J
ohn W. Forbes II, state secretary of finance under former Virginia Gov. Jim Gilmore, has been sentenced to 10 years in prison after pleading guilty to federal wire fraud charges. It is by far the biggest scandal involving a state cabinet-level official in years.
The case also raises questions about a state entity that is supposed to use money obtained in a massive 1998 lawsuit settlement against four major tobacco companies for the public good.
That entity with the long-winded title of the Virginia Tobacco Indemnification and Community Revitalization Commission has so far distributed $728.7 million for do-good projects in the tobacco belt stretching from the economically hard-hit counties in Southside and Southwest Virginia. It also has paid out $288.3 million to state tobacco growers on the theory that they need help to weather the decrease in tobacco sales following a slew of health-related lawsuits and the end of a 1938 federal program that artificially propped up tobacco prices.
Forbes, who was the state’s top financial official from May 2001 until January 2002, also served on the tobacco commission’s board. In June 2001, he won a $5 million grant from the commission to set up the Literary Foundation of Virginia. Designed to promote adult literacy, the program apparently did little other than provide $1 million in salaries for Forbes and his spouse and help them buy a million-dollar house.
“You not only betrayed the citizens of the commonwealth, but also the governor that appointed you,” U.S. District Judge Henry E. Hudson told Forbes as he passed down the 10-year sentence in Richmond on Nov. 23.
But one has to ask what the real purpose of the tobacco commission is. It has done some useful work in helping small businesses grow and narrowing the digital divide in poor counties dealing with declines in the tobacco, textile and furniture sectors.
But why do tobacco farmers need nearly $300 million in aid? They had been living off federal largess for decades, namely, from a Depression-era program that kept tobacco prices artificially high by having the federal government restrict tobacco growing and sales.
After years of protection by a Congress controlled in part by Southern Democrats, the program created “allotments” allowing tobacco growing in areas of only about four acres. These units could be bequeathed to survivors and kept tobacco prices at levels perhaps several times higher than that of far more useful crops such as corn and soybeans.
I reported on the program for BusinessWeek back in the 1990s in my home area of Beaufort County, N.C. where I started reporting on tobacco in the early 1970s. One farmer had ammassed allotments of 30 acres and he paid more than a milllion dollars on the crop, thanks to the system. It was far more than what he got from other crops. The support program has since come to an end.
Virginia officials thought that tobacco farmers, who grow a deadly product, deserved more. So, one of the tobacco commission’s first activities was sending allotment holders checks for simply having an allotment. Some got up to $12,000.
A check of the allotment holders’ addresses that we did some years back at Virginia Business magazine showed that in some counties many holders didn’t even live in Virginia. In Brunswick County, about 28 percent didn’t live in Virginia, but in cities such as Philadelphia, Baltimore and Las Vegas. On Halifax County’s list, one holder lived on the Gold Coast of downtown Chicago.
All got checks from the commission’s $2.1 billion war chest. Another $1.7 billion went to the state’s general fund to be spent as the state saw fit. Although the tobacco settlement — Virginia’s share was $4.2 billion — was intended to be used to convince people not to smoke, only a tiny portion of Virginia’s payout has been used for this purpose.
This shows, once again, how much tobacco reigns as King of Virginia, despite the corruption it seems to generate.
Peter Galuszka