JENNIFER MCDONALD

McDonald

Former Front Royal-Warren County Economic Development Authority Executive Director Jennifer Rae McDonald now faces federal fraud and money laundering charges and, if convicted, could serve at least two years in prison.

A grand jury in the U.S. District Court for the Western District of Virginia that met in Charlottesville handed up a 34-count indictment charging McDonald with wire fraud, bank fraud, aggravated identity theft and money laundering. The jury handed up the sealed indictment last week. Federal authorities arrested McDonald on Tuesday morning and the court unsealed the indictment.

A conviction of the single count of aggravated identity theft carries a mandatory two-year federal prison sentence and a fine of up $250,000. Wire fraud carries a maximum of 20 years in federal prison and a fine of up to $250,000. Bank fraud carries a maximum sentence of up to 30 years. A conviction of money laundering carries a sentence of up to 10 years.

McDonald made her initial appearance before U.S. Magistrate Judge Joel C. Hoppe via Zoom in the federal court in Harrisonburg. Assistant U.S. Attorney Sean Welsh appeared for the prosecution.

McDonald told Hoppe she would like the court to appoint an attorney to represent her rather than hiring legal counsel. Peter Greenspun, McDonald’s attorney in a Warren County civil lawsuit, said he is unaware that she has assets with which she can pay an attorney. Greenspun pointed out that McDonald filed for federal bankruptcy protection in September 2020.

Hoppe appointed the federal public defender's office to represent McDonald.

The U.S. Attorney’s Office did not seek detention. Hoppe granted McDonald release on her own recognizance, meaning she does not need to pay toward a bond. Hoppe required McDonald to abide by the conditions of her bond and ordered her into pretrial services. Hoppe also ordered McDonald to have no contact with her husband, Samuel North, because he is a potential witness in the case.

The indictment accuses McDonald of devising and participating in schemes in which she used EDA money to make payments on personal credit cards and toward balances of credit cards of family members. McDonald created false documents, including invoices and real estate documents, to disguise the scheme, the indictment states. She also forged the names of others to disguise and to effect the fraud scheme, the indictment states.

EDA Board of Directors Chairman Jeff Browne reacted to the indictment by phone on Tuesday.

“I think (the EDA) had hoped there would be an indictment and expected it and it was good to see it finally came,” Browne said. “It’s been a long time coming but federal prosecutors dot every ‘i’ and cross every ‘t’ and check it 50 times before they bring an indictment so, with (COVID-19) and everything else it’s just taken a lot longer than it should have.”

“We’re very hopeful and we’ll continue to help federal prosecutors with the case where we can and obviously we’re continuing to pursue the civil cases that we have,” Browne said. “We’re doing economic development, but we’re also trying to get some justice for Warren County residents.”

McDonald submitted false documents to bank employees and auditors and settlement agreements; and also made wire transfers, withdrew money, deposited checks and issued cashier’s checks and payments to financial institutions to further the fraud, the indictment states.

McDonald served as the EDA executive director from April 2008 to December 2018. She owned and operated DaBoyz LLC. The indictment identifies a DaBoyz co-owner only by the initials “D.M.” McDonald also owned and operated MoveOn8 LLC.

McDonald devised and participated in a scheme from June 3, 2014, to Dec. 20, 2018, to defraud the EDA and to obtain money and property by means of false and fraudulent pretenses, representations and promises, the indictment states. McDonald, through her position at the EDA, had access to funds belonging to the authority in checking accounts and from credit facilities in the entity’s name, the indictment states.

In one instance, federal authorities accuse McDonald of using EDA money to pay off loans for Little Rugratz LLC in which she and a family member owned an interest.

The indictment also describes real estate schemes that authorities claim McDonald pursued with EDA money.

“(McDonald), without authorization, used EDA funds to purchase real property for her benefit in the names of others and in the name of DaBoyz, LLC,” the indictment states. “For these real estate transactions, (McDonald) often earned commissions as a real estate agent.”

The indictment states that McDonald used EDA funds without authorization to buy properties at:

• 400 Craig Drive, Stephens City.

• 118 Jutland Court, Stephens City.

