Star Scientific vs. state of Virginia lawsuit headed for December trial

A trial date has been set in a tax dispute that pits a controversial dietary supplement maker against the state of Virginia, the first sign of movement in the case in more than 18 months.

A judge in Mecklenburg County, near the North Carolina border, will hear arguments in December over a tax bill contested by Virginia-based Star Scientific Inc., according to lawyers representing the state.

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Virginia Attorney Gen. Ken Cuccinelli II recused his office from the matter after it became public that he was defending the state even though he owned stock in Star Scientific and had accepted lake house vacations and private plane rides from its chief executive.

Federal and state authorities also are probing the relationship between Star Scientific chief executive Jonnie R. Williams and Gov. Robert F. McDonnell (R). Williams paid $15,000 for the catering at McDonnell’s daughter’s 2011 wedding.

Cuccinelli has said he had no personal involvement with the suit, which was being handled as a routine matter by staff attorneys in the office, and that his relationship with Williams presented no conflict of interest.

But he agreed to appoint outside counsel— Richmond attorneys William Hurd and Stephen Rosenthal—to represent the state in place of the Attorney General’s office out of an abundance of caution.

Hurd and Rosenthal said that after consultations with lawyers for Star Scientific and the court, a a decision has been made for a judge to hear the matter on Dec. 13 and 14.

They noted that Dec. 14 is a Saturday, a rare court date, a sign of commitment on all sides to resolving the issue. They declined to comment on whether they believe it has taken an unusually long time to reach this phase of the case.

Democrats have accused Cuccinelli of allowing the case to linger. Star Scientific, which has been losing money for years, has told investors that if it loses the suit, it will owe the state $1.7 million in back taxes and penalties.

At issue is the proper assessment of tobacco curing barns owned by the former tobacco company. The company first contested a $708,000 sales and use tax bill in 2002, fighting the bill with the state for years before filing suit in 2011.

Cuccinelli has said Williams never discussed the lawsuit with him. But he acknowledged for the first time earlier this week that the CEO did “grouse about the taxes” prior to filing suit.

Cuccinelli failed to disclose his stock holdings in the company for more than a year and acknowledged in April that he had previously disclosed only some of the $13,000 in gifts Williams had provided. He has said both were oversights and asked the Richmond Commonwealth Attorney to conduct a review of his annual economic disclosure forms.

But Cuccinelli has noted that his office opposed Star Scientific in the matter, upholding the position of state officials that the company owed the taxes. His office has said attorneys met every court deadline and that, as the plaintiff, it was up to Star to take the next step in the case.

A spokeswoman for Star Scientific said she had no comment on the pending litigation.

 
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