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Recently, forty-four Sea Serpent swim team members from the YMCA of South Boston/Halifax County traveled to the Salem YMCA to participate in the PYSA Swimming Championships against 10 other YMCA…
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Williams out at Star Scientific
SoVaNow.com / December 30, 2013Johnnie R. Williams Sr. the embattled founder of Star Scientific, stepped down as CEO on Friday at the company’s annual shareholders meeting. Star Scientific President Paul Perito also relinquished his position.
Once hailed as a potential source of income for Southside Virginia tobacco growers who would supply the company for its line of products, Star Scientific is reorganizing in the wake of a difficult, scandal-tinged year.
Williams and Perito will remain with the company during 2014 as the company works to clean up some of its ongoing legal issues. Perito will continue as a Vice President and Senior Counsel for Legal and Regulatory Affairs with a primary role of managing Star’s ongoing litigation. He will receive a base salary of $500,000. Williams will serve as a non-executive employee assisting in patent prosecutions at a base salary of $1.00 per month.
Just last month, Star Scientific settled its tax dispute with the state of Virginia for nearly $1 million. The case, which stemmed from a 2002 audit of Star Scientific, languished in the courts for nearly two years. It was based on claims of unpaid sales and use taxes on tobacco-curing barns in neighboring Mecklenburg County.
At the time of a 2002 audit, Star Scientific was in the business of manufacturing low-tar cigarettes, with warehousing and production facilities in Chase City. Williams, through Star Scientific, had developed and patented a way to cure tobacco that minimized the formation of cancer-causing particles. The curing process required local farmers to dry their tobacco in barns designed and owned by Star Scientific. At issue was the proper assessment of those curing barns. The company contested the $708,000 sales and use tax bill from the 2002 audit, eventually filing suit against the state in 2011.
The settlement includes payment of the $708,000 in back taxes plus interest and penalties.
In 2012, Star Scientific announced it was giving up the tobacco business to focus instead on dietary supplements marketed under the name Antabloc.
State and federal investigators continue to look into whether Williams or Star Scientific received anything in return for loans and gifts Williams gave to Virginia Governor Bob McDonnell and McDonnell’s family.
Among the items under investigation are a $15,000 payment made by Williams to foot the food bill for Cailin McDonnell’s wedding reception, a July 2011 all-expenses paid vacation for the McDonnell family at Williams’ Smith Mountain Lake house, including use of Williams’ Ferrari, $120,000 in campaign contributions given by Williams and Star Scientific to McDonnell and his political action committee, Maureen McDonnell’s role as a spokesperson for Star Scientific, and $9,600 in food, lodging, transportation, and entertainment gifts McDonnell received from Williams and his company in 2011 and 2012.
Star Scientific also faces two shareholder suits — one in Virginia and the other in Massachusetts — filed by stockholders who claimed the company failed to make proper disclosures about its finances and stock trades made by company insiders.
Replacing Williams as CEO is Dr. Michael Mullan, MBBS (MD), PhD, who as CEO and president of the Sarasota based Roskamp Institute and Archer Pharmaceuticals, conducted extensive research of Alzheimer’s Disease and other memory disorders.
Under the terms of his two-year employment contract, Mullan will receive a base salary of $600,000 in 2014 and $750,000 in 2015. He could also receive a $150,000 cash bonus and stock options totaling 6 million shares of common stock if he meets certain performance goals, involving clinical trials for products and financial metrics.
Christopher C. Chapman, MD, an independent director with Star Scientific, is the new President. Chapman’s base salary is $300,000 for 2014, and $375,000 for 2015. His two-year employment contract includes a $75,000 cash bonus and 3 million in stock options if he too meets performance goals related to clinical trials and financial metrics.
Chapman served as a member of Star Scientific’s Board of Directors since September 2005, and has extensive experience in new drug applications, clinical studies and device submissions to the FDA for approval.
Shares of Star Scientific, once traded as high as $3.16 per share, dropped to $1.14 before the management change was announced. On Friday, shares closed at $1.27.
In 2012, the last year for which complete financial records are available, Star Scientific reported losing $22.9 million, and in the first three quarters of 2013, the company reported losses in excess of $20 million.
The new leadership team is looking to consolidate both the research and administrative functions of Star Scientific in one new location, in Sarasota, the home of Mullan and a number of newly elected board members.
Elected to the Board of Directors, along with Mullan and Chapman, were four new members, Benjamin M. Dent, Scott P. Sensenbrenner, Naomi Whittel and Thomas L. Wilson. They replace outgoing board members Neil L. Chayet, Ralph B. Everett, Burton J. Haynes, Paul L. Perito and Jonnie R. Williams, Sr.
Shareholders also voted to change the company’s name to Rock Creek Pharmaceuticals.
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