Cuccinelli will appoint outside counsel for suit involving firm he owns stock in

Bill O'Leary/Washington Post - Virginia Attorney General Ken Cuccinelli

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Virginia Attorney General Ken Cuccinelli II will announce Friday that he is appointing outside counsel to handle a tax lawsuit brought against the state by a company in which he owns more than $10,000 in stock.

Cuccinelli, the presumptive Republican nominee for governor, had been under pressure from Democrats to recuse his office from the case, given his personal financial stake in Star Scientific and gifts he received from the company’s chief executive, Jonnie R. Williams Sr.

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While maintaining that he had no conflict of interest in the matter, Cuccinelli will announce that he has appointed a Democratic former attorney general and a Republican former state solicitor general to jointly handle the case at no cost to the state. Star is suing the state over a tax assessment.

Cuccinelli spokesman Brian Gottstein will say in a statement Friday that the move is prompted by a desire “to move past what has become an unnecessary distraction.”

The announcement came as additional ties between Cuccinelli and Williams came to light. State financial disclosure records show that Cuccinelli was not the only top official from his office to have stayed at Williams’s home.

Two top deputies to Cuccinelli were guests at the $2.2 million home in 2010, a time when Cuccinelli had just taken office and was hiring staffers from other parts of the state.

Star Scientific, a former tobacco company that now sells dietary supplements, has reported that it is the subject of federal investigation into its securities transactions.

Williams was living in Florida when Cuccinelli used the house, Williams’s attorney, Jerry Kilgore, has said.

At the time, Cuccinelli, who was elected in 2009, was living primarily with his family in Fairfax County. On his annual financial disclosure form, Cuccinelli reported the lodging as a gift worth $800.

Financial disclosure forms show that Deputy Attorney General Richard Neel also spent nights at Williams’s home and that he valued the stays at $1,620. Before his hiring as the office’s top lawyer responsible for technology, real estate, environment and transportation, Neel was in private practice in Fairfax.

And Harrison L. Clark, then working as director of administration for the office, said he received $432 worth of lodging.

According to Goochland County land records, the home is a six-bedroom, six-bathroom residence on 28 acres.

Gottstein noted that the staffers who stayed at Williams’s home disclosed the arrangement before the filing of the Star Scientific lawsuit.

“This is old news,” Gottstein said.

He said Williams offered a temporary place to stay to a few staffers who had joined the office from distant parts of the state. He did not detail how many people used the home or for how many nights. Cuccinelli stayed there “occasionally,” Gottstein said, when he had a late night or early morning planned at the Richmond office.

Kilgore, who earlier had provided information about Cuccinelli’s use of the home, declined to comment further.

Clark has since left the attorney general’s office and could not be located to comment, and Neel deferred comment to the office spokesman.

Gov. Robert F. McDonnell (R) also has been facing questions about his ties to Williams and Star Scientific.

McDonnell and his wife, Maureen, promoted the company even as Williams and the company were contributing more than $100,000 in gifts to McDonnell and donations to his campaign and political action committee.

Williams also paid $15,000 for the catering at the 2011 wedding of McDonnell’s daughter.

Star Scientific sells Anatabloc, a dietary supplement that uses a chemical found in tobacco and other plants to fight inflammation, and facial cream.

The company filed suit against the commonwealth in July 2011, challenging a 2002 sales and use tax assessment on tobacco curing barns it owns in southern Virginia. The company has told investors that if it loses the suit, it will owe the state $1.7 million in back taxes, penalties and fines.

Cuccinelli has not personally intervened in the suit, his office has said.

Both parties say the case has been handled as a routine tax issue. Cuccinelli’s spokesman said the staff attorney on the case did not initially seek outside counsel because neither she nor her supervisor knew Cuccinelli owns company stock.

On Sunday, The Washington Post reported that Cuccinelli also initially failed to disclose holdings in the company, as required by law.

A campaign consultant said the omission was an administrative oversight. He said it happened when Cuccinelli did not immediately realize a second purchase of Star Scientific stock by a financial adviser pushed the value of his total holdings above $10,000. Virginia law requires that elected officials disclose all holdings of at least that size.

In 2012, Cuccinelli realized the error and amended his 2011 form to reflect the holding, the consultant said. In January, he reported that he owned between $10,001 and $50,000 in Star Scientific stock last year.

In 2010 and 2011, Williams also gave Cuccinelli $6,700 worth of Anatabloc as well as the use of a lake house and boat, together valued at $3,000, and transportation to Kentucky, valued at about $3,200.

Laura Vozzella contributed to this report.

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