Virginia Tobacco Commission Grants Go to Family Connections

A Virginia commission that invests money from a national tobacco settlement gave $21 million to an economic development group and a telephone cooperative run by family members of the commission's powerful chairman, according to a review of grants by The Associated Press.

While not illegal, the grants are part of a rocky history of questionable spending by the Virginia Indemnification and Community Revitalization Commission, which currently controls about $600 million in cash and investments.

The commission's chairman is Terry Kilgore, a Republican state legislator from a powerful political family. Kilgore has served on the commission since it was created in 1999. He was vice chairman for a decade and chairman for the past four years, approving grants that have benefited his father and brother's groups in Scott County, a rural area of southwest Virginia.

Kilgore recently hired an attorney in response to news that FBI is investigating whether a state senator was lured into resigning with the promise of a lucrative commission job. The resignation helped swing the balance of power in the state Senate to Republicans during a contentious debate over the state budget and Medicaid expansion.

Kilgore's brother, John Kilgore Jr. is head of the Scott County Economic Development Authority, an organization that was awarded more than $14 million in grants since the commission's inception. Much of the money has been passed on to businesses that invest in the county, but several million dollars have been spent to build a technology center that sits mostly vacant.

Their father, John Kilgore Sr., is president of the Scott County Telephone Cooperative's board, according to its website. The nonprofit that provides cable, phone and Internet to rural areas, received more than $7 million from the commission to expand broadband access.

The cooperative paid several of its board members -- including Kilgore's father -- about $20,000 in 2012 for working an average of one hour a week, according to tax records. The rate of pay is significantly higher than similarly situated co-ops.

The executive director of the co-op and Kilgore Sr. did not return calls seeking comment.

Terry Kilgore said his family ties have not affected the commission's investments and noted that projects have to be vetted by the commission's staff before he and other commissioners vote on them. Kilgore said he approves projects solely based on whether they are “going to create jobs and improve the economy.”

The commission uses funds from a settlement against tobacco companies to stoke economic development in tobacco growing regions. It has awarded grants for a wide variety of projects -- from $300,000 to build an RV park in Lee County to more than $20 million to Liberty University for a medical school.

Earlier this year, the Virginia Inspector General Michael F.A. Morehart's office issued a report noting that Terry Kilgore voted on a project at a 2013 commission meeting involving the Scott County Economic Development Authority. The report said that while the vote did not violate the state's conflict of interest laws, it recommended commissioners to “take significant care to avoid even the appearance of a conflict of interest in order to maintain and integrity and accountability.”

James Madison University ethics law expert and political scientist Robert Roberts said commission members should, at a minimum, recuse themselves from votes involving family members.

“It just looks terrible,” Roberts said.

Kilgore disagreed and said he's taken steps to make sure he's in compliance with state law.

Earlier this year, he asked former state Attorney General Ken Cuccinelli, a Republican, to weigh in on whether commissioners could vote on grants to organizations represented by a firm that employed a sibling.

Jerry Kilgore, Terry's twin brother, is a lobbyist who was hired by the businessman at the center of the corruption trial of former Gov. Bob McDonnell to help secure tobacco commission grants. No grants were ever awarded and the Kilgores have not been accused of any wrongdoing in the McDonnell case. Jerry Kilgore is a former Virginia attorney general and was the Republican nominee for governor in 2005.

Cuccinelli's opinion said commissioners could vote on grants involving siblings as long as they did not live with each other and they were not “financially dependent upon one another.” The opinion did not mention grants involving a commissioner's parent.

The commission has long been under scrutiny. A former commissioner stole $4 million from the commission and is serving a 10-year prison sentence. A 2011 study by the General Assembly's Joint Legislative Audit and Review Commission was critical of several grants the tobacco commission made, saying they did little to boost local economies. Gov. Terry McAuliffe's requested records of the commission's spending earlier this year and is currently examining that spending, according to a governor's spokesman.

The federal scrutiny of the commission began after the June resignation of Phil Puckett, a Democrat. After a public outcry over his possible job offer at the commission, Puckett withdrew his interest in the position.

Terry Kilgore appeared to be the driving force behind the job offer, according to internal commission emails.

“I'm not aware of the genesis of this idea, but Terry asked us to speak to you when you're available,” Tim Pfohl, the tobacco commission's interim executive director, wrote to Puckett about a week before he resigned from the Senate.

Puckett's resignation came during a months-long battle between Republican lawmakers over whether expanding Medicaid should be in the state budget. Puckett's departure gave Republicans enough leverage to force McAuliffe, a Democrat, to sign a budget that did not include Medicaid expansion.

Puckett said in a statement at the time of his departure that he was resigning so his daughter could be appointed to a state judgeship -- not because he was seeking a job on the commission. The Senate had blocked her appointment because of a policy lawmakers are not allowed to put immediate family members on the bench.

Kilgore declined to comment on the FBI investigation. His attorney has said Kilgore hasn't done anything wrong.

As for the commission's spending, one of its biggest investments was with the Scott County Economic Development Authority to build the Crooked Road Tech Center, a large commercial space. John Kilgore Jr. said in 2010 it would help create 140 high-tech jobs within one year and its groundbreaking issued a press release saying the center would “continue to establish Scott County as a mecca for technology.”

Currently, the lone tenant is LENOWISCO, a quasi-government agency that has only a handful of employees. Terry Kilgore said he recently attended a meeting with a company interested in moving into the center, and he is confident it was a good investment.

“I think we will be able to bring some jobs in there,” he said.

Emails showed the commission was not always diligent in keeping tabs on money given to the economic development group. Last year, Pfohl asked John Kilgore Jr. to provide documentation for a partial grant spent for a proposed museum.

“We need to get that $17,500 advance documented ASAP -- it was advanced more than FOUR years ago!” Pfohl wrote.