June 14 (Bloomberg) -- A federal investigation into a Virginia businessman’s political ties is threatening to harm the reputations of Republican Governor Bob McDonnell, an often mentioned prospective presidential candidate, and the man running to replace him.
Ken Cuccinelli, the state’s attorney general and Republican gubernatorial nominee, is squaring off against former Democratic National Committee Chairman Terry McAuliffe in a race testing the staying power of the diverse voting bloc that backed President Barack Obama 2008 and 2012 and turned Virginia into a swing state.
For Cuccinelli, who like McDonnell has links to the targeted businessman, the timing of the investigation’s progression couldn’t be worse: a related trial, which will focus on felony embezzlement charges against the governor’s former chef, is scheduled to be held in mid-October.
“That’s when the last of the voters start paying attention to the election” held on Nov. 5, said Quentin Kidd, the director of the Judy Ford Wason Center for Public Policy at Christopher Newport University in Newport News, Virginia.
“I think a lot of people on both the Democratic and Republican side are looking at that trial, at the schedule, and saying that it could throw a wrench into the last couple weeks” of the campaign, Kidd said.
The outcome of the governor’s race is likely to influence whether Virginia remains in the competitive presidential state column or is nudged toward the Democrats. It also may establish momentum for the 2014 midterms when control of the U.S. Senate will be in play and Virginia Senator Mark Warner, a Democrat, is up for re-election.
The federal probe centers on Jonnie Williams, chief executive officer of Star Scientific Inc., a former cigarette maker that has shifted into marketing a nutritional supplement and skin cream. The FBI is examining whether McDonnell and his family took gifts from Williams in exchange for favors that helped promote Star and its dietary products.
Williams, whose firm donated $108,500 worth of in-kind air travel to help elect McDonnell in 2009 and cover travel expenses during his tenure, paid $15,000 in catering expenses at the June 2011 wedding of the governor’s daughter. Two months later, the company promoted a dietary supplement, Anatabloc, to doctors attending a luncheon at the governor’s mansion, according to court records.
McDonnell has said he didn’t list the catering payment on his state financial disclosure forms because it was a gift to his daughter. He has said his administration never gave any preferential treatment to Williams or his company.
“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,” McDonnell said in an April 30 interview at a Bloomberg Washington Summit.
Williams’s company, which had $6 million in sales last year, disclosed this year that it and its directors are being investigated by the U.S. Attorney’s office for stock sales and other transactions dating back to 2006. Star Scientific is also being sued by shareholders claiming it misled investors about academic research into its products.
In 1994, Williams settled a U.S. Securities and Exchange Commission complaint alleging he helped spread misleading claims about a pharmaceutical company in order to inflate the value of its stock.
Cuccinelli’s ties to Williams were underscored in April, when he amended his financial disclosure forms to include previously unreported gifts he received from the businessman, including the use of a vacation home. Cuccinelli has said his omission was inadvertent.
Star Scientific is also fighting in court a $1.7 million tax assessment from Virginia. Cuccinelli’s office in April appointed an outside law firm to handle the case to avoid concerns about conflicts of interest. He also appointed a Richmond prosecutor to look into possible violations by himself or McDonnell of the state’s financial disclosure laws.
McDonnell’s ex-chef, Todd Schneider, is scheduled to go to trial Oct. 15 on charges that he took state property from the governor’s mansion. The case is expected to spotlight Williams’s connections to Virginia’s two leading Republicans.
Schneider has said in court filings that he apprised federal investigators about Williams’s efforts to ingratiate himself with McDonnell, and that Cuccinelli had conflicts of interest because of his ties to the businessman.
“Depending on how big this gets with respect to McDonnell, there’s no doubt about it, some of the controversy will hurt the Cuccinelli campaign as well,” said Stephen Farnsworth, a political scientist at the University of Mary Washington in Fredericksburg, Virginia.
No ‘Special Benefits’
Star Scientific denies any wrongdoing in its dealings with politicians. “Our company neither sought nor received any special benefits from any public official and was glad to be part of any effort to promote business and create jobs in the Commonwealth of Virginia,” spokeswoman Talhia Tuck said in a statement.
Polls show a close race between Cuccinelli and McAuliffe. A poll in May by Hamden, Connecticut-based Quinnipiac University gave McAuliffe a slight advantage, 43 percent to 38 percent. A Washington Post survey, also last month, put Cuccinelli ahead, 46 percent to 41 percent.
Poll results also showed the federal investigation isn’t resonating much now with an electorate more concerned about jobs and the economy. In the Quinnipiac survey, just 12 percent of Virginians said the McDonnell-Williams ties were a “major issue,” compared to 44 percent who said it was “just politics” and 42 percent who had no opinion.
“I think McAuliffe or somebody is going to bring it up, but I don’t know if it will be that weighty an issue with the voters unless it looks like bribery or fraud,” said Toni-Michelle Travis, a political scientist at George Mason University in Fairfax, Virginia.
“If it’s just lack of reporting, that’s one thing. If it’s deeper than that, then McAuliffe will go after it,” she said.
Other Democrats already are.
Cuccinelli’s “blatant conflicts of interest clearly demonstrate that he can’t be trusted to effectively represent the interests of Virginia taxpayers,” Danny Kanner, a spokesman for the Washington-based Democratic Governors Association, which is backing McAuliffe’s campaign, said in a statement.
A spokeswoman for Cuccinelli’s campaign said in a statement that he “has consistently demonstrated a commitment to transparency and accountability and that includes being up front and honest with Virginians.”
Anna Nix, the spokeswoman, also sought to turn the tables on the Democrats, saying Cuccinelli’s actions “stand in stark contrast to Terry McAuliffe, who refuses to release his tax returns and is consistently plagued with business failures, including his struggling electric car company GreenTech.”
The extent to which the probe will affect McDonnell’s political standing depends on what it uncovers.
“I think it’s going to hurt the governor’s reputation as kind of a straight-shooter, but it’s hard to say at this point how much it hurts him,” said Kidd.
Barred by state law from seeking another term this year, McDonnell was a surrogate for Republican nominee Mitt Romney in last year’s presidential race and was mentioned as a potential running mate on the ticket.
“If these investigations clear up quickly, you might see him make a run at a presidential campaign” in 2016, Farnsworth said. “But with these issues hanging over his head and the large numbers of Republicans also being talked about for 2016, McDonnell’s star has faded, it seems to me.”
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