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.
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.
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.
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.
The essential question about ITFederal had been asked in 2016 – Is what we are being told about this company’s financial status true?
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.
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.
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?
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.”
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.
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.
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.
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 …
Town reversed initial commitment to cover Afton Inn ‘winterization’ costs
During an update on the status of various properties at a Front Royal-Warren County Economic Development Authority Asset Committee meeting, Friday morning, the status of the on-hold Afton Inn “winterization” project two months into the winter of 2019-20 was broached.
In the agenda summary the project, described as once “a high priority” of the town government, was now observed to apparently be dead in the cold winter elements.
According to Asset Committee Chairman Greg Harold, Town staff apparently did an about-face on responsibility for, or the necessity of, covering the winterization costs.
Harold told those present that since the Town approached the EDA about working together with Afton Inn redeveloper 2 East Main Street LLC in November to get the stabilization project underway to prevent further deterioration of the 151-year-old brick and wood building shell, he had a record of communications with Town Attorney Doug Napier indicating Town responsibility for, and intent of, paying for the winterization work.
At various points in those communications a Memorandum of Understanding (MOU) dating to the 2014 transfer of ownership from the Town to the EDA for marketing and redevelopment purposes was referenced; as was Napier’s written expression of a “moral obligation” of the Town to provide for the “safety and welfare” of its citizens as pieces began falling off the building; and former Town Planning Director Jeremy Camp’s written notice of the apparent availability of Community Development Block Grant (CDBG) funding for the Main Street façade improvement work that could be utilized by the Town to pay for its own staff to work on the winterization project.
Consequently, Harold noted the EDA spent $3,500 on an engineering report to get a cost estimate on the project to the Town. However, several subsequent emails from the Town indicated logistical complications discovered by its staff leading to the likelihood of increased costs.
Harold observed that Interim Town Manager Matt Tederick had stepped in at a mid-December EDA board meeting to state that earlier communications indicating the Town would cover the winterization costs were a “mistake”.
Harold noted that his response to Town Attorney Napier asking for substantiation to support the interim town manager’s assertion was forwarded to the Town’s outside counsel, Damiani & Damiani, handling its civil claims against the EDA with no further communications.
However, EDA Board Treasurer Jorie Martin interjected by phone hook up that she had one initial communication from Damiani & Damiani stating that they “would get back to us” after which there were no further communications.
In that December 19 email to Napier forwarded to the Town’s outside counsel, Harold wrote, “I have read the MOA, and I am not able to find any subordination clause or other languages that strips Front Royal of this requirement (of funding),” adding, “Contrarily, there are 2 paragraphs which explicitly detail and reaffirm the town’s commitment.”
One of those paragraphs from the MOU dated June 23, 2014, is quoted stating, “The Town agrees that during ownership of the Afton Inn property by the EDA, the Town shall not require the EDA to perform any repairs, maintenance or demolition of any part of the Afton Inn building unless the Town agrees to bear the costs of such repairs, maintenance or demolition.”
The following paragraph describes the Afton Inn’s close proximity to Town Hall at the head of the East Main Street Historic Downtown Business District, observing, “The Town has clearly identifiable interests in the use to be made and in the appearance, of the Afton Inn property … As such, the Town has an appropriate, identifiable interest in keeping the Afton Inn property in both a viable safe physical condition and an aesthetically pleasing condition.”
It was again noted that 2 East Main Street LLC continues to express hope of maintaining its interest in the Afton renovation project now stalled by the EDA’s financial dilemma tied to the financial scandal asserted in the County-EDA funded Cherry Bekaert forensic audit of EDA business in recent years.
And put up a parking lot?
However, it would appear in this season of the interim town manager and a new council majority committed to cost and tax reductions despite $29 million in capital improvement funding needs in the coming budget year, those steering the ship of Front Royal Town government have simply decided the Afton Inn’s appearance, condition and redevelopment are no longer fiscal priorities.
As the discussion moved to the collection of bad debts, EDA Board Vice Chairman Jeff Browne noted that since the involvement of the EDA’s contracted attorney, the first check from a debtor had been received – “We just have to pick it up … so, we’re already starting to see results,” Browne told the Asset Committee, leading Board Chairman Ed Daley to quip, “Was this a large check from a municipal corporation that owes us a very significant amount of money?”
“The answer would be no,” Browne replied, dashing the hope the Town had decided to make good on at least a portion of its undisputed $8.4 million debt to the EDA on the principal for the Town Police Department construction project, if not on Afton Inn winterization costs.
See this discussion just past the 38-minute mark of the linked Royal Examiner video, as well as other topics in the entire meeting video. Among topics discussed were bids received on removal of the solar panels on the EDA’s Kendrick Lane office complex; a pending closing date of February 28 on the Stokes Mart property sale; and re-acquisition of the Workforce Housing parcel, hopefully, at the same $10 price, it was inexplicably transferred to the Cornerstone LLC branch of the Aikens Group in late November 2018 for.
