Rosalind S. Helderman and Laura Vozzella WASHINGTON POST
Va. Gov. McDonnell on Two-Way Street with Chief Executive of Struggling Company
April 1, 2013
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  • By Rosalind S. Helderman and Laura Vozzella

    Gov. Bob McDonnell and his wife, Maureen, had about 200 guests to Virginia’s historic Executive Mansion for their daughter Cailin’s 2011 wedding. The menu included fresh poached jumbo shrimp, bruschetta topped with Virginia tomatoes and stuffed free-range chicken breast.

    The $15,000 worth of fine dining came courtesy of Jonnie Williams Sr., the chief executive of a Henrico County-based company that has made major contributions to McDonnell’s campaigns and that is the subject of a federal securities investigation.

    The wedding gift, which was not disclosed by McDonnell, is just one element of the McDonnells’ close relationship with Williams and his company, a relationship that has included rides on Williams’ corporate jet, personal gifts to the first family, and efforts by the governor and his wife to promote the company.

    Events surrounding the first daughter’s wedding show the extent of the bond.

    Just about the time Cailin McDonnell got married, Williams’ company, Star Scientific, was introducing a dietary supplement called Anatabloc, whose key ingredient is found in tobacco and other plants.

    Anatabloc was crucial to the future of the company, which has been losing money for years. But the science behind the product — an anti-inflammatory the company hopes might be helpful to people with such ailments as Alzheimer’s and multiple sclerosis — was unproven.

    In financial filings, Star Scientific has made clear that it needs Anatabloc to be a success.

    In March, the company reported that it had lost $22.9 million in 2012, the 10th consecutive year Star had lost money. The company slashed its workforce last year, part of a decision to end production of all tobacco products and focus exclusively on dietary supplements.

    “Our future prospects, therefore, are dependent on the expanded distribution and consumer acceptance of our dietary supplement products and cosmetic product,” the company said in its 2012 annual report.

    Star also has been fighting skeptics’ claims that the science behind Anatabloc is overstated. Last week, a Star Scientific investor filed suit in federal court in Richmond, alleging that the company misled stock holders about Anatabloc’s promise.

    Star officials declined to comment for this article, but the company, in a statement to the Richmond Times-Dispatch, said it stands by the product and that the lawsuit is without merit.

    As Star Scientific struggles with questions about the science, the company is facing a new challenge: a federal investigation.

    A spokesman for the U.S. Attorney’s Office for the Eastern District of Virginia declined to comment about the company. But in an annual report filed in March, Star Scientific said it received subpoenas from the U.S. Attorney’s Office in January and February as part of an investigation thought to be focused on transactions involving the company’s securities.

    *** Three days before her daughter’s June 2011 wedding, Maureen McDonnell flew to Florida, where she spoke at a seminar for scientists and investors interested in anatabine, the key chemical in Anatabloc, according to people who attended the conference.

    The governor’s wife told the group that she supported the product and touted the pill, which is not regulated by the Food and Drug Administration, as a way to lower health care costs in Virginia, the attendees said.

    About three months after the wedding, the McDonnells and Star Scientific were together again, this time at the governor’s mansion for the official launch party for Anatabloc.

    McDonnell and Williams declined to be interviewed for this article. Through a spokesman, the governor responded to a list of questions. In his written answers to some of those questions, the spokesman, Jeff Caldwell, said Williams picked up the catering bill for the wedding as a gift to Cailin and her husband, Chris Young. Because it was not a gift to the governor, Virginia law did not require McDonnell to include it on his annual disclosure form, Caldwell said.

    Caldwell said the first family’s efforts on behalf of Virginia-based Star Scientific were typical of what any governor would do to promote the state’s businesses and products.

    In Internet forums, boosters of the company’s stock have cited the connection to the McDonnells as a reason to believe in Star Scientific, despite its shaky finances. A photo of the smiling governor holding a packet of Anatabloc has appeared on the Anatabloc Facebook page. (Caldwell said McDonnell, who has used the supplement, did not authorize the use of the picture.)

    In addition, launching Anatabloc with a luncheon at the mansion gave the company a boost, according to a doctor who attended.

    “It was an event that was designed to try to make a big splash,” said John Clore, a professor at the Virginia Commonwealth University School of Medicine. “That was the week it was showing up in stores.”

    Maureen McDonnell’s presence at the Florida event, hosted by the Sarasota-based Roskamp Institute, caused a stir.

