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Tax suit raises conflict questions for Cuccinelli

(AP) — A lawsuit against the state of Virginia by a nutritional supplement maker whose stock comprises Attorney General Ken Cuccinelli’s total investment portfolio is raising questions about the Republican’s potential conflicts of interest.

Henrico-based Star Scientific Inc. sued Virginia’s Department of Taxation in Mecklenberg Circuit Court in July 2011 over a $700,000 tax dispute with the state. A deputy attorney general filed an answer to the complaint the following month. There have been no new motions, pleadings, filings or hearings in the case since.

The issue comes as the conservative attorney general — who is unchallenged for the Republican gubernatorial nomination this year — fends off critics, particularly Democrats, over his refusal to resign his current office to run for governor. His decision ends a tradition observed by six attorneys general since 1985 who resigned to campaign for governor, including current Gov. Bob McDonnell.

Cuccinelli’s 2012 Statement of Economic Interest reports $10,001 to $50,000 worth of Star Scientific stock as his only investment.

Cuccinelli’s financial filings also indicate a relationship between the GOP’s presumptive nominee for governor and Star Scientific’s chief executive officer, Jonnie Williams.

In his 2011 Statement of Economic Interest report, Cuccinelli reported nearly $13,000 worth of gifts from Williams, including a $6,000 box of food supplements, a $3,254 trip to Kentucky and the use of a lake house and boat valued at $3,000, according to data from the reports gathered by the nonpartisan and nonprofit Virginia Public Access Project. In his 2010 SEI filing, Cuccinelli — who lives in Fairfax County and has never moved to Richmond — reported $800 worth of lodging at Williams’ Richmond-area home.

University of Richmond law school professor Carl Tobias said 19 months is a long time for a case to lie dormant in court without any action.

“Usually one side or the other will move things along in cases like that,” he said.

It’s not unprecedented, however, and doesn’t, by itself, indicate an impropriety, Tobias said. “I would think that maybe they’re negotiating a settlement to it,” he said.

Paul Campsen, a private attorney in Norfolk for whom tax litigation is a specialty, said he seldom sees tax cases languish the way the Star Scientific lawsuit has. If plaintiffs don’t push them along, then the government to which the disputed tax bill is due usually moves more quickly to recover its money.

Christian Tennant, an attorney representing the company in the tax lawsuit, said the case remains in pretrial discovery stages. He said a trial date probably will not be set until the second half of this year.

The gubernatorial election is in November.

Brian Gottstein, spokesman for the attorney general’s office, said Thursday that the office has contacted Star Scientific’s lawyers for months “in an attempt to move the case along, but the attorney has stated he is extremely busy with another significant litigation matter.”

The delay, however, viewed alongside Cuccinelli’s financial ties to the plaintiff, exposes Cuccinelli to criticism on the ethical question of whether to recuse himself and his office from the case by hiring a private law firm to litigate it, something the office has done regularly for any number of reasons.

“I think in a case like that, it’s probably better for the attorney general to step out of it,” Tobias said.

Campsen said he believes the decision to step aside and hire outside counsel should have been an easy one for Cuccinelli, given his direct financial interest in the company.

“To me this isn’t just the appearance of a conflict, it is a conflict of interest,” he said. “This looks bad and this smells bad.”

Gottstein dismissed suggestions that Cuccinelli or his staff had shown Star Scientific preferential treatment.

“(T)he assistant attorney general handling the case and her supervisor knew nothing about the attorney general’s relationship with the company, so they had no reason to consider outside counsel,” Gottstein said in a written response to questions from The Associated Press.

“Moreover, as I stated before, the attorney general has not been personally involved in this case. This case has been handled in the ordinary course of business by the tax attorneys” at the attorney general’s office, he said.

Gottstein also said it would be almost impossible for the office to operate if it bowed out of any case where its attorneys owned stock in widely traded public companies. For instance, he said, employees may own stock in Virginia-based utility giant Dominion, which is also among the largest contributors to political campaigns in the state, “yet the OAG is involved as opposing counsel in large Dominion Power rate cases.”

Even though Cuccinelli’s Star Scientific holdings are appearing widely in news accounts, staff lawyers with the attorney general’s office will continue to handle the Star Scientific tax lawsuit.

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