After initially being “gifted” to the EDA for $10, due to unmet, publicly undisclosed deadlines not being met, the EDA acquired the property at a cost of $445,000, with additional resources allegedly being committed to the project leading to the property being written off as a $600,000-plus loss.
In addition to Harold, Daley, Browne, and Martin, the latter by phone hookup, present at Friday’s Asset Committee meeting were EDA attorney Sharon Pandak, also by phone connection, EDA Executive Director Doug Parsons and South River Supervisor Cheryl Cullers.
Town, County, EDA join forces with commercial realty community
At 8 a.m. Wednesday morning, February 19, members of the local real estate brokers community gathered at the Kendrick Lane Front Royal-Warren County Economic Development office for a “Commercial Property Open House.
After some breakfast snacks provided by the EDA through the Shenandoah Valley Golf Club’s catering service and a briefing by EDA Executive Director Doug Parsons on economic incentives available locally and through the state economic development partnership, the group representing 10 realty companies, accompanied by EDA, Town and County officials began the tour close by.
First to be viewed of 28 properties were two vacant offices in the EDA office complex at 400 Kendrick Lane. Then it was on to the Town Trolley for a foray into the adjacent Royal Phoenix Business Park’s 117 vacant acres before heading into the Route 522/340 North Commercial and Industrial Corridor.
Royal Examiner caught up with Parsons and Administrative Assistant Gretchen Henderson shortly after noon following the Open House tour’s conclusion back in Front Royal. In fact, Parsons noted that of the 28 EDA overseen properties on the tour, all but seven were in the town limits.
On the Town side, Community Development Director Felicia Hart had taken the point, working with EDA Board Vice-Chairman Jeff Browne to propel the Commercial Property Open House forward. Following Hart’s January 29 termination with several other Town staff and department heads as part of the interim town manager’s Fiscal Year 2021 budget proposal, Browne worked with Interim Town Manager Matt Tederick to see things moved forward on the logistical side.
Planning Director Taryn Logan represented Warren County and Chris Brock, who identified himself as Interim Planning and Zoning Director, was present for Front Royal. Parsons and Henderson acknowledged the contribution of town staff in preparation of a properties’ booklet for the open house and the provision of the trolley for the tour.
“Everybody’s working together,” we observed to Parsons of the joint EDA-Town-County driven interaction with local commercial realtors.
“Yes, as always,” the EDA executive director replied.
“Or at least ‘almost’ always,” we suggested of certain litigious efforts of one participating municipal partner. However, Parsons declined to take the bait, preferring to accentuate the positives of the day. So, we asked for his assessment of the day and its impetus.
“The idea behind the event was to bring together the Blue Ridge Association of Realtors members and take them on a tour of 28 properties here in Front Royal and Warren County that we think are good, viable properties for both commercial and industrial development. So, we looked at 21 properties in town and seven outside of town.
“I think we saw a good variety of buildings, vacant ground that could be used for a variety of purposes. I think the realtors appreciated the information, and I think it was a good partnership effort between the Town and the EDA. I want to thank Chris Brock and Alfredo Velasquez for their help in collating and binding the materials. And Chris’s expertise was a big part of the day as he was able to talk to the group about planning and zoning and certain properties in town.
“Taryn Logan was also a very valuable asset to help explain the planning and zoning in the county and some of the history of the properties.
“And a lot of the realtors that were on the tour, they knew a great deal about some of these properties because they’d either bought or sold them before; or had dealt with them in the past, so knew the history. There was a lot of knowledge on the bus which was shared amongst the group and hopefully, it’ll lead to some sales for some of the properties here in town – and out in the county,” Parsons concluded what he believes was a morning well spent.
Apparently the private sector participants agreed. A sign out sheet was punctuated with “Comments” including “Great Event”, “Good Idea”, “Thank you so much!!”, “Wonderful – very informative” and “Next Year?”
We asked Parsons about his pre-tour briefing on some financial incentives available through the Town, EDA and the Virginia Economic Development Partnership (VEDP).
“I know a lot of times the real estate community in states across the nation may not be as in tune with the local and state incentives that these job developers’ programs have to offer. So, I was hoping to make them aware of what is out there for them in that regard … Because if you’re a realtor and you are dealing with someone and maybe there’s a ten or twenty thousand dollar gap in being able to close the deal, if you can bring the Virginia Jobs Investment Program incentive to the table, or the tech zone incentive here locally to the table, it could be a deal closer for someone,” Parsons observed.
And deal closings on some commercial properties are what the EDA, its municipal partners, and private sector realtors are all looking to make happen.