• 1309 Robinhood Lane, Front Royal.

• 2890 Buck Mountain Road, Browntown, in the name of DaBoyz LLC.

• 1321 Happy Creek Road, Front Royal, in the name of DaBoyz LLC.

• 2951 Rileyville Road, Rileyville, in the name of DaBoyz LLC.

The indictment goes on to state that McDonald used EDA money, without authorization, to make payments toward balances accrued on personal and family members’ credit cards. McDonald created false documents, including invoices and real estate documents, to disguise the scheme, the indictment states. McDonald forged the names of others, submitted false documents to bank employees, auditors and settlement agents, the indictment states. She made wire transfers, withdrew funds, deposited checks, obtained cashier’s checks, and paid financial institutions as part of the scheme, the indictment states.

The first count of the indictment charges McDonald with wire fraud. The indictment charges her with transferring a total of $3,562,100 on three dates in 2016 and 2017 from an EDA account with The First Bank and Trust to a Union Bank and Trust account in the name of TLC Settlements LLC, and transferring a total of $416,491 in four transactions from May 30, 2018, to July 6, 2018, from an account held at The First Bank and Trust in the name of the EDA to another account held by the authority at United Bank.

Another count in the indictment charges McDonald with bank fraud. The count accuses her of making debits via cashier’s checks totaling $740,000 from a United Bank account in the name of the EDA made payable to Service Title of Front Royal LLC, on different dates from July 24, 2014, to Aug. 31, 2015.

The indictment states that McDonald made wire transfers totaling $3,562,099 from an account held at The First Bank and Trust in the name of the EDA to an account held at Union Bank and Trust held by TLC Settlements LLC, on dates from Sept. 14, 2016, to April 26, 2017, and made payments to a Sears personal credit card through Citibank with four checks from an EDA account with United Bank totaling $51,915 on different dates in June 2018.

The indictment accuses McDonald of committing aggravated identity theft from Sept. 8, 2016, to Sept. 20, 2016, during and related to wire fraud. The indictment identifies the alleged victim only by the initials “T.T.”

The indictment charges McDonald with money laundering through interstate commerce related to 17 real estate transactions that took place on different dates between Oct. 31, 2016, and March 16, 2018. The indictment states that McDonald transferred $584,011.28 and $583,933.56 on Oct. 31, 2016, from “J.S.” to an account in the name of DaBoyz LLC at Union Bank and Trust. The indictment also states that McDonald withdrew a total of $1,062,248 from the DaBoyz checking account at Union Bank and Trust on different dates from Nov. 22, 2016, to March 16, 2018.

The indictment also calls for McDonald, if convicted of the alleged counts, to forfeit any real or personal property or related proceeds she acquired as a result of the offenses. The United States also will seek a monetary judgment against McDonald equal to the value of any property or proceeds.

A special prosecutor from the Harrisonburg-Rockingham County Office of the Commonwealth’s Attorney brought indictments against McDonald and co-defendants in Warren County Circuit Court in May 2019. The grand jury indicted McDonald and co-defendants on counts of embezzlement and other charges. The court dismissed all charges against McDonald and the co-defendants in mid-April 2020 at the request of the prosecutor, an action that left many people in the Front Royal-Warren County community angry. The Harrisonburg-Rockingham County prosecutor’s office explained months later that it sought to drop the charges in order to hand over the case to the federal authorities.

The criminal indictment is separate from a civil lawsuit filed by the EDA that accuses McDonald and a handful of co-defendants of misappropriation or embezzlement of authority funds for their own benefit and used in various real estate schemes. The EDA claims McDonald used more than $20 million of the authority’s money in her schemes. State law allowed the EDA to triple the amount sought in the suit.

A judge in Warren County Circuit Court recently granted a motion for partial final judgment that marked the end of the EDA’s complaint as it pertains to McDonald but leaves the case active against the co-defendants. McDonald has agreed through her legal counsel that she is liable to the EDA for $9 million.

McDonald’s bankruptcy case in the U.S. District Court remains active as a trustee continues to liquidate her assets.

– Contact Alex Bridges at abridges@nvdaily.com