FRONT ROYAL – An attorney representing ITFederal and its developer Curt Tran - two defendants in the Front Royal-Warren County Economic Development Authority’s $17.6 million embezzlement and misappropriation lawsuit -- states in court documents that the complaint against his clients should be dismissed due to the authority's vague claims.
According to previous reports, former U.S. Rep. Bob Goodlatte, R-Roanoke, announced in June 2015 that ITFederal would invest $40 million into an economic development project that would bring 600 jobs to the Avtex site off Kendrick Lane.
The initial announcement claimed the project would include three buildings of various sizes and uses - 37,000-square-feet of office space, 20,000-square-feet of retail space and a 10,000-square-foot cloud data center. All three buildings were expected to be completed by September 2018, while to date an unspecified 10,000-square-foot building is the lone strucutre under construction.
Goodlatte attended the project's October 2015 groundbreaking and was quoted in previous reports as saying: “This place can once again be a good place for business to thrive.”
The project was slated to be constructed on a 30-acre plot valued at over $1.5 million, which the EDA sold to ITFederal for $1. Contract stipulations state that if ITFederal does not invest $2 million and receive a certificate of occupancy for a 10,000-square-foot building by September 2020, the land will be returned to the EDA.
In September 2015, the Town of Front Royal granted the EDA a $10 million loan to attract businesses at the site. County Attorney Dan Whitten previously said the EDA gave that $10 million to Tran with no stipulations stating it must be spent at the Avtex site or in the community.
In December 2015, the EDA obtained a $10 million loan from the Winchester-based First Bank and Trust Company with collateral being the remaining 117 acres at the Avtex site. That loan was used to repay the town.
A report by Cherry Bekaert, the firm hired to investigate past EDA finances, states that Tran “was introduced to the Town and the EDA” in June 2014 by Goodlatte, who represented Tran “as a successful businessman” who had contracts with the federal government.
The EDA's civil complaint states the authority was told that Tran did not need the loan, but “such assistance was requested by Rep. Goodlatte.”
The Cherry Bekaert report states that former EDA board member Ron Llewellyn was the only board member to tell Cherry Bekaert representatives that Goodlatte “called him directly and pressured him." Two past board members, Jim Eastham and Patty Wines, had died by the time Cherry Bekaert's study began.
Whitten said in a Wednesday phone interview that Tran is repaying the EDA for the loan in monthly increments of about $42,000 and he has not missed a payment. While that may be the case, Whitten previously explained that that the EDA believed the money would be paid back much quicker.
The EDA’s civil lawsuit complaint alleges that Tran and McDonald used “all or a portion” of that loan for “their personal benefit.” While Whitten said over the phone Wednesday that there were no restrictions on how the loan must be spent, the EDA would have never given him money had it had not been under the false impression that ITFederal could bring 600 jobs.
The lawsuit further alleges that Tran intentionally deceived and induced the EDA to give him the loan. This was done, the complaint states, by creating a fake ITFederal website that illustrated the company had active contracts from the federal government.
Brandon Elledge, Tran’s and ITFederal’s lawyer, states in court filings that this is “nonsensical” as the EDA’s complaint notes that the website had not been updated since 2012 whereas the loan was granted in 2015. He also disputes the EDA's claim that ITFederal did not have substantial contracts from the federal government.
Elledge states that allegations against Tran and ITFederal listed in the EDA’s lawsuit are “conclusory recitations or vague statements” that were arrived upon based on “information and belief" and not hard facts.
On multiple occasions, the EDA’s lawsuit states that “Tran and Defendant McDonald represented, through McDonald…”
Elledge states that using this terminology is misleading because it does not precisely define Tran's role and “it fails to state with particularity who made what representation to whom.” He adds that saying “Tran through McDonald,” makes it apparent that Tran’s “alleged participation is purely conclusory.” Without additional details, he adds that the EDA’s complaint does not prove that Tran or ITFederal conspired to perpetrate fraudulent activity.
Whitten said on Wednesday the fact that ITFederal had contracts from the federal government was always relayed to the EDA board by McDonald and Wines.
“Tran never came to one of the meetings,” he said.
Whitten explained that Tran is also named as a defendant in the lawsuit because he signed an agreement with McDonald stating that the EDA would spend $1.5 million on the ITFederal project. He said the EDA never approved or knew about that contract and the $1.5 million the authority subsequently spent on construction does not count toward the $2 million investment that must be made.
Elledge counters that all of Tran’s alleged misconduct did not violate any contracts and the charges should be dropped.
Elledge also notes that the lawsuit alleges conspiracy and that the “defendants acted in concert, agreed, associated, mutually undertook or combined together.” He adds that the “various transactions are only connected by” McDonald and there are no allegations that Tran acted with or was aware of transactions between the EDA and other defendants.