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Ruff: Changes will prevent future scams / November 17, 2010
Virginia Tobacco Commission vice chairman Frank Ruff yesterday broke the commission’s silence regarding the imminent sentencing of former commissioner John W. Forbes in a $4 million federal fraud case.

The commission in 2001 awarded a $5 million grant to Forbes’ Literary Foundation of Virginia to invest in Sallie Mae and other institutions to create educational opportunities in the tobacco-producing regions. He was at the time Gov. Jim Gilmore’s secretary of finance and his representative to the tobacco commission. He did not vote on the grant application.

The foundation ceased operating in 2006. Forbes in August 2010 pled guilty to one count of wire fraud, admitting he used $4 million of the money for his personal use, according to the Richmond Times-Dispatch.

Ruff, a Republican who represents Mecklenburg County in the Virginia Senate, said that reforms instituted in recent years make it unlikely that $4 million in tobacco settlement could disappear in the future.

He noted that the commission more than five years ago had adopted a reimbursement-only policy for dispensing funds. The change had probably been made in response to tobacco commissioners’ concern about what Forbes was doing with his grant money, he said.

Recalling the history of the disappearing grant to Forbes’ foundation, Ruff said the commission had a commitment from Sallie Mae that the funds would be properly invested.

He said that, over time, tobacco commission members who were out in the community did not get any feedback that the money was actually reaching students.

Commissioner’s request reports

“We felt that we ought to have reports of where the money was spent,” he said. “We told staff to get the reports. He [Forbes] did make some reports until about $800,000 had been put out into the community.”

The reports stopped coming about a year and a half after the grant was awarded, Ruff said.

As industries such as Burlington in Clarksville closed in the early years of the decade, the commissioners became more concerned about getting the grant money out to where it was needed, he said.

“We looked at options to speed things up and were told by the Attorney General’s Office that the matter was out of the Tobacco Commission’s hands. Unless something was found regarding the foundation doing anything illegal, nothing could be done. They’re [the AG’s office] not an investigating unit and there was no indication that anything was being done improperly.”

He said the commission was told it had no rights to get any money back from the foundation, “which is one of the reasons we went to a reimbursement policy.”

He said he believes the investigation that led to Forbes being charged with fraud was initiated by the FBI, possibly in response to a tip from a disgruntled spouse or the purchaser of a Chesterfield County home he built following receipt of the grant funds.

Ruff: Commission “victimized”

“The tobacco commission has been victimized – that is our situation,” Ruff said. “Any money recovered through the judicial process should go back to the tobacco commission.

The senator took issue with recently published comments by former Gov. Gerald Baliles concerning the Tobacco Commission’s handing of the grant to Forbes’ foundation.

Baliles chaired a blue ribbon panel that in 2008 recommended a series of tobacco commission reforms, including some that deal with fiduciary responsibility. This week he reportedly told the Times-Dispatch that the reforms should be implemented.

Ruff said “misstatements were made” and the comments recently made by Baliles were “outdated,” since the Tobacco Commission had tightened its standards before the Blue Ribbon Commission looked into its processes.

Baliles, a Democrat, had a “burr in his saddle” because a Patrick County education program he championed did not receive the level of tobacco commission funded he advocated, Ruff said.

Panel recommends audit

Another reform recommended by the Blue Ribbon Commission was that the Joint Legislative Audit and Review Commission or another entity study how the Tobacco Commission issues grants and monitors performance.

The Tobacco Commission discussed the recommendation in July 2008, but did not act.

Ruff said the Tobacco Commission did not have the authority to ask JLARC to do an audit, but could have asked the General Assembly to make the request.

“We could have gone to other entities, but that would have involved some costs. The question is” What were we going to accomplish?” Ruff commented.

He noted that the Tobacco Commission is audited annually by the state.

A JLARC audit was blocked last year by House of Delegates Republicans, but revived this year by language the Senate added the state budget. The audit is expected to be completed by early summer, according to the Times-Dispatch.

Del. Tommy Wright, R 61st., who serves on the Tobacco Commission, said that although reforms are in place to protect the commission’s money and the state annually audits the committee, he would welcome a JLARC audit.

He said it is in the best interest of the Tobacco Commission to see that proper controls are in place because “one vote of the General Assembly could do away with Tobacco Commission money altogether.”

Wright said he could not comment on the Forbes case because legal counsel had asked Tobacco Commission members and staff to remain mum while the case in litigation.

Forbes is scheduled to be sentenced Nov. 23.

The Times-Dispatch last week reported that the U.S. attorney’s office has declined to comment on whether an investigation, conducted by the FBI and the Virginia State Police, continues.

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