FRONT ROYAL – New allegations of embezzlements by Jennifer McDonald, the former executive director of the Front Royal-Warren County Economic Development Authority, appeared Tuesday in Warren County Circuit Court records.
The newly filed documents total nearly 3,000 pages and include “working papers” compiled by Cherry Bekaert, a firm hired by the county on behalf of the EDA to perform an intrinsic fact-finding study of the EDA’s finances that resulted in the authority filing a $17.6 million lawsuit in March against McDonald and eight other defendants. McDonald was arrested on four felony counts of embezzlement. The newly filed documents have not resulted in criminal charges so far but are part of the civil suit.
The papers detail 10 new areas of alleged embezzlement — bringing the total of allegedly stolen funds to $21,152,000 — that were not outlined in the EDA’s initial complaint. The individuals identified in the papers have not been named as defendants in any lawsuit or have been charged with any crimes pertaining to the EDA scandal at this point.
The filing notes that due to “scope limitations” imposed by the EDA board and the Board of Supervisors, Cherry Bekaert was “unable to complete all the procedures we [Cherry Bekaert] considered necessary to fully investigate and examine certain EDA transactions that, based on evidence and belief, appear irregular.”
The 10 areas that allegedly involved embezzlement include: the New Markets Tax Credit Program ($3,501,000); Leach Run Parkway easements ($110,000); wetland credits ($1,127,000); a right-of-way purchase from New Hope Bible Church ($345,000); a property at 999 Shenandoah Shores Road ($6,000); payments to relatives of McDonald ($457,000); the USDA’s Intermediary Relending Program ($25,000); the B&G Goods store ($21,000); payments to known and suspected business partners of McDonald ($320,000); and the USDA rural business enterprise loans program ($304,000).
The filing states that McDonald “possibly in collusion with others” carried out the embezzlements.
Regarding payments to relatives, the filing states that McDonald, over many years, embezzled $457,000 from credit lines reserved for town and county use to make payments to eight family members. An alleged embezzlement related to the Shenandoah Shores property indicates that McDonald used EDA money to pay off a relative’s student loan.
The lawsuit further alleges that McDonald is suspected of spending $304,000 that was reserved for town and county credit lines to make payments represented as loans under the USDA Rural Business Enterprise loan program to 58 “friends and suspected undisclosed business partners” from August 2005 through December 2018.
The filing states that McDonald is also suspected of embezzling $3.5 million of money from town and county credit lines that were designated for projects under the New Markets Tax Credit program to make personal real estate purchases. Although these real estate purchases were detailed in the EDA’s initial filing, exactly where the money came from was not revealed until Tuesday’s filing.
The New Markets Tax Credit program allows projects to be constructed in economically distressed areas through interest-only payments for seven years, at which point the remaining balance is refinanced. A series of town and county projects were expected to be financed through the program, but the projects never qualified for the program.
The filing notes that the EDA board approved a resolution allowing McDonald to obtain $39,600,000 in bank financing credit facilities to finance projects through the tax credit program.
“McDonald created false documents to conceal the suspected embezzlements and directed the unauthorized expenditures be recorded in the EDA general ledger accounts as valid,” the filing states.
Regarding B&G Goods, the filing states that in September 2014, the EDA board approved the $530,000 purchase of a building at 506 E. Main St. that would house the store. The filing states that B&G was supposedly going to pay rent to offset debt service so the EDA could obtain bank financing without town or county sponsorship.
The filing adds that McDonald “may have been personally involved” with B&G, which was not disclosed to the EDA board. The filing adds that McDonald directed about $39,000 that was “characterized as loans” and about $21,000 that was characterized as “maintenance payments” to B&G owner Henry Lambert.
The filing states that instead of paying this supposed loan back, Lambert turned over a van and inventory. Lambert has not been named as a defendant in the EDA lawsuit or in any criminal case pertaining to the EDA scandal.
The filing further states that McDonald and Missy Henry, former EDA administrative assistant, held a “yard sale” of that inventory when B&G closed in November 2016 and converted the money for their personal use. Henry has not been named as a defendant in the EDA lawsuit or in any criminal case pertaining to the EDA scandal.
Regarding the alleged Leach Run Parkway embezzlement, the filing states that McDonald executed 11 contracts to purchase right-of-ways or easements from various entities including Warren Memorial Hospital and HEPTAD LLC., the latter of which former EDA board member Ron Llewellyn was the registered agent.
The filing also states that as part of the Leach Run Parkway project, McDonald executed a right-of-way purchase from the New Hope Bible Church. The filing states she “directed the expenditures to be recorded to EDA general ledger accounts, overstating the cost of the asset.”
The filing states that in interviews, McDonald said she received approval from the EDA board to make that purchase. While approval was given, the filing states the board authorized a $65,000 purchase price but doctored documents state $345,000 was spent.
The filing adds that a deed for the $345,000 purchase appeared altered and signatures of the church’s trustees on that document “appeared markedly different” than they did on documents illustrating a $65,000 purchase.
The filing further alleges that McDonald embezzled $1.1 million from town and county credit lines for “wetland credits.” The filing states that “doctored invoices” were made payable to the Shenandoah Wetland Company. The filing adds that McDonald then directed those payments to be recorded in the EDA general ledger accounts.