EDA presents budget proposal to Board of Supervisors; delinquent taxes from contractors
On Tuesday, February 11 at the evening work session of the Warren County Board of Supervisors, the EDA Board and staff presented its budget proposal to get through the final 3 1/2 months of this fiscal year and to continue into FY 2021.
Also included on the agenda was a discussion with Building official David Beahm and Commissioner of the Revenue Sherry Sours on the payment of delinquent taxes and business license fees by contractors prior to issuance of building permits.
County Administrator Doug Stanley discussed the Department of Environmental Quality Financial Assurance requirements. Also, Stanley, along with County Attorney Jason Ham, discussed the management and lease agreements of the Front Royal Golf Club.
See the presentations, including discussion of the Town’s $8 million-plus debt to the EDA on the new police station and the status of the Front Royal Golf Club in this exclusive Royal Examiner video:
EDA report to County – long-time annual auditor withdraws from lagging 2018 audit process
During one of six operational updates from entities with which it is either directly or indirectly involved at its Tuesday, February 4 meeting, the Warren County Board of Supervisors got what Front Royal-Warren County Economic Development Authority Executive Director Doug Parson called “bad” and “very disappointing” news.
That news was that long-time EDA auditor Yount-Hyde-Barbour had withdrawn from the EDA’s 2018 audit process. That process is running considerably behind as the EDA tries to get to the bottom of the final year of a number of years during which a contracted financial investigation by Cherry Bekaert, known for its forensic audit discoveries of criminal financial behavior, alleged a number of years of financial improprieties within EDA operations.
The Cherry Bekaert investigation conducted from mid-September 2018 into the spring of 2019 has resulted in a $21.3-million EDA civil litigation against what currently stands at 14 human and business entity defendants and multiple financial felony indictments by a special grand jury empaneled to investigate potential criminality tied to the EDA civil litigation. At the center of both the civil and criminal cases is former EDA Executive Director Jennifer McDonald.
It was Yount-Hyde-Barbour that was contracted by the EDA to conduct its annual audits during most, if not all of the years during which the EDA financial scandal is believed to have occurred. In recent months retired Warren County Finance Director Carolyn Stimmel and Heather Tweedie of the auditing firm Hottel-Willis have been pouring through the EDA’s 2018 financial records trying to ascertain what EDA assets went where, how, to what purpose and most importantly, were those purposes legitimate and authorized by the EDA Board of Directors.
Yount-Hyde-Barbour had been expected to take the result of Stimmel and Tweedie’s work to belatedly conduct their annual audit for 2018. Completion of that audit has been termed crucial to the
EDA’s future ability to function as it attempts to traverse the operational aftermath of the financial crimes alleged to have occurred under McDonald’s decade of executive leadership of the EDA.
One EDA civil case defendant’s attorney wondered aloud during a past motions hearing that if their client was a defendant for the financial actions alleged against them, why the EDA auditor that had rubber stamped the EDA’s finances annually through the years of alleged embezzlements and misdirection of assets, wasn’t also a defendant.
Could Yount-Hyde-Barbour’s withdrawal from the 2018 audit process be an indicator of potential legal issues between the auditor and the EDA? In response to media questions Sands Anderson attorney Dan Siegel, present with lead EDA civil case attorney Cullen Seltzer for a closed session discussion with County officials of the EDA’s civil case landscape, said only that EDA counsel continues to explore potential legal liability in many directions.
VDOT Revenue Sharing
In other business Tuesday, after a week’s delay to allow new supervisors to gather additional information, the county board unanimously approved the County’s contribution to the Virginia Department of Transportation (VDOT) Revenue Sharing Program. It was explained that the program that runs through multiple municipal fiscal year budgets allows involved municipalities to get a 50% revenue match from the State on needed and desired road improvements throughout the county.
Numbers presented projected the County’s contribution in the coming FY 2021 budget at $250,000. It was a number projected to remain constant in FY 2021 through FY 2024. Six total involved road project costs were cited at $2.9-million over a number of years, with a 25% County contribution total of $753,312.50 and a 25% contribution from involved Sanitary District and POA fees at $703,313.50.
Short-term rental permit
By a 3-2 margin, a divided board approved a short-term rental Conditional Use Permit (CUP) for Stephen J. Aron Jr. despite some objections from neighbors in the gated River Ridge Property Owners Association. Tony Carter and Archie Fox cast the two dissenting votes.
Carter cited neighbor concerns about security issues tied to the applicant’s efforts to recoup some of his residential property improvement costs in purchasing what he said at the earlier public hearing was the run-down home of what he described as the less than conscientious previous occupants. In explaining her vote for the CUP, Delores Oates noted that renters wouldn’t be given the code to the gate, but would utilize a locked key box key to activate entry to the gated community.
Carter replied that, that solution still allowed entry and access of strangers to a community that many residents may have located to for the additional security provided by locked access available only to residents and their guests.
