CEO of Company in Va. Governor's Scandal Steps Down

RICHMOND, Va. (AP) -- A troubled dietary supplement maker in Virginia will start next year off with a new leader after its chief executive stepped down Friday, a shakeup that comes as the company faced a federal investigation, shareholder lawsuits and a scandal involving Virginia's governor.

As previously announced last month, Star Scientific Inc. said CEO and founder Jonnie R. Williams Sr. and president Paul Perito resigned at its shareholders meeting in Washington, D.C., though each will stay on in some capacity for another year. Shareholders also voted to change the name of the Glen Allen, Va.-based company to Rock Creek Pharmaceuticals, a wholly owned subsidiary.

Dr. Michael Mullan, CEO of the private research center Roskamp Institute, replaced Williams following the meeting.

State and federal authorities are investigating Williams' relationship with Virginia's two top Republicans -- Gov. Bob McDonnell and Attorney General Ken Cuccinelli. Both received thousands of dollars in gifts from Star Scientific and Williams. Separately, the company is facing a federal investigation regarding its securities and shareholder lawsuits alleging trumped-up claims for its dietary supplement Anatabloc.

At the time of the announcement, the company said Williams and Perito recommended to its board that "significant leadership changes are needed to better leverage opportunities in pharmaceutical development."

Following the transition, Star Scientific has 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.

The company had 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.

Mullan also heads Archer Pharmaceuticals Inc., which specializes in targeted drug discovery for Alzheimer's disease based on research done at Roskamp in Florida. He is a British researcher who previously headed an Alzheimer's research center at the University of South Florida. He has designed studies assessing the effect of the compound on mice.

Dr. Christopher Chapman, who runs a pharmaceutical consulting firm, will 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% 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 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 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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