    The governor’s wife has long been interested in nutrition and dietary supplements. According to her official biography, she launched a small business that helped market nutritional products.

    Her brief speech at Roskamp, which is conducting research on Anatabloc under a royalty agreement with Star Scientific, was a “communique that wowed attendees,” California investor John Faessel wrote in an online posting.

    “She spoke briefly about the company and the work they were doing, and how she believed it would be important not only for the people of Virginia but for society in general, to help them ward off this inflammation,” Faessel said.

    Patrick Cox, a stock adviser from Maryland who also attended the event, said Maureen McDonnell expressed support for Anatabloc. “My understanding is that she’s trying to find ways to lower medical costs,” he said.

    Caldwell said Maureen McDonnell attended the event to tour the Roskamp facility and hear about potential treatments of Alzheimer’s — of particular interest to her because the governor’s father died of the disease a year earlier. She also went as a “strong promoter of Virginia businesses,” Caldwell said.

    Caldwell said that neither Maureen McDonnell nor the governor led an effort to encourage the use of Anatabloc.

    But in a news release, the company mentioned plans for a special event at the governor’s mansion to mark Anatabloc’s launch.

    “A group of Richmond-area physicians and health care providers are gathering at the Virginia governor’s mansion today to learn more about the state of research on Anatabloc,” the release said.

    The company also used the luncheon at the mansion to award research grants to scientists at the University of Virginia and Virginia Commonwealth University.

    Jerry W. Kilgore, a former Virginia attorney general and the GOP’s 2005 candidate for governor, who is now Williams’ attorney, acknowledged that the company benefited from the McDonnells’ involvement.

    “I think with any Virginia product, it’s helpful to have support from the governor. In any state, it’s helpful to have a governor’s support,” he said.

    McDonnell’s political action committee, Opportunity Virginia, paid for the lunch, Caldwell said, calling it “one of numerous events hosted at the mansion in support of Virginia businesses and universities.” It was allowed “based solely on the benefit to the commonwealth.”

    Amy Bridge, who served as mansion director for two governors, Democrats Mark R. Warner and Timothy M. Kaine, said they hosted executives for meetings and lunches, particularly when they were trying to lure business to the state.

    She recalled that Warner, for instance, invited JetBlue executives to the mansion when the airline was weighing whether to offer flights in and out of the Richmond airport.

    “Conventional wisdom is that you use the mansion for the business of the people and for things that are going to benefit the state,” she said, especially if a firm will bring development and jobs.

    Star had about 35 employees when it launched Anatabloc. The dietary supplement is manufactured by a company subsidiary in Massachusetts.

    Williams, 57, a Virginia native, gained a reputation in his early 20s as a wunderkind who could sell anything to anyone. In his early years in Fredericksburg, he sold cars, real estate and eyeglasses.

    In 1979, when he was 24, he was profiled in his hometown newspaper under the headline “Super Salesman.”

    Williams has now spent more than a decade looking for healthful ways to profit from chemicals found in tobacco and to remake the image of what was once the mainstay of the Virginia economy.

    Along the way, Williams made powerful friends. Attorney General Ken Cuccinelli, the presumptive Republican nominee for governor, has stayed at Williams’ home near Richmond and has used his boat. Cuccinelli also is a Star Scientific investor.

    Although Williams isn’t the biggest donor in Virginia politics, he has access to something that makes him especially valuable: a private jet.

    He has offered Star Scientific’s plane to his friends, including a number of Republicans who have run for Virginia’s highest offices.

    Kilgore received more than $27,000 in donations and in-kind travel from Williams, according to the Virginia Public Access Project, a nonpartisan group that tracks money in politics.

    Williams helped found Star Scientific in 1990 as Star Tobacco, a cigarette and cigar company. In 1994, the company launched research aimed at creating less harmful cigarettes and smokeless tobacco, using a curing technique that Williams said he invented with a microwave oven.

    More recently, Star has branched out into biotech, first introducing a product that reduces the urge to smoke and, later, focusing on its dietary supplement, Anatabloc. Last year, the company introduced a facial cream that also contains anatabine.

    Star said in December in a regulatory filing that it planned to stop making and selling its dissolvable smokeless tobacco products at the end of the year and instead focus on its dietary supplement business.

