Star Scientific has reported that it is under federal investigation, an inquiry it believes is focused on securities transactions, and the company is also being sued by an investor who alleges that it misstated the promise of its dietary supplement Anatabloc.
One of Cuccinelli’s purchases of company stock — about $10,000 worth — was made just two months after the company filed suit against the state.
There is no evidence that Cuccinelli sought to intervene personally in Star Scientific’s suit, which the company filed in July 2011 to challenge a sales and use tax assessment on tobacco-curing barns it owns in Mecklenberg, Va.
Attorneys for Cuccinelli’s office, acting on behalf of the state, responded to the suit within two weeks, defending the tax assessment. But no further court action in the matter has occurred since. Both parties say it was handled as routine business by staff lawyers for the attorney general’s office.
Cuccinelli has not sought to recuse his office from the suit, despite his personal financial interest in the company. But on Saturday, his office said it was reviewing the handling of the case and will have an announcement about it soon.
If the financially struggling company loses the suit, it has told investors that it would owe the state $1.7 million in back taxes, penalties and interest.
House Minority Leader David J. Toscano (D-Charlottesville), a lawyer, called on Cuccinelli to recuse himself. “I think it's important for attorneys, whether they are in private practice or the attorney general of Virginia, to avoid even the appearance of impropriety,” he said.Brian Gottstein, a spokesman for Cuccinelli, said his office did not retain outside counsel to handle the issue because neither the assistant attorney general handling the case nor her supervisor knew of Cuccinelli’s relationship with the company.
“This case has been handled in the ordinary course of business by tax attorneys” within the attorney general’s office, he said in a statement.
According to documents released by Cuccinelli’s campaign, the attorney general purchased 5,060 shares of Star Scientific stock — worth a little more than $10,000 — in October 2010.
By year’s end, when disclosure forms are due, the stock’s value had dipped just below $10,000 and so it did not have to be disclosed. But in September 2011, Cuccinelli acquired 3,600 additional shares in the company, lifting the total value to nearly $19,000 by the end of the year.