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SoVaNow.com / April 11, 2013Virginia’s latest non-stop headline maker, Star Scientific, can’t seem to get out from under the media glare, with people wondering if lavish gifts by the company CEO to Gov. Bob McDonnell and governor-wannabe Ken Cuccinelli constitute graft, mere tokens of friendship, or something in between. Yet for all the ink spilled over Star, there’s one aspect to the story that has gone barely noticed. Perhaps you have to be a local to even care.
Isn’t it just a little sad and depressing how a company once named “Star Tobacco” has very little to do today with, um, tobacco?
Once upon a time, Star vowed to be a very, very big deal for Southside Virginia, and it milked the story for all it was worth. In 2002, then-Gov. Mark Warner announced Virginia would provide $800,000 in direct cash incentives and additional tax credits to power the start-up of a Star processing facility in Chase City employing 315 workers. By then, the company had changed from Star Tobacco to Star Scientific — the new name surely must’ve pleased investors, politicians and, one suspects, the rubes — yet its primary product line remained tobacco, repurposed as “safer” alternatives to cigarettes.
Today, the company has ditched its line of lozenges and other smoking stand-ins, and Star is strictly a dietary supplement maker with a flagship product, Anatabloc, that contains a compound that is only vaguely connected to the golden leaf. No matter: We’re long removed from the days when Southside and Star were supposed to rise (if not fall) together. All that’s really left to connect the company to the region is an empty warehouse in Chase City and a vestigial legal mess over back taxes on tobacco barns.
And what about the tobacco industry itself hereabouts? Business is holding up surprisingly well for the growers who continue to cultivate the crop. But it’s certainly a small number compared to the days when the government-backed price-support program made it possible for families with just a few acres to their name to scratch out a decent income growing tobacco. The consolidation in production that followed in the wake of the tobacco program’s demise has, by and large, been good for the surviving operations, but yesterday’s wide circle of people with a direct stake in the industry is today more of a pinpoint.
Tobacco and that other traditional punching bag — low-end manufacturing — once served as lynchpins of Southside Virginia’s economy. In this sense, the region was and is little different than many other American communities that have depended on old-line industries for their livelihoods. In recent decades, many of these sectors of the economy have been swallowed up in the name of trade and globalization, and taking their place has been a financial sector so bloated that it now claims the status of “Too Big Too Fail.” If you’re wondering where the connection lies, consider U.S. strong-dollar policies — great for Wall Street, brutal for Main Street. Nowhere is this more true than in the manufacturing sector, where well-run businesses have been run out of the marketplace by low-cost rivals in places like China.
With traditional, formerly sturdy companies falling by the wayside, the stage is increasingly dominated by high-flying replacements, many of which don’t seem to have any actual substance to them. That’s the Star Scientific prospectus in a nutshell. We read that the company’s chief, Jonnie Williams, is the consummate salesman, but what’s he selling? Williams’ background is littered with the shards of failed ventures, and today Star is under federal investigation for alleged stock irregularities and under legal siege from angry investors. Yet for all this Williams appears impervious to trouble, the veritable toast of the town. His phone calls get through to the Governor’s Mansion (at least until recently) where others have to cool their heels. What does this say for how the system — and the economy — functions?
The reason the Star story has legs is not because the company may be on the hook for a $1 million-plus tax bill to the state, or that the dietary supplement Anatabloc sounds suspiciously like 21st century variation of snake oil, but because of something more basic: The company’s chief executive ponied up $15,000 to pay the catering bill at the governor’s daughter’s wedding. Who doesn’t understand the gist of that? As if to underscore the point, a few days before Cailin McDonnell walked down the aisle, the governor’s wife — a former Redskins cheerleader, no less — traveled to Florida to cheer on Star’s product line before a group of potential investors. Conservatives wonder why their paeans on the wonders of the marketplace have been delivering diminishing returns at the ballot box. Are they simply clueless, or in on the grift?
The Star Scientific episode is but a gross example of how a rigged economy delivers outsized returns for the wealthy, powerful and connected, with everyone else forced to settle for the (somewhat) entertaining spectacle of politicians squirming once the details spill out. It might all seem like cheap fun, but it’s not. The Washington Post has another story out this week about the gifts at the McDonnell daughter’s wedding — the report further undermines McDonnell’s claim that it was his daughter who was the recipient of Star’s largess, not him (talk about throwing a relative under the bus!) — but there’s an anecdote towards the end that especially caught my eye. It turns out that not only was the food at the wedding reception provided for free, so was the bride’s dress. “It’s because it’s the governor’s daughter,” explained the owner of the Hampton Roads shop that provided the gift, as quoted by The Post. “We really just wanted to do business with them.”
Why wouldn’t they?