    The company had said in November that Williams would cut his salary to $1 per month starting in January. His base salary was $1 million in 2011, and it has been that amount for several years.

    Williams had a knack for cultivating politicians and celebrities who could assist the company. Anatabloc’s paid pitchmen include professional golfer Fred Couples.

    Kilgore said Williams has run a number of companies that have thrived and holds 14 patents for his work with tobacco curing and Anatabloc.

    “Quite frankly, no successful businessman hasn’t had bumps in the road,” Kilgore said. “Everything isn’t a straight highway to success. … He’s had several successful businesses.”

    Caldwell said McDonnell has known Williams for about five years and considers Williams and his wife, Celeste, family friends.

    The relationship was cemented during campaign flights on the company plane, Kilgore said.

    Over eight months during the 2009 gubernatorial election, Star Scientific donated more than $28,500 worth of air travel to McDonnell’s campaign. That commitment increased after McDonnell took office; Star reported donating nearly $80,000 in flights to Opportunity Virginia, the governor’s PAC.

    “They used the company plane to get from A to Z all the time,” Kilgore said.

    There were personal gifts, as well. On his financial disclosure forms, McDonnell said he had received more than $9,600 worth of food, lodging, transportation and entertainment from the company and from Williams in 2011 and 2012.

    Elected officials in Virginia are allowed to accept gifts, provided they disclose those worth more than $50. Gifts to family members don’t have to be disclosed, nor do gifts from a relative or “personal friend.”

    The food at McDonnell’s daughter’s wedding was provided by Seasonings Fine Catering and Event Planning, a Richmond company owned by Todd Schneider, whom the McDonnells hired to serve as the mansion’s executive chef in 2010. Schneider left his mansion job in 2011 amid a state police investigation into alleged improprieties involving kitchen operations. He was recently indicted on four embezzlement charges. He declined to comment through his attorney.

    Kilgore said Williams wanted to make sure that the wedding “day was special.”

    “It’s not out of the ordinary for Jonnie to be a generous person.”

    At the time of the wedding, a McDonnell spokesman said the family had paid for the event. But Caldwell now says that McDonnell’s daughter and her fiancé decided to pay for the wedding expenses and that the gift from Williams helped them cover much of the cost of food.

    He said McDonnell doesn’t know whether other wedding expenses were paid through gifts to the couple.

    *** Anatabloc combines anatabine with vitamins A and D3 to create a supplement that inhibits inflammation, according to its website. But the company also has suggested that the product could be useful in combating other ailments, including Alzheimer’s disease.

    Heather Snyder, director of medical and scientific operations at the Alzheimer’s Association, called the role of inflammation in Alzheimer’s an “active area of investigation.”

    But, she added, “there really is no data to support this product at this time.”

    Because it is a dietary supplement and not a drug, it is not regulated by the FDA.

    Some doctors say Anatabloc has promise. Clore, the VCU professor who attended the mansion event, said he was interested in doing research on the product.

    “I’m a diabetes person,” Clore said. “The reason I was reading up on it is, there’s a lot of interest in inflammation as a major player in complications of diabetes. Compounds people use now … like aspirin or ibuprofen, decrease inflammation, which may, in turn, decrease risk of complication.”

    Clore had heard about work being done on anatabine by a fellow endocrinologist, Paul Ladenson of the Johns Hopkins School of Medicine. A Star Scientific news release in January quoted Ladenson as touting the results of a “rigorously conducted, placebo-controlled, double blind trial.”

    The release did not say where the study was done. But Hopkins spokeswoman Kim Hoppe said the study had not been conducted at the medical school and that none of its researchers was involved. Ladenson is a consultant for Star’s wholly owned subsidiary, Rock Creek Pharmaceuticals, and Hoppe said he violated Hopkins’ policy by providing a quotation for the news release without having it approved by the school.

    Ladenson did not respond to requests for comment.

    In the annual report filed in March, Star disclosed the existence of the investigation, thought to be focused on transactions involving the company’s securities, because it is a risk factor that could affect the company’s chances of success. The company said it believed the investigation to be “principally focused” on “private placements,” stock trades offered to a small group of interested investors, sometimes at a discount, rather than on the open market.

    Kilgore declined to comment about the investigation.

    Asked whether McDonnell, his wife or any other member of the administration has been interviewed about their relationships with Star Scientific and Williams, Caldwell said it would be inappropriate to comment, given the publicly disclosed federal investigation into the company.