Theft raises questions about use and safety of tobacco settlement money

By Anita Kumar
Washington Post Staff Writer
Monday, November 22, 2010; 6:53 PM

RICHMOND - In the days since Virginia's former secretary of finance admitted that he stole $4 million earmarked for the state's most economically depressed areas, many have begun to question whether more than $1 billion from a settlement with the nation's largest tobacco companies has been spent properly and if the money is safe.

In the past decade, more than 1,300 projects in Virginia have been funded, including high-speed Internet access in rural areas, walking trails and improvements to the Martinsville Speedway. But some wonder whether the state is failing to fulfill its core mission of creating jobs and helping tobacco farmers.

"What you basically have is a huge amount of money very few people have any say-so over,'' said Sen. R. Edward Houck (D-Spotsylvania), one of the legislators who called for a study of the tobacco commission. "It's going to constantly raise questions."

Former governor Gerald L. Baliles (D), who led a 2008 study group that faulted the commission for spending too much on smaller projects, renewed his call last week for the group to better track its results. Gov. Robert F. McDonnell (R) said through a spokesman that he was "extremely disappointed" with the theft and is "discussing internally what steps to take in the wake of this announcement to ensure that such fraud cannot take place again."

But officials at the state Tobacco Indemnification and Community Revitalization Commission say they long ago established safeguards that would prevent future thefts and that their projects have created thousands of jobs in Southside and Southwest Virginia.

"I think we are running fine,'' said Del. Terry G. Kilgore (R-Scott), the group's chairman. "We have a lot more control over the dollars. And we have done a lot of good."

John W. Forbes, 54, secretary of finance under Gov. James S. Gilmore III (R), admitted that he stole $4 million from the commission while serving as a member. He pleaded guilty to one count of wire fraud in August while the case was under seal and will be sentenced in a federal court in Richmond on Tuesday. His guilty plea was only recently made public.

Forbes received a $5 million grant for the Literary Foundation of Virginia, which he founded as a charitable organization, but later admitted that he used $4 million of the money for a new home, personal investments, cash and to start a company, according to court documents.

"He feels completely remorseful for what's occurred," said Erich C. Ferrari, Forbes's attorney. "He's ready to accept the punishment."

A spokesman for Gilmore did not respond to a call for comment.

A work in progress

Tobacco crops once fueled the state's economy. But in recent years, some farmers have turned to soybeans, hay and cattle. Others have quit or sold their farms. The number of tobacco farms in Virginia has decreased. In 1997, Virginia tobacco farms produced 118,000 pounds of tobacco. In 2009, they produced just 46,500 pounds.

Fifty-two states and territories, including Virginia, divided $206 billion that was expected to come from the nation's four largest cigarette manufacturers over 25 years. So far, Virginia has received $1.23 billion.

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