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Va. first lady bought stock in Star Scientific

By Rosalind S. Helderman and Carol D. Leonnig, Published: August 16, 2013

Maureen McDonnell, the first lady of Virginia, twice purchased thousands of shares of stock in Star Scientific, a spokesman for McDonnell’s legal team confirmed Friday night. The stock was bought and held in the same time frame that she and Gov. Robert F. McDonnell were taking steps to promote the dietary supplement company.

Spokesman Rich Galen said the first lady did not inform the governor either time she purchased stock, which Galen said she bought for herself and her children.

McDonnell’s relationship with Jonnie R. Williams Sr., the chief executive of Star Scientific, is now at the center of ongoing federal and state investigations.

The relationship has been the subject of intense public scrutiny for months, but this is the first indication that the governor’s family held a personal financial stake in the success of the struggling supplement company.

A person familiar with the stock purchase said government prosecutors have been investigating the McDonnell family’s ownership of Star Scientific stock to determine whether the governor took any official acts to help the company’s prestige.

Any evidence that the governor acted in an official capacity to indirectly help his own interest in a company could increase his legal jeopardy in a potential criminal case. Persons with knowledge of the case have said Williams is cooperating with investigators.

The person familiar with the stock purchase said the first lady e-mailed Williams from time to time to check how the stock price was doing.

Bill Burck, an attorney for the first lady, said she purchased 6,000 shares of Star stock on June 1, 2011. That was the same day she spoke at a gathering of doctors and investors in Florida and told them she supported the company and believed its new product could be used to lower health-care costs in Virginia.

At $5.18 a share, the purchase cost Maureen McDonnell more than $30,000 and came just a few days after Williams had written a $50,000 check to the first lady.

Burck said the first lady bought 522 more shares for nearly $2,000 on Aug. 2, 2011.

That was the day after she arranged for a meeting between Williams and a top state health official where Williams pitched his company’s new dietary supplement, and a few weeks before she hosted a luncheon at the governor’s mansion marking Star’s formal launch of the product. The governor also attended the event.

Burck said she sold the shares on Dec. 20, 2011, for $2.34 a share, a significant loss. But she used the proceeds, more than $15,000, to buy 6,672 shares on Jan. 20, 2012.

A person familiar with the probe said there is no evidence that Star officials provided the stock to Maureen McDonnell at a discount.

The purchase decisions were made by the first lady separately from her husband, Burck said.

“She bought it because she believed in Star, she believed in the product and she believed in the company,” he said.

Under Virginia law, if McDonnell (R) or his wife held more than $10,000 in Star stock at the end of either 2011 or 2012, he would have been required to disclose the holding on his annual statement of economic interest, filed each January.

His annual statements do not report any ownership of Star stock on his or his wife’s part.

Burck said Maureen McDonnell’s sale of the stock in December 2011 — which was followed quickly by her repurchase the next month — was related to the drop in the stock’s price. She was not attempting to avoid disclosing the holding, he said. Galen said “it would be wrong to suggest that there was any violation of Virginia disclosure laws,” but he provided no further explanation.

He referred additional questions to Burck. It is the first time the couple has acknowledged that the governor and first lady have hired separate attorneys to deal with the matter.

A person familiar with the purchase said the stock was transferred into the name of the adult children of the governor in December 2012. The governor learned only at that time that the first lady had repurchased shares in 2012, the person indicated. The law requires that the governor disclose stock holdings of immediate family members, defined as his spouse and dependent children.

Galen’s statement came as The Washington Post and other news organizations were preparing to report the stock ownership. Neither Galen nor Burck would indicate whether any member of the McDonnell family continues to own the stock.

McDonnell has volunteered no information about the stock purchase during months of public scrutiny of his interactions with Williams, which began with the publication of a story in The Post in March detailing their relationship. That reticence could undermine his recent efforts to repair his public image, a campaign that has included a public apology. McDonnell has also repaid $124,000 he said came as loans from Williams and has returned “tangible” gifts from the executive.

Virginia Attorney General Ken Cuccinelli II (R), now running for governor, also purchased Star Scientific stock in 2010 and 2011 and failed to initially disclose it, as required by law. He quietly amended his disclosure forms in October 2012 to reflect the holding, weeks before he designated the Richmond commonwealth attorney to investigate whether McDonnell had abided by state disclosure laws. Cuccinelli has said his omission was inadvertent.

Jerry Kilgore, an attorney for Williams, declined to comment, as did Abbe Lowell, an attorney for Star Scientific. A spokesman for the U.S. attorney’s office also declined to comment.

Persons familiar with the case have said Williams is cooperating with prosecutors as they determine whether McDonnell agreed to take official actions to assist Williams in exchange for items of benefit.

McDonnell has said repeatedly that he did nothing to help Star beyond what he would do for any state-based enterprise. He has also said he always tried to be diligent with his annual disclosure forms, which require elected officials to disclose all gifts worth $50 or more but do not require disclosure of gifts to spouses or other immediate family members.

The first lady’s stock purchases came in the same year-long time span in which Williams lavished gifts and money on McDonnell’s family, including $120,000 to Maureen McDonnell and to a corporation owned by the governor and his sister.

In addition, Williams gave $15,000 for catering at the wedding of one of McDonnell’s daughters, a $6,500 Rolex watch intended for the governor, $15,000 in high-end clothing for the first lady and a $10,000 engagement gift to another of the governor’s daughters.

McDonnell appears to have assisted Williams in getting a meeting with Virginia’s secretary of health in 2010, where he pitched his product. In 2011, Williams met with another top state health official at the governor’s mansion, a meeting that was arranged by Maureen McDonnell.

In 2012, another Star official met with the state’s top human resources official and requested that the state employee health insurance plan cover Anatabloc, a dietary supplement the company introduced in 2011.

© 2013 The Washington Post

http://www.washingtonpost.com/local/virginia-politics/va-first-lady-bought-stock-in-star-scientific/2013/08/16/8757f8fc-06c7-11e3-a07f-49ddc7417125_story.html [with comments]

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