Virginia Governor Under Investigation for Receipt of Payments from Supporter

The federal government and the Commonwealth of Virginia are investigating the circumstances of the receipt of funds by the governor’s family and a corporation he partly owns.  The governor is Robert McDonnell and the donor is wealth businessman Jonnie R. Williams, Sr., who owns Star Scientific, Inc., a dietary supplement manufacturer.

The Washington Post reported that $145,000 in payments went to the McDonnell family during 2011 and 2012.  The first payment from Williams to the McDonnell family came in May 2011, with a $50,000 check from Williams’s trust account payable to McDonnell’s wife Maureen.  At the same time Williams wrote another check in the amount of $15,000 to pay for catering of McDonnell’s daughter Cailin’s wedding.  In March 2012 Williams wrote a $50,000 check from his trust account to MoBo Real Estate Partners, a company McDonnell co-owns with his sister.  Then, later in the spring of last year MoBo received another payment, this time for $20,000.  Finally, in December of last year Williams provided a $10,000 check to McDonnell’s daughter Jeanine to help defray the costs of her wedding.

In addition to the payments described above, Williams gave gifts to the family that included $15,000 in luxury clothing for Mrs. McDonnell and a $6500 Rolex watch that Mrs. McDonnell had asked Williams to purchase as her gift to the governor.

The payments present a number if interesting questions and issues.  First, the fact that the transactions mostly occurred by check suggests that the parties were not trying to hide them.  Cash transactions or transfers of money through straw companies are typical means of disguising illicit payments.  That did not seem to happen in the governor’s case.

Additionally, McDonnell seems to have at least partially complied with the Virginia disclosure requirements for public officials.  For elected officials Virginia requires the disclosure of personal loans but not loans made to their corporate holdings.  Moreover, gifts of more than $50 must be disclosed, but gifts to family members of elected officials are exempt from the disclosure requirement.  On the commonwealth’s disclosure forms McDonnell revealed that his family owed money to a creditor in an amount between $10,001 and $50,000.  The governor has also disclose gifts that he has received from Williams.

Another question to be answered is whether there was an actionable quid pro quo in the relationship between the governor and Williams.  This is often a difficult question.  Governors routinely tout businesses in their states to encourage investment and further economic development.  The question in a situation like the present one is whether any steps taken by McDonnell to promote Star Scientific were simply a governor extolling a state’s business or in return for gifts or loans.  Moreover, there is the question of whether Williams’s company received favorable treatment from the commonwealth in return for the loans/gifts.

Also, investigators will seek to discover whether there were terms for the repayment of the purported loans.  If there were terms, the next question is how advantageous were they for the governor and his family.  Terms for repayment and the beginning of repayments may help to defeat any inference or conclusion that the purported loans were actually gifts.

According to the Post article, a federal grand jury in Richmond is receiving evidence in the investigation.  The Washington Post article can be found here.

About Richard Serafini

Welcome to my blog. I am an attorney and practice in the area of corporate trial work. Areas of particular emphasis are white collar defense, securities litigation, health care litigation, internal investigations, RICO, and financial litigation. I will be posting interesting developments in my areas of interest. I hope that you find this blog helpful and informative.