Company Tied To McDonnell May Have Dodged A Bullet

August 9, 2013 10:46 a.m.

Star Scientific, the Virginia company whose CEO’s ties to Gov. Bob McDonnell (R) are under federal investigation, told investors on Friday that it does not expect to be prosecuted as a result of a federal probe of its securities transactions.

“We cannot predict whether or the extent to which the ongoing investigation will result in any legal action against any individual or entity,” the company said in a filing with the Securities and Exchange Commission (SEC). “[B]ut on the basis of the results of the internal investigation, the cooperation with the [U.S. Attorney’s Office], and discussions and communications between our outside counsel and the [U.S. Attorney’s Office], we do not believe our company will be prosecuted for any of the matters that the [U.S. Attorney’s Office] has been investigating.”

Star Scientific had previously disclosed that it and its directors had received subpoenas in January and February from the U.S. Attorney’s Office for the Eastern District of Virginia, as part of an investigation focused on securities transactions. The company, whose stock is traded on the NASDAQ Global Market, currently produces dietary supplements and cosmetic products that include a compound, anatabine, found in tobacco and other plants.

In what may be a separate probe, federal officials have also been investigating the relationship between Star Scientific’s CEO, Jonnie Williams, and McDonnell. Last month, McDonnell repaid $124,115.17 in loans Williams provided to him and his family in recent years. The governor also announced his intention to returns tens of thousands of dollars worth of gifts received from Williams.

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In its SEC filing on Friday, Star Scientific disclosed that, despite net sales of $2.5 million for the three months ending June 30, it had suffered a net loss of $8.7 million in the second quarter of 2013. The company has operated at a loss for 10 years.

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