FBI Inquiry Into Ties to Donor Clouds Virginia Governor’s Future

Star Scientific Inc. (STSI) Chief Executive Officer Jonnie Williams treated Virginia Governor Robert McDonnell to a $2,268 vacation getaway.

When the Republican governor’s daughter married in 2011, Williams paid $15,000 for the catering. And the company Williams runs, a money-losing maker of dietary supplements based in Glen Allen, Virginia, spent $7,383 on a trip for McDonnell to Massachusetts and more than $100,000 funding his campaigns, according to state filings.

Gifts from Star’s CEO are the focus of questions by the Federal Bureau of Investigation, which is asking people close to the governor whether his administration did anything to help the company, according to a law enforcement official familiar with the matter. The inquiry, reported in local media, including the Washington Post, threatens to tarnish the image of the potential 2016 presidential candidate and influence the race for his successor.

“This still-unfolding scandal is a real departure from the governor’s generally squeaky-clean image,” said Stephen Farnsworth, the director of the Center for Leadership and Media Studies at the University of Mary Washington in Fredericksburg, Virginia. “This controversy has really put a dent into the governor’s political future.”

Photographer: Bonnie Jo Mount/The Washington Post via Getty Images

Governor Robert McDonnell, a Republican from Virginia, said his administration hasn't conferred any favors on Star Scientific Inc. Close

Governor Robert McDonnell, a Republican from Virginia, said his administration hasn't... Read More

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Photographer: Bonnie Jo Mount/The Washington Post via Getty Images

Governor Robert McDonnell, a Republican from Virginia, said his administration hasn't conferred any favors on Star Scientific Inc.

McDonnell, 58, who says he has done nothing wrong, has cultivated a political presence beyond his home state. In 2011 and 2012, he was the chairman of the Republican Governors Association, which raises money for candidates, and last year was seen as a potential vice presidential pick for Mitt Romney.

Chef’s Tale

The case also has injected controversy into the race between Republican Kenneth Cuccinelli, the state’s attorney general, and Terry McAuliffe, the former director of the Democratic National Committee, to win the November election to succeed McDonnell.

In a Virginia court filing this week, Todd Schneider, a former chef for McDonnell at the governor’s mansion, said he told federal investigators in March 2012 about Williams’s efforts to curry favor with the governor. That included lending his summer home, cars and private jet, the chef said in the filing.

Star received help, too: During a luncheon at the governor’s mansion in August 2011, the company promoted a dietary supplement that accounts for almost all of its sales.

Virginia law allows public officials to accept gifts, as long as they are disclosed, while those to family members can go unreported. McDonnell, who hasn’t been charged with any wrongdoing, has said he neglected to report the $15,000 that Williams paid for catering because it was a gift to his daughter.

Governor’s Response

McDonnell, in an interview this week, said his administration hasn’t conferred any special benefits on Star Scientific. He said the company’s event at the governor’s mansion was organized by the office of his wife, Maureen, and that he attended because Star was giving grants to the state university’s medical systems.

“The purpose of that was not to bestow any particular benefit on the company,” he said.

“I don’t ever do anything, whether it’s with Mr. Williams or his company or any other person or any other company, to give anybody any special treatment,” the governor said.

As for the wedding catering, “I made the determination -- and I think that I believed was correct -- that it was a gift to my daughter and therefore under current laws did not need to be disclosed,” McDonnell said in an interview with WTOP radio on April 30. He said the decision to accept the gift from Williams was his daughter’s “It’s caused a fair amount of pain for me.”

Chef Charged

The governor wouldn’t comment on the FBI inquiry.

FBI spokeswoman Dennette Rybiski in Richmond declined to comment, citing the bureau’s policy.

Schneider was charged in March with embezzling food from the mansion and is fighting the allegations. Margaret Spencer, a state circuit judge, on April 30 told attorneys to refrain from discussing the case.

Schneider has sought to have the case against him dismissed, alleging that state Attorney General Cuccinelli had conflicts of interest. Cuccinelli owned stock in Star Scientific and used Williams’s vacation home last summer, according to the chef’s filing.

Thanksgiving Stay

On April 26, Cuccinelli made a motion to withdraw from the case. He also restated his financial disclosures -- after reviewing them -- to report previously undisclosed gifts, including a family summer vacation worth $3,000. Williams’s company has been fighting a $1.7 million tax assessment from Virginia in court. Last month, Cuccinelli’s office appointed an outside law firm to handle the case to avoid any conflict of interest.

Brian Gottstein, a spokesman for Cuccinelli, said Schneider is seeking to politicize his case.

“This case will be tried in court and not in the media,” Gottstein said.

Steven Benjamin, a lawyer for Schneider, didn’t immediately respond to a request for comment.

Star Scientific, a former cigar and cigarette company that has shifted into making dietary health supplements and skin cream, disclosed in a March filing with the Securities and Exchange Commission that the company and its directors were being investigated by the U.S. Attorney’s office. The company said the investigation is principally centered on securities transactions.

Family Friend

Williams has been Star’s CEO since 1999. McDonnell described him as a family friend. The CEO didn’t respond to a request for comment.

When McDonnell first ran for governor in 2009, Star donated $28,600 to his campaign, according to the Virginia Public Access Project, which tracks money in the state’s politics. In 2010, it gave $79,900 worth of plane flights to Opportunity Virginia, the governor’s political action committee, according to the group.

The focus on Williams’s ties in Richmond, the state capital, has drawn attention to Virginia laws that make it easy to lavish gifts on politicians. Virginia is one of only 10 states that don’t place limits on such giving, according to the National Conference of State Legislatures, which reviewed laws that apply to lawmakers.

“Even if no laws were broken -- and Virginia laws are notoriously lax regarding gifts to the family members of public officials -- the cozy relationship between the governor’s family and the businessman using his Richmond connections to help promote sales of his dietary supplements is quite unseemly,” said Farnsworth of the University of Mary Washington.

Final Months

The questions about Star’s ties to the governor come as he is completing his final months in office, with the legislature already adjourned for the year.

“Only time will tell if it’s a real case and what it will do to his political image,” said Nathan Gonzales, an analyst who follows state races for the Rothenberg Political Report.

McDonnell has remained popular with voters since he was elected, seeking to stoke job growth while overseeing a state spared the worst of the recession. With an economy fueled in part by federal spending, 5.3 percent of Virginians were unemployed in March, compared with 7.6 percent nationally.

Fifty-three percent of voters approved of McDonnell’s performance, according to a poll by Quinnipiac University in late March.

“The public has always seen him as a nice guy, if nothing else; this scandal has the possibility of taking that away,” said Quentin Kidd, the director of the Judy Ford Wason Center for Public Policy at Christopher Newport University, in Newport News, Virginia. “If this scandal lingers or goes bad, and the public turns away from him, it will be easy for Republicans to dismiss him having any political future.”

To contact the reporter on this story: William Selway in Washington at wselway@bloomberg.net

To contact the editor responsible for this story: Stephen Merelman at smerelman@bloomberg.net

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