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Va. entrepreneur caught in growing political drama

Monday - 5/13/2013, 2:41pm  ET

AP Business Writer

RICHMOND, Va. - When Jonnie R. Williams believed he had discovered a way to make tobacco less harmful, the Virginia car salesman-turned-entrepreneur tried to sell his method to anyone who would listen.

Persistent phone calls to the nation's top cigarette makers often started with the colorful venture capitalist, once dubbed a "super salesman" by a local newspaper, dropping names and promising the world.

"He knew anybody and everybody and they were all endorsing his idea," said Chris Coggins, who ran the research and development department at Lorillard Tobacco Co. in the mid-1990s. "He very much is a hobnobber, that's his raison d'etre, if you like. ... He was a salesman like you wouldn't believe."

Two decades later, revelations of Williams' lavish gifts and his company's generous political donations are at the center of a growing scandal dogging the state's two top Republicans - Gov. Bob McDonnell and Attorney General Ken Cuccinelli.

The FBI is looking into Williams' relationship with McDonnell and his wife, each of whom promoted Williams' company's latest health care breakthrough - an anti-inflammatory supplement - around the same time he paid $15,000 for the catering at their daughter's wedding. Cuccinelli also has come under scrutiny for failing to report that he vacationed at Williams' homes and held stock in the company, Star Scientific Inc.

Meanwhile, Star Scientific Inc. is facing a federal securities probe and three shareholder lawsuits, alleging trumped up claims for its newest supplement, Anatabloc, which boasts Hall of Fame golfer Fred Couples as an ambassador.

Williams and company officials declined to be interviewed.

In more than 30 years in business, Williams, the son of a retired sailor-turned-Philip Morris employee has earned his share of scars and riches.

Early on, Williams established himself as a gifted car and real estate salesman in his hometown of Fredericksburg. By the time he was 24, he drove a gold Mercedes, owned two homes and had started a local optical shop, according to newspaper articles in The Free Lance-Star from the `70s and `80s.

His optical business collapsed following a fine for fitting contact lenses without a license, leaving tens of thousands of dollars in debts, according to a 1981 article. As the shop's equipment was auctioned off, one person told the paper: "If the auctioneer really wanted to make some money, he'd auction off Jonnie's address and phone number."

He invested in other medical businesses, including Spectra Pharmaceutical Services Inc., a failed Massachusetts company that touted an ointment to possibly cure eye diseases. The Securities and Exchange Commission accused Williams of using research with false claims to promote Spectra's stock.

Williams, without admitting guilt, paid back the alleged ill-gotten profits, plus interest, totaling $295,000.

The three shareholder lawsuits make similar allegations against Star Scientific, saying the company made false or misleading statements regarding clinical trials of its Anatabloc supplements.

"They promoted the product by creating the impression that Johns Hopkins University and the medical facility there had endorsed it," said Thomas Shapiro, a Boston attorney for one of the shareholders.

Still Williams, 57, has had successes, including investments in the maker of laser vision-correction systems that eventually became part of Abbott Laboratories Inc. He has been involved in startup bio-tech companies for more than a decade and owns numerous properties, including a six-bedroom house outside Richmond valued at $2.2 million.

Cuccinelli and some of his staff stayed at the home in 2010 when they were transitioning into office. According to property records, he also owns two homes at Smith Mountain Lake - one valued at around $2.3 million - that played hosted to both McDonnell and Cuccinelli.

Before Star began to focus on supplements, Williams was in a race against himself to try to "fix the tobacco industry." He testified in a legal case over his patents that sought to use microwaves to reduce the cancer-causing toxins called tobacco-specific nitrosamines, or TSNAs, that develop during the tobacco curing process.

To some, Williams was blowing smoke.

"It was all a sales story, and like all good scientists would, I wanted some data. And there never was any. It was `sign here' almost," Coggins said, recalling his many conversations with Williams.

By the late 1990s, Star Scientific, formerly known as Star Tobacco and Pharmaceuticals, was selling cigarettes to make money while it tried to license its process to make less harmful ones. The "StarCured" method was at the center of a longstanding patent dispute that ended last year with Reynolds American Inc., the country's second-largest tobacco company, paying Star Scientific $5 million as part of a confidential settlement agreement.

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