FRONT ROYAL – Town Attorney Doug Napier said the town is likely to file litigation against the Front Royal-Warren County Economic Development Authority because the town’s Freedom of Information Act Request seeking the findings of a forensic audit into the EDA’s finances was denied.
The town is seeking a report detailing the findings of the audit conducted by Cherry Bekaert, which the EDA commissioned in September 2018. In May 2018, it was learned that the town was owed $291,000 stemming from overpayments on debt service.
In March, the EDA filed a $17.6 million lawsuit against nine defendants alleging that a series of embezzlement schemes were carried out by the authority’s former executive director Jennifer McDonald and others. The lawsuit’s complaint does not mention the overpayments but does state that town credit lines were used improperly.
In denying the request, County and EDA attorney Dan Whitten cited FOIA exemptions including the fact that the preliminary report includes “criminal investigative files” related to possible prosecution; that it is “legal memoranda and other work product complied specifically for use in litigation;” and that the information is protected by attorney-client privilege.
Napier said it is likely that the town will file litigation against the EDA sometime early next week.
Town Council has passed a resolution stating that town officials “have the right and duty” to see the audit’s results to determine the standing of taxpayer money and whether it will be “promptly returned.”
Whitten noted that the authority does not yet have a final report but that a draft is “being updated on a weekly basis.” Once the final report is completed, Whitten said the EDA will give it to the town, which would hopefully cease any possible litigation at that point.
He added that the final report from the forensic audit will not be complete until the EDA finalizes its regular annual audit, which he said will hopefully be finished before the month’s end. Whether or not more defendants will be added to the EDA’s lawsuit upon the final report’s completion, Whitten said he does not know.
Napier previously said even though the town did not help pay for the consultant, the EDA is legally obligated to turn over the report’s findings.
“The EDA has acted as our fiscal agent, our financial agent...that makes them our fiduciary. They’re under an affirmative legal obligation to give it to us,” he said.
So far, the county has approved up to $760,000 that will pay for both the audit and outside legal counsel for representation. EDA Chairman Gray Blanton said the authority would make its best effort to repay the county for expenditures.