Jonnie R. Williams, CEO at center of Virginia gift scandal, is stepping down


Virginia Gov. Bob McDonnell speaks during a battleground preservation announcement at Ball's Bluff State Park on Aug. 15 in Leesburg. (Win McNamee/Getty Images)
November 7, 2013

Jonnie R. Williams Sr., the wealthy benefactor who is at the heart of a federal investigation into Virginia Gov. Robert F. McDonnell, is stepping down as chief executive of Star Scientific Inc., the dietary supplement maker announced Thursday.

The company said Williams would remain involved in the company in a non-executive role for a year after he resigns, which is timed to a shareholder’s meeting in December. But Star leaders said they decided a dramatic corporate restructuring was necessary, to refocus the company on seeking FDA approval to research products for possible new drugs.

Star has been working to stabilize its stock price since revelations that Williams provided more than $160,000 in gifts and loans to McDonnell and his family. He has told federal authorities he provided the assistance believing McDonnell would help the company. A criminal probe is ongoing.

The timing of the announcement is not directly related to the criminal probe, but the decision is partially related to the investigation. The investigation led to the company’s discovery that Williams had given hundreds of thousands of dollars in personal and corporate funds to McDonnell and his family. Giving money and gifts to public officials is against Star company policy.

Members of the company’s board were mindful that publicity surrounding Williams interactions with the governor if the fast-moving probe were to result in charges would raise investor concerns if he were to remain in a leadership role, said a person familiar with the decision.

Timeline: Star Scientific and Gov. McDonnell

A major factor in the decision is that the company needed a massive overhaul of the strategy Jonnie Williams championed. Now, the company agrees, it must focus more its products’ future in pharmaceutical applications rather vitamin supplement.

The company also had to provide sufficient notice to prepare its investors in advance of the December annual meeting.

Williams founded the company in 1990 as Star Tobacco, a small discount cigarette maker. It has shifted focus in recent years to the production of dietary supplements, including a nutritional supplement containing a chemical found in tobacco that is said to have anti-inflammatory properties.

The company has been working to repair relations with investors, also announcing in August that it did not expect to face any charges as a result of a separate federal investigation into its securities transactions.

The company will now be led by Michael Mullan, an Alzheimer’s researcher who is the chief executive of the Roskamp Institute, a Florida lab that had been researching Star’s products under a royalty agreement with the company.

Mullan will also replace Paul Perito as chairman of the company’s board, who is also stepping down as president of the company, a role he has held since 2000.

Though Perito gives up the role of board chair, he will remain active in the company. He is to become vice president and senior counsel, with the role of advising the company on all legal matters. According to the company, the leadership changes came at Williams’s and Perito’s suggestion, to “better leverage opportunities in pharmaceutical development and FDA approval in the biotechnology space.”

Several Star board members will also be replaced, subject to approval of investors at a December shareholder’s meeting.

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