After just over five hours of testimony, evidence and opening and closing arguments from plaintiff and defense attorneys Tuesday, a seven-person civil court jury of Warren County Circuit Court found former Front Royal-Warren County Economic Development Authority husband Jennifer McDonald. Sammy’ North is liable for all of his claims relating to his part in a 2015 real estate purchase of property at 1309 Robinhood Lane, which was raised by the transfer of $110,000 in EDA funds. These EDA claims included (i) fraud, (ii) unjust enrichment, (iii) proselytization, (iv) conspiracy, (v) ultra vires (related to exceeding his wife’s powers as an EDA officer), and (vi) punitive damages.
Financially, North was found liable for $110,000 in compensatory damages, plus $165,000 on a determination of statutory conspiracy, and an additional $350,000 in punitive damages on a malicious intent judgment, bringing the liability to $625,000. With interest estimated at $268,000, North’s total liability is approximately $893,000.
Defense attorney Frank Reynolds has indicated that he will seek a motion to have the verdict overturned because the civil court found it unfounded, as did counsel for four other EDA civil defendants in the financial scandal, who went to trial in July and found liable were found. Hearings on these defense motions are scheduled to be heard by Judge Bruce D. Albertson on November 30. A timeline for defense motions and plaintiffs’ responses to facilitate the inclusion of the North case in this hearing in late November was discussed prior to the adjournment around 5:00 p.m. Tuesday afternoon. October 25. North’s civil liability trial was originally scheduled for July but proceeded after North filed for bankruptcy, which plaintiff’s attorney said was later withdrawn.
Asked about the verdict, Jeff Browne, the current Chair of the FR-WC EDA Board, who was present at the hearing as he was in the July cases, told the Royal Examiner: “Well it’s another victory. It shows that we have a good legal team and had a good case. And it’s making a real difference to the people of Warren County.”
Asked if he was concerned when he was made aware that the jury had come to a verdict so quickly – about 45 minutes – Browne said: “No, not really. I felt that was a good sign.”
It should be noted that in the closing arguments, counsel for both sides had characterized the evidence presented to the jury as “simple” in nature, although they disagreed on the content of that evidence in terms of the defendant’s knowledge or lack of knowledge of the Disagree on McDonald’s use of EDA assets.
“And the jury listened to that evidence and made a decision,” Browne noted of the verdict and the time it took to reach it. He noted that more civil cases will come to court in March-April 2023. Speaking at the November hearing on the defendants’ recent motions to overturn jury verdicts, Browne added: “I don’t think there will be any changes in November, I hope not. And we will have the opportunity to start accumulating assets.”
Having added the North verdict and jury-decided liability to the four cases handed down in July, the EDA is poised to release over $15 million in assets across those five in anticipation of the verdicts being overturned on November 30 cases. Coupled with an out-of-court “no-fault” settlement with McDonald, at least on paper, the civil case defendants involved were convicted or held liable for approximately $24 million of the estimated $26 million circa 2014 EDA “financial scandal.” 2018
As with the July civil lawsuits against April Petty, William Lambert, Donald Poe and Earthright Energy, and Truc “Curt” Tran and IFederal related to the EDA financial scandal uncovered in 2018, plaintiffs’ and defense’s arguments in the EDA v. North case flipped at least in part, what the Defendant knew or did not know about Jennifer McDonald’s lack of unilateral authority to move EDA assets in connection with the Defendant’s use of those assets under what Plaintiff’s counsel termed “a scheme.” .
Defense attorney Reynolds argued that the plaintiffs council failed to present evidence that his client knew his wife was not authorized to remit $110,000 in EDA funds for his September 2015 purchase of a townhouse at 1309 Robinhood Lane . In fact, the defense attorney argued that the transfer of $110,000 to facilitate her husband’s purchase of $107,500 plus closing costs could have been approved by an EDA assets committee. Reynolds cited his client’s and Settlement Title staff’s recollection of the presence of then-EDA Chief Executive Patty Wines, who had been present at the closure of the Robinhood Lane property since her illness, to argue that it was an authorized transfer may have acted in the context of EDA’s efforts towards affordable development.
