RICHMOND, Va. — The head of a dietary supplement maker entangled in a political scandal with Virginia Gov. Bob McDonnell will resign amid a securities probe and shareholder lawsuits.
Star Scientific Inc. CEO and founder Jonnie R. Williams Sr. and president Paul Perito will step down after its shareholder meeting Dec. 27, the company said Thursday. State and federal authorities are investigating Williams’ relationship with Virginia’s two top Republicans —McDonnell and Attorney General Ken Cuccinelli.
Separately, the company is facing a federal securities probe and shareholder lawsuits alleging trumped up claims for its dietary supplement Anatabloc.
The Glen Allen, Va.-based company said Williams and Perito recommended to its board of directors that “significant leadership changes are needed to better leverage opportunities in pharmaceutical development.” Both will stay on with the company for another year to help with litigation and new product development.
Following the leadership transition, Star Scientific said it intends to accelerate plans to submit a new drug application with the Food and Drug Administration, as well as undertake clinical trials. It did not identify the drug.
Star Scientific had sold varieties of tobacco lozenges that dissolve in the mouth since 2001 but exited that business last year to focus on dietary supplements, including its Antabloc anti-inflammatory support product. Hall of Fame golfers Fred Couples and Nancy Lopez are ambassadors for the supplement.
“We are proud of the successes we have had in identifying and developing truly innovative processes and products that can make a difference in people’s lives,” Williams said in a statement.
Company spokeswoman Talhia Tuck said the resignations were not related to any of the investigations. In August, the company said it doesn’t expect to be prosecuted for “any of the matters” being investigated.
Dr. Michael Mullan, CEO of the private research center Roskamp Institute, is expected to replace Williams following a shareholder vote at the annual meeting, the company said. He also heads Archer Pharmaceuticals Inc., which specializes in targeted drug discovery for Alzheimer’s disease based on research done at Roskamp in Florida.
Mullan is a British researcher who previously headed an Alzheimer’s research center at the University of South Florida. He has designed studies assessing the impact of the compound on mice.
Dr. Christopher Chapman, who runs a pharmaceutical consulting firm, is expected to serve as president.
The Roskamp Institute is involved in numerous studies related to the compound in Anatabloc. Its founder, Robert Roskamp, owns shares in Star Scientific and the company also has a deal that grants a for-profit affiliate of the institute 5 percent royalties of sales of Anatabloc.
Star Scientific said Mullan would remain CEO of Roskamp for “strategic planning issues,” but withdraw from day-to-day operations.
In a regulatory filing, the company said Williams plans to continue as a non-executive employee for one year to help with patent prosecutions and new product development. Perito intends to serve as vice president and senior counsel of legal and regulatory affairs for one year to manage ongoing litigation.
Star Scientific has recorded losses for 10 consecutive years beginning with the year ending Dec. 31, 2003. Its accumulated deficit as of Dec. 31, 2012 was $231.5 million. It had 23 employees as of the end of last year.
Investigators are looking at whether Williams or his company benefited as a result of more than $124,000 worth of gifts and loans to the McDonnell and first lady Maureen McDonnell, each of whom promoted Williams’ company’s anti-inflammatory product. McDonnell said in July that the gifts and loans had been returned or repaid to Williams.
Cuccinelli, who on Tuesday lost a bid for governor, also accepted more than $18,000 worth of gifts from Williams and Star Scientific, and once owned more than $10,000 in company stock. In September, Cuccinelli gave a Richmond charity $18,000 — the same value as gifts he accepted from Williams.
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