Star Scientific had to return Va. money from economic development project

Star Scientific, whose chief executive paid for the food at the wedding of Gov. Robert F. McDonnell’s daughter, failed to create enough jobs to meet its part of an economic development deal with Virginia and was forced to repay hundreds of thousands of dollars.

The state awarded the company nearly $1 million in incentives to expand a facility in Mecklenburg County in 2002. The $49.9 million project was supposed to create 315 jobs.

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But Star Scientific, a former tobacco company that now sells dietary supplements, was required to repay the first installment, a $300,000 grant from the Governor’s Opportunity Fund, after failing to meet investment and job goals outlined in its agreement with the state, said Suzanne West, a spokeswoman for the Virginia Economic Development Partnership. She said all of the money was returned by 2008.

An additional $657,000 in other incentive and worker-training money was not provided to the company, for the same reason, West and another state official said.

Three years after the last of the money was returned, McDonnell and his wife, Maureen, worked to promote the company, which marked the launch of a dietary supplement in 2011 with an event at the Executive Mansion in Richmond.

Through a spokesman, McDonnell (R) has described efforts that he and his wife made on behalf of the company as part of a broad campaign to promote state businesses. But the spokesman acknowledged recently that the McDonnells were not aware of the company’s record with state efforts to boost its business.

The problems with Star began more than a decade ago. Project notes maintained by one state official detailed difficulties the official had getting meetings with company officials in 2002 and 2003 to discuss a $157,500 worker-training grant.

According to the notes, the official recommended revoking the offer after learning that a project coordinator for Star had “left the company to be incarcerated for some scandal that occurred outside this company.”

The project coordinator, Lloyd A. Jones, was a part-time consultant to the company who served on its board of directors for eight months and who resigned after he informed Star that he was the target of a federal investigation. In 2003, he pleaded guilty to accepting a bribe in his previous job as an official with the U.S. Department of Agriculture.

In an interview, Jones said he did not recall the details of the project but did not believe that its troubles stemmed from his unrelated legal difficulties. He said Star was a “solid” company with “great potential.”

“We were not aware of this decade-old grant,” Jeff Caldwell, a McDonnell spokesman, said in a statement.

Caldwell said the 2011 launch event for the dietary supplement, an anti-inflammatory product called Anatabloc, was organized by Maureen McDonnell’s office and paid for by the governor’s political action committee.

Caldwell described the luncheon as a “small event” that the governor attended briefly to greet guests and acknowledge Star Scientific’s presentation of research money to two public medical schools.

Maureen McDonnell also spoke at a 2011 Florida gathering of doctors and investors interested in Anatabloc’s key ingredient, anatabine, a chemical found in tobacco and other plants. And the company had a picture of the governor holding a packet of Anatabloc on the product’s Facebook page.

The photograph was removed this week after The Washington Post reported on the relationship between McDonnell and the company.

In a statement, Star Scientific said it undertook the 2002 expansion project as part of a deal to create a “dissolvable, low toxin, smokeless” product for tobacco giant Brown & Williamson. Star was to open a facility in Chase City, Va., with up to 10 manufacturing lines, and the new product was to have national distribution.

A company spokeswoman said the deal stalled after B&W was acquired by R.J. Reynolds, which Star was suing in a dispute over patent infringement.

“After RJR decided not to move forward . . . it was impossible for Star to create this employment opportunity without a ‘big tobacco’ partner, and the project was never fulfilled,” company spokeswoman Talhia Tuck said in a statement.

Tuck said Jones had “very limited involvement” in the project. The idea that it stalled because of his legal troubles is “folly” and “inaccurate,” she said.

A spokesman for Sen. Mark R. Warner (D), who was governor at the time of the award, said there was nothing unusual about the project. That state officials had required Star to return money when the project didn’t pan out is a sign of strength in the state’s business-incentive programs, the spokesman said.

Warner did not receive donations or gifts from Star Scientific or its chief executive, Jonnie R. Williams Sr., according to the Virginia Public Access Project, a nonpartisan group that tracks money in state politics.

Star Scientific and Williams gave nearly $120,000 in donations and gifts to McDonnell, his campaign and his political action committee.

McDonnell has declined to be interviewed about Star Scientific. He has not responded to questions about whether Williams or Star Scientific provided gifts other than the $15,000 in wedding catering to members of the first family. Virginia law requires that elected officials disclose gifts they receive worth more than $50. But the law does not require the disclosure of gifts to family members.

McDonnell’s spokesman has said the wedding catering did not need to be disclosed because it was a gift from Williams to the bride and groom.

Jerry Kilgore, a former state attorney general who now represents Williams, has said Williams helped launched a number of highly successful businesses, including Visx, which builds machines used in laser eye surgery, and Psychemedics, which makes kits for drug tests.

“Jonnie has a great work ethic,” Kilgore said in an interview in late March. “He’s hardworking. He believes in his product and moving it forward.”

Kilgore has declined to comment further.

Laura Vozzella contributed to this report.

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