FRONT ROYAL – The Town Council is demanding to see the findings of an audit report detailing alleged embezzlement or misappropriation of the Front Royal-Warren County Economic Development Authority’s finances of more than $17 million.
Council members during a Monday work session unanimously agreed to vote next week on a resolution seeking the audit report. After that, Town Attorney Doug Napier said he will file a Freedom of Information Act request for the report. If the FOIA request is denied, he said the town could take the EDA to circuit court over the matter.
Napier noted that the town has been left "in the dark, to say the least," but is legally entitled to receive the report.
John Anzivino, interim EDA director, explained on Tuesday that no EDA board members have a copy of the report and they only saw it once before being briefed on the manner by Cherry Bekaert LLP, the firm conducting the audit. He said he does not know how many copies of the report there are, but they all remain secured in the hands of financial consultants or attorneys. He added that County Administrator Doug Stanley and Supervisor Tony Carter were present during the briefing but that they did not see a hard copy of the report and only heard what was said.
Anzivino added that the report remains a draft and is not complete. He said that the EDA will release it when legal counsel believes “the time is right.”
"There's still more things being discovered, and you want to make sure you get everything, and that you get it buttoned up the right way," Anzivino said.
He added that before the report is made public, it must be finalized.
The financial report led to the EDA's filing of a $17 million civil court case against nine defendants for misappropriation or embezzlement of the authority's money. That lawsuit led to Commonwealth’s Attorney Brian Madden seeking a special grand jury, which was impaneled by Judge Clifford Athey, to investigate the matter.
Although it is not mentioned in the lawsuit, the town discovered last year that it is owed at least $291,000 from the EDA stemming from overpayments related to debt service. It was that revelation that led the county to hire Cherry Bekaert on behalf of the EDA.
Mayor Hollis Tharpe said the $291,000 in overpayments were “inadvertent” charges and not embezzlement. He added that “it’s a massive mess, without a doubt.”
Napier said that the town wants the report because officials have “been repeatedly denied” and “stonewalled so much” in attempts to get answers.
Town Councilman Jacob Meza noted that the EDA representatives inquired whether the town would like to split funding for Cherry Bekaert. He wondered if the town's decision against doing so would serve as justification for the EDA not supplying the report.
Napier replied that the town was asked by “a higher authority" that was investigating the matter to not help pay for the consultant. Asked after the work session, Napier declined to identify that higher authority.
It has recently been revealed that the Virginia State Police has investigated EDA-related matters since August 2018.
Even though the town did not help pay for the consultant, Napier said the EDA must legally turn over findings of the report.
“I think that we’re entitled to...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. I think we’re entitled, it’s a matter of law,” Napier said.
Nonetheless, Town Manager Joe Waltz said: “In reality, we probably won’t see that forensic audit.”
Tharpe noted that the council’s discussion regarding the audit would usually be held in a closed session, but officials want citizens to know that the town is not ignoring the situation.
“It’s time for the public to know that the Town Council does have an open eye and their ears are not closed. We are due money that was inadvertently overcharged and we’re gonna try to recover it,” he said.