Cuccinelli Bought Stock Even After Embattled Company Sued Virginia

Virginia Attorney General Ken Cuccinelli (R) bought stock in Star Scientific, a now-embattled dietary supplement maker, just weeks after the company sued the state over a tax dispute.

A report released on Thursday by Richmond Commonwealth’s Attorney Michael Herring (D) made that clear, and left open the possibility that Cuccinelli personally learned about the lawsuit before he bought the stock. Cuccinelli’s office handled the lawsuit until early April, when Cuccinelli, who is currently running for governor, announced he would recuse his office and appoint outside counsel to handle the matter.Herring’s report, a review of Cuccinelli’s financial disclosure forms conducted at the attorney general’s request, found no evidence that he broke the law when he failed to disclose ownership of Star Scientific stock or gifts received from Jonnie Williams, the company’s chief executive officer.

“Although one cannot help but question whether repeated omissions of gifts from Williams are coincidence or a pattern reflecting intent to conceal, the disclosure of several other gifts and benefits from Williams in his original statements suggests that the Attorney General was not attempting to conceal the relationship,” Herring’s report concluded. “Furthermore, we find no evidence that in his Statements the [attorney general] intentionally mischaracterized gifts and benefits from Star Scientific and Williams.”

Star Scientific, which has lost money for years and whose biggest product is a dietary supplement it claims helps regulate inflammation, is currently the target of a federal probe. Meanwhile, the relationship between Williams and Virginia Gov. Bob McDonnell (R) is also under investigation, and questions have been raised in the press about Cuccinelli’s failure to originally disclose thousands of dollars worth of Star Scientific stock. Herring’s report provides a glimpse of one way in which the relationship between Cuccinelli, his office, and Star Scientific was complicated.

Cuccinelli made two large purchases of Star Scientific stock, one in October 2010 and one in September 2011. Each purchase was for slightly over $10,000, and Cuccinelli ended up with 8,660 shares of the company. The second of those two purchases occurred less than two months after Star Scientific filed a lawsuit against the state. According to Herring’s report, Cuccinelli said he learned of the lawsuit after it was filed.

“[Cuccinelli] also indicated that he made no recommendations of attorneys who might be able to assist with the litigation,” the report states. “Records show that the Attorney General owned his interest in Star Scientific while his office represented the Commonwealth in litigation with the company. Investigators interviewed members of his Office staff and found no evidence that Mr. Cuccinelli’s personal financial interest in Star Scientific affected his judgment or that of his employees during the litigation.”

The tax dispute is an old one. While the lawsuit was filed on July 14, 2011, Star Scientific has been fighting a $860,115 sales and use tax bill since 2002. The company has indicated that it will owe the state $1.7 million in back taxes and penalties if it loses. According to The Washington Post, a trial date is set for December.

In an email to TPM on Thursday, Herring said his office had been unable to determine if Cuccinelli had learned of the lawsuit before he bought his second batch of Star Scientific stock. But Herring did offer more details about how the attorney general’s office had handled the case.

“The tax matter was filed, and the case was assigned to a junior lawyer in the office,” Herring wrote. “That attorney filed an answer and provided regular status updates on all her cases to her immediate supervisor, who was not the [attorney general]. We don’t know whether he had actual knowledge of the suit before his purchase, which records indicate occurred on 9/3/11. The lawyer assigned to the case did not discuss it with the [attorney general] and was unaware of his relationship to Williams.”

Between June 29, 2012 and July 2, 2012, Cuccinelli sold 1,500 shares of Star Scientific for $7,033.93, making a profit. Cuccinelli sold the balance of his shares on April 12, after the federal investigation of Star Scientific became public, and news reports about Williams started coming out. He took a loss.

A spokesperson for Cuccinelli did not respond to a request for comment.