During the January public hearing it was noted in favor of the request that many short-term rental operations do quite a bit of vetting of guests. The applicant indicated he intended to be conscientious about those allowed to stay at the residence he and his family plan to spend a great deal of time at themselves.
In addition to the EDA, other operational updates the county received were from VDOT, RSW Jail, the Virginia Cooperative Extension Service, Department of Social Services and the Town of Front Royal.
See a related story on the Town report; and see the full Warren County Board of Supervisors meeting – other than the 3-hour-plus closed session – in this Royal Examiner video:
Economic development proceeds amidst legal and Spotted Lanternfly threats
This reporter sat down with Front Royal-Warren County Economic Development Authority Board of Directors Vice-Chairman Jeff Browne and Executive Director Doug Parsons on Friday, January 31, to discuss the work they do amidst challenges they face in the aftermath of the financial scandal that developed during the executive leadership of Jennifer McDonald and a previous EDA board majority.
In what we hope is the first of at least monthly video interviews on EDA business and affairs, listen as Browne and Parsons describe how their time is budgeted as they continue the EDA’s work of business retention and recruitment in an environment of dueling civil litigations. They continue to offer an olive branch to the Front Royal Town Council to work together in good faith to determine exactly what the EDA owes the Town in allegedly misdirected EDA assets generated by Town taxpayers, as opposed to an increasingly expensive attorney-driven civil suit filed by the Town against its existing co-created EDA.
It is litigation, as is pointed out in the interview, in which town taxpayers face the unhappy task of funding both sides, as Town taxpayers for the plaintiff and as County taxpayers for the defendant.
And speaking of olive branches, Browne and Parsons conclude the interview by describing the economic threat presented by the expanding presence of the fruit-tree and grapevine feeding Spotted Lanternfly in Frederick County to our north; and how Warren County citizens and businesses can be on the alert to spot, report and mitigate early signs of the destructive bug’s presence in our county.
Watch the discussion in this exclusive Royal Examiner video:
Judge denies EDA civil suit defendants’ motions for removal from case
In a written ruling signed January 24 and filed in the Warren County Circuit Court Clerk’s Office on January 27, Judge Bruce D. Albertson denied a host of EDA civil litigation defense motions for removal from the case as alleged co-conspirators with central defendant, former EDA Executive Director Jennifer McDonald.
Among defendant attorneys involved in the December 12 motions hearing were those representing April Petty, Jesse Poe, Donald Poe and his Earth Right Energy (ERE) solar panel installation company, and ITFederal and its principal Truc “Curt” Tran.
The basis of those defense counsel arguments for dismissal of their clients from the civil case primarily revolved around the plaintiff’s notion of an overarching conspiracy that somehow links the various defendants to central figure and former EDA Executive Director McDonald; and that there are legally definable contractual breaches making those defendants individually liable for funds that came their way through McDonald.
At the December motions hearing christened “Groundhog Day” by one media rep present (guilty as charged) for the bulk of four-and-a-half-hours of repetitive legal arguments put forth by each defense attorney on essentially identical claims for removal of their clients from the civil case, lead plaintiff attorney Cullen Seltzer’s counter was briefer.
That was because Seltzer’s reply was essentially a one-response-fits-all argument. That response was that there did not have to have to be direct knowledge among all defendants of each interlocking conspiracy McDonald is alleged to having been a party to, for that conspiracy to exist to the benefit of separate defendants in separate transactions. Seltzer scoffed at the idea of McDonald as “a rogue tornado” distributing EDA assets to various defendants without a general common knowledge that something illegal was transpiring to each defendant’s benefit.
“I deny each Demurrer and Plea in Bar for the reasons cited by the plaintiff,” Judge Albertson wrote in his brief, three paragraph ruling.
However, the judge also ruled that a plaintiff claim of “Breach of Fiduciary Duty” against all defendants, cited only McDonald and her former Administrative Assistant Michelle Henry for such action.
“Plaintiff alleges that this count applies to all defendants due to the conspiracy count. The manner in which this count is written, however, names only Ms. Henry and Ms. McDonald as parties that have breached this duty. I find that his count does not apply to the other defendants as written in the Amended Complaint,” the judge ruled.
The judge also continued a decision on Earth Right Energy’s “Plea in Bar and separate Motion for Sanctions” based on other arguments heard December 12. There was disagreement between ERE attorney Ryan Huttar and EDA counsel on the validity of contracts between the EDA and ERE in amounts over $10,000, which is most, if not all involved contracts.
EDA counsel noted that any EDA transaction or contract over $10,000 had to be approved by the EDA Board of Directors, which EDA counsel stated did not happen in the Earth Right Energy cases. However, Earth Right attorney Huttar contended the company’s contracts, including a $27-million one with the Warren County Public School system negotiated while Greg Drescher was both an EDA board member and superintendent of schools, were legally binding.
It appears a decision on those arguments will require additional factual information to be brought to the court.