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.
Although Cuccinelli bought the first batch of Star stock as a stand-alone purchase, his financial adviser acquired the second as part of a retirement account that included other stocks, LaCivita said.
LaCivita said that when Cuccinelli realized, in mid-2012, that the value of his combined holdings had exceeded $10,000 in 2011, he amended that year’s financial disclosure form to reflect that fact. Around the same time, Cuccinelli sold 1,500 shares of Star Scientific stock at a $7,000 profit.
He included his Star Scientific holdings, totaling $10,001 to $50,000, on his 2012 disclosure form. It is the only company in which Cuccinelli has ever reported holding more than $10,000.
Jerry Kilgore, a former state attorney general and a former GOP gubernatorial nominee, now represents Star’s chief executive, Jonnie R. Williams Sr. He said Cuccinelli bought the stock on the open market and Williams learned of the investment only afterward.
“He got no favored treatment. He got no discount,” Kilgore said. “They’re a publicly traded company, and anybody can purchase stock.”
Asked whether Williams or Star Scientific had received any assistance from Cuccinelli in the tax suit or other public matters, Kilgore said, “Absolutely not.”
Cuccinelli’s association with Williams goes back to at least 2010, when the attorney general reported receiving temporary lodging valued at $800 at Williams’s Richmond area home, according to the Virginia Public Access Project, a nonpartisan group that tracks money in politics.
Williams considers Cuccinelli a friend, and he allowed the attorney general to use his home shortly after Cuccinelli took office, when the legislature was in session and Cuccinelli was living primarily with his family in Fairfax County, Kilgore said.
Cuccinelli’s financial disclosure forms indicate that he received a number of gifts from Williams in 2011, including a “box of food supplement,” valued at about $6,700; the use of a lake house and a boat, valued at $3,000; and transportation to Kentucky, valued at about $3,200. Kilgore said the company gave Cuccinelli a box of its dietary supplement Anatabloc as part of the company’s regular marketing practices.
“It was an unsolicited gift that Mr. Williams sent to the attorney general after the AG asked Mr. Williams about the latest project he was working on,” Gottstein said in an e-mail. “The attorney general found out the value of Anatabloc only after looking it up online when he reported the gift on his annual disclosure form.”