Virginia’s Attorney General Faces Scrutiny for Ties to Executive

Steve Helber/Associated Press

Attorney General Kenneth T. Cuccinelli II and his wife, Tiero, after he was nominated as the Republican candidate for governor of Virginia.

He first bought the tiny company's stock after bunking down in its chief executive's six-bedroom home.

He added to his holdings soon after the rollout of a new product that the company hinted could be a cure for Alzheimer's disease.

As the stock reached a 52-week high last year, he sold part of his portfolio for a $4,000 profit.

Kenneth T. Cuccinelli II, Virginia's attorney general, said that the timing of his ownership of Star Scientific shares reflected nothing more than his own investment analysis.

Star Scientific and its chief executive have been at the center of an exploding political drama in Virginia as state and federal investigators look into lavish gifts that the executive, Jonnie R. Williams Sr., gave Gov. Bob McDonnell.

And now, despite his efforts to distance himself, scrutiny is growing of Mr. Cuccinelli's ties to the executive.

Aides to Mr. Cuccinelli, the Republican candidate for governor this year, insisted he enjoyed nothing like the relationship to Mr. Williams that Mr. McDonnell had. Last week Mr. Cuccinelli indirectly condemned Mr. McDonnell, a fellow Republican, for the first time, lamenting, "What we've all been seeing is very painful for Virginia."

The statement followed a report that Mr. Williams's gifts to the governor and his family totaled $145,000, and included a Rolex watch, designer clothing and a $50,000 check to Mr. McDonnell's wife. The gifts were first revealed in The Washington Post.

Mr. Williams, 57, also gave the attorney general $18,000 worth of gifts, including frequent stays at Mr. Williams's homes outside Richmond and in the Blue Ridge Mountains, according to Mr. Cuccinelli's financial disclosure statements. Mr. Cuccinelli at first failed to report some gifts, as well as his Star Scientific stock, as required by law, which he has said was an oversight.

The attorney general is not known to be a target of the investigations into Mr. McDonnell, including one by a federal grand jury. At no time, the attorney general said, did he receive stock tips from the executive. But Mr. Cuccinelli's buying and selling of Star Scientific shares raises questions about whether he and Mr. Williams were as distant as campaign aides insist.

Star Scientific was Mr. Cuccinelli's only stock holding worth more than $10,000 since he became attorney general, according to his disclosure forms. In at least two cases, his buying and selling was closely timed to vacations he and his family enjoyed as guests of Mr. Williams.

In a statement, the campaign said that Mr. Cuccinelli never discussed his stock purchases or sales with Mr. Williams "at any point in time."

On Friday, a Virginia judge ruled that a trial of Mr. McDonnell's former Governor's Mansion chef, whose statements to investigators first drew them to Mr. Williams, could proceed in October. The trial, on charges of pilfering food from the governor's kitchen, will return all the players to the footlights just a few weeks before Mr. Cuccinelli faces Terry McAuliffe, his Democratic opponent, at the polls.

For a relative novice at stock picking, Mr. Cuccinelli's investment in Star Scientific was highly unusual. It is a thinly traded stock in a company that has lost money for a decade. It stayed afloat by selling stock at a discount in "private placements" to large investors, whose hopes were repeatedly raised by company promotions about big payoffs.

In that sense, Star seems an extension of the personality of Mr. Williams, who has been called a "super salesman" since his earliest years in business.

Mr. Williams, who declined through a company spokeswoman and his lawyer to comment, repeatedly ran into trouble with regulators. The Food and Drug Administration forced him to stop selling a cigarette called LungGuard over false claims that it blocked carcinogens. The Securities and Exchange Commission collected $300,000 for incorrect claims that a skin cream cured wrinkles.

For years the stock of Star Scientific was buoyed by investors led to expect a windfall from a patent infringement suit against the tobacco giant R. J. Reynolds. When a jury ruled against Star in June 2009, the stock plunged 80 percent.

It came back the next year as the company aggressively trumpeted a new business — a dietary supplement derived from a chemical in tobacco to treat Alzheimer's disease.

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