However, senior EDA attorney Cullen Seltzer countered those arguments with one of the three witnesses he called, former Warren County and EDA attorney Dan Whitten. In fact, Tuesday’s trial was concluded in one day with the summons of only four witnesses: Kelly Shaney, Whitten, and Closing Company Service Title Records Administrator Jennifer McDonald by the plaintiff and defendant Samuel North by the defense.
Under direct scrutiny, Whitten pointed out that any transfer of more than $50,000 in EDA funds for acquisitions would have to be approved by the entire EDA board in an open session vote. Whitten testified that the transfer of $110,000 from McDonald’s in 2015 for her husband’s purchase of 1309 Robinhood Lane was never discussed in public or closed session and was never approved by the EDA board. EDA Attorney Seltzer also noted North’s invocation of his Fifth Amendment right not to incriminate himself when asked at filing why the package was purchased at Robinhood Lane.
When cross-examined, Whitten expressed no knowledge of an EDA asset committee in 2015 that may have discussed or referred the transaction. Also under defense cross-examination, McDonald testified that the EDA’s Assets Committee existed before her tenure as EDA chief executive from 2008 to 2018. During the defense’s closing argument, Reynolds hammered Whitten’s ignorance and absence from FDFA Assets Committee meetings to highlight a loophole in the plaintiff’s case, which alleged that the $110,000 transfer was unauthorized. But in his final counter-argument, EDA attorney Seltzer countered that no EDA committee, likely composed of two board members, could have approved a $110,000 transfer under the EDA’s policy on full board approval of such transfers over $50,000.
Financial difficulties or not
In opening statements and some evidence, the EDA attorney presented a scenario of financial difficulties experienced by North and his wife in 2015, which led to the decision to move EDA assets to facilitate North’s purchase of 1309 Robinhood Lane. Seltzer provided records showing that North’s plumbing business had lost over $71,000 between 2013 and 2016, while the couple claimed total gaming revenue/losses of $1.125 million over the same four-year period made. The defense countered that the income/losses tax claims actually indicated a break-even gambling scenario and not a hefty loss of over $500,000 that caused the couple financial difficulties.
In conclusion, Reynolds told the jury that the plaintiff had failed to show “any bit of information here, other than that they were married” to implicate his client in a conspiracy to defraud the EDA. North had testified on direct inquiry that his wife managed the couple’s tax and financial affairs, and he was unaware of the large gambling claims until they were shown them at the filing. In response to a question from his attorney, North estimated that he had lost at most $2,000 in one year gambling. When asked by the EDA lawyer that he had signed tax returns that he had not reviewed, North said he trusts his wife on such matters, adding, “Finance has never been my niche.”
Impact of 5th Amendment responses
An important piece of evidence from the plaintiffs, which opened their evidentiary proceedings, was a video excerpt of the above statement given by the defendant to the EDA lawyer on March 30, 2021. During questioning about details of the Robinhood Lane purchase, North invoked his 5th Amendment right to avoid self-incrimination, which Seltzer later told the jury was a total of 45 times. Called as the last witness for plaintiff, questioned about her wire transfer of the $110,000 for her husband’s purchase of the 1309 Robinhood Lane package in September 2015, a package EDA attorney found that North gave his wife a gift, McDonald invoked her 5th Amendment right not to incriminate herself about 11 times before Seltzer ended his direct prosecution.
During the closing arguments, plaintiff and defense counsel debated the implications of these 5th Amendment responses from both North at the deposition and McDonald on the witness stand. Reynolds noted simple diligence in the face of potential criminal charges in similar matters, while Seltzer, representing the EDA, stressed to the jury that the 5th Amendment is specifically invoked to support the constitutional right not to “incriminate oneself” in relation to potential criminal charges.
The quick determination of civil liability shows that plaintiff’s latter argument carried the greatest weight for the seven jurors during their deliberations.