.
The Board concluded the meeting with a closed session to discuss the potential disposition of real property to business prospects and legal consultation on active litigation. Following the closed session, the Board approved a confidential settlement agreement; a resolution to take a voluntary non-suit as to each of the lawsuits filed by the EDA against the Town of Front Royal; a motion to accept $350,000 from Jennifer McDonald and Samuel North to convey title to 158 Faith Way; and a motion to engage with Timberlake-Smith to serve an EDA’s general counsel beginning May 1, 2024.
Elaboration on these actions will be posted when and if any further information becomes available.
The next monthly Board meeting will be held on Friday, April 26, 2024, at 8 a.m., at the Warren County Government Center.
(From a release by the FR-WC EDA and Warren County Director of Economic Development)
EDA in Focus
FREDA Board Continues to Fine Tune its Economic Development Processes as Operational Status Approaches
At a work session on its newly implemented every two week meeting schedule the Front Royal Economic Development Authority (FREDA), now also doing business as the Town of Front Royal’s Business Development Board (BDB), gathered with Town Manager Joe Waltz and Director of Community Development and Tourism “Lizi” Lewis and other staff to review evolving processes as it edges toward fully operational status. As reported of its meeting of March 4: “The FREDA board and staff continue to fine tune a path forward as they and the town’s elected officials move closer to having assets in place to allow it to actively pursue its recently finalized mission and vision statements.”
And with the Front Royal Town Council having also recently approved a Memorandum of Understanding (MOU) regarding funding of FREDA/BDB that Mission: “To provide leadership necessary for Front Royal to optimize economic opportunity and community improvement” and Vision: “To sustain and grow a healthy economy that provides opportunity and protects the characteristics that make Front Royal a unique community” appear to be on a rapidly approaching horizon.
Frank Stankiewicz, far left end of table in green, makes a point to his BDB/FREDA board colleagues as discussion of development of an Existing Business Survey that won’t put off a high level of response, but allow additional detail to be included if so-desired by respondents.
And so at 12:30 p.m. Monday afternoon, March 18, the Town of Front Royal Business Development Board, down one member Aiden Miller, with above mentioned staff and Administrative Assistant Hillary Wilfong and IT Director Charles Hutchings rounding out the work session’s meeting roster, faced a five-pronged “Goal Setting Discussion”. The five sub-categories being A: Infrastructure (Downtown Parking and Traffic Studies), B: Existing Business (Survey Questions), C: New Business (Identify Target Sectors), D: Workforce Development (planned Site Tours of Blue Ridge Tech Center and Laurel Ridge Community College), and E: Asset Development (Inventory of Assets).
The importance of keeping infrastructure regarding traffic flow, ease of access to business locations, and parking needs updated to changing circumstances was cited. Potential fixes on Route 55 East into town from Linden, particularly from Leach Run Parkway to its intersection with Commerce Avenue drew the board’s attention before moving into subsection “B” Existing Business and a survey Lewis had drafted based on previous board discussion.
“This is a start, this is a working, living draft,” Lewis told the board of a page-and-a-half “Draft Business Survey” handed out for review by the board. And this Existing Business survey drew the board’s attention for about 20 minutes of the nearly hour-long discussion that saw the work session adjourn at 1:29 p.m.
Director of Community Development and Tourism ‘Lizi’ Lewis presented her working ‘Existing Business Survey’ draft to the BDB/FREDA board for feedback and suggestions. Town Manager Joe Waltz provided backup on some questions as the board draws closer to operational status.
Not intimidating busy business owners with too lengthy of a questionnaire requiring a great deal of detail was debated. A solution seemed to be suggested by offering briefly answerable questions with additional space for “Comments” in specific areas for those who might want to offer that additional detail, without requiring such detail from all responders. Lewis acknowledged trying to achieve a balance between a “quantitative” response from a broader range of existing business owners, with a “qualitative” response from those willing to provide additional detail on certain topics.
Among those topics were employee recruitment and the local employee pool; infrastructure improvements to what is currently available that might help their existing business to operate more efficiently; “Community Engagement” as in participating in special business friendly events, sponsorship of youth sports, and Chamber of Commerce membership; and even how local business owners spent their downtime. Were options available locally that kept them here for their downtime, or did they prefer to leave the area to relax. And if so, what kind of new business additions might alter that tendency to leave the area for relaxation.
A suggestion was made to hand out the finalized Existing Business Survey at local Rotary meetings as a means to seek that qualitative/quantitative answer balance.
David Gedney, far side of table, explores variables on the BDB/FREDA boards 5-pronged ‘Goal Setting’ work session discussion, as Frank Stankiewicz, left mostly obscuring Chairman Rick Novak at head of table, and Tom Eshelman listen.
As for “Asset Development” securing a comprehensive inventory of available existing commercial spaces within the town limits was broached. Related to the “Existing Business Survey” finding out if those businesses owned the properties they are in, or rent their physical space, was suggested as a link between those sub-sections.
Towards the meeting’s end plans for visits to two area “Workforce Development” instructional institutions were discussed, the Warren County Public Schools-connected 9th thru 12th grade Blue Ridge Technical Center in Front Royal; and Middletown’s Laurel Ridge Community College. With the community college visitation options being tighter it was tackled first. A visit the morning of Thursday, April 18, from 9 to 11 a.m. was chosen as the most accessible for the most board members and staff. A tentative date of Monday, April 15, in the afternoon was selected without a definitive time frame pending verification with the Blue Ridge Tech Center staff on their availability that day.
The next regular FREDA/BDB meeting was scheduled for noon on Monday, April 1.
Thank You to our Local Business Participants:
