FRONT ROYAL – The Town Council at its regular Monday cast a unanimous vote allowing the town attorney’s office to file a lawsuit against the Front Royal-Warren County Economic Development Authority and “any other necessary parties to recover all moneys owed or will be owed” to the town, according to the motion authorizing the lawsuit.

Last year, Town Finance Director B.J. Wilson discovered that the town is owed at least $291,000 from the EDA stemming from overpayments related to debt service.

The town turned the matter over to the Virginia State Police in August and the FBI has since been seen removing evidence boxes from the EDA’s office.

So far, the county has loaned the EDA $460,000 that was used, beginning in September, to pay the firm Cherry Bekaert to perform what is being called an “intrinsic fact-finding” mission that delved into the EDA’s finances.

The study led to the EDA filing a $17.6 million civil lawsuit in March alleging a series of embezzlements and financial misappropriations against nine defendants, including former EDA Executive Director Jennifer McDonald. This week, Circuit Court Judge Clay Athey said the amount of the alleged embezzlement has increased to $21 million.

That civil lawsuit led to the formation of a special grand jury that is investigating potential misappropriations in the town, county, schools, the EDA and the Warren County Sheriff’s Office. Two months after the grand jury was empaneled, McDonald was arrested on four felony counts of embezzlement and is being held in jail without bond.

The Town Council motion authorizing the lawsuit against the EDA notes that the town has attempted to learn how much in addition to the $291,000 it is owed by the EDA for over a year.

Those efforts included the filing of multiple Freedom of Information Act requests seeking the results of the intrinsic fact-finding study. The study has been dubbed an intrinsic fact-finding, although the motion notes that EDA officials previously called the effort a “forensic audit.”

“Yet currently EDA officials not only refuse, in writing, to furnish this “forensic audit” to the Town, but based on publicly reported accounts of court proceedings, the EDA has now represented to a court of law that no “forensic audit” exists and has never existed,” the motion states.

The motion states that the EDA never “completely honored” those FOIA requests despite authority representatives stating in writing and orally that a report detailing results of the fact-finding expedition would be supplied to the town.

The motion notes that the Town Council believed that one goal of the study was “to give an in-depth and accurate picture” of the town’s financial standing with the EDA.

Assistant Town Attorney George Sonnett explained that the town has made every attempt to receive cooperation from the EDA in obtaining financial information related to the town. He said the town is now fed up and has opted to sue for losses instead.

The motion states that the town and taxpayers have relied on the EDA to help finance projects, including the Front Royal Police Department’s recently opened headquarters, a West Main Street extension and Leach Run Parkway.

Due to this relationship, the motion notes that the EDA has served as the town’s financial and legal agent for those projects. Therefore, the motion states, that the town deserves the study’s results, although the town did not finance or commission it.

The motion states that town citizens are county citizens and therefore have paid for the study.

“Town Council and its officials and agents have the right and the duty, as a matter of law and fact, to see the entire study, to determine its scope, contents, and conclusions to determine if the town’s taxpayers’ moneys are fully accounted for and will be promptly returned in their entireties to the town,” the motion states.

The town approved the lawsuit after entering a closed session for legal consultation.

Interim Mayor Matt Tederick noted while some citizens believe that the council should never enter closed sessions, “I respectfully disagree.” He said the state code allows the council to do so for a variety of reasons and consultation with legal counsel is a “good reason.”

“Have any of you ever been involved in a legal dispute and gone to court? Did you invite opposing legal counsel into your discussions with your attorney? Did you lay out your plan as to how you’re going to win in front of opposing counsel? Of course you didn’t, and I’m not either,” he said.

– Contact Josh Gully at jgully@nvdaily.com