Altria Probed by U.S. FTC Over Role in Resignation of Juul’s CEO

(Bloomberg) -- When embattled e-cigarette maker Juul Labs Inc. replaced its leader last month with an executive from key shareholder Altria Group Inc., the Marlboro seller underscored that it had no part in the decision. But regulators have more questions.

Altria disclosed in a filing Thursday that it has received a civil investigative demand from the Federal Trade Commission seeking information about the company’s role in the recent leadership change at Juul. The investigation arose during the FTC’s antitrust review of Altria’s investment in Juul.

Altria’s shares fell as much as 3% in New York, the biggest slide in a month.

Juul spokesman Josh Raffel declined to comment. Steve Callahan, the director of communications for Altria, said he had nothing to add beyond the filing “other than Juul is an independent company which makes its own decisions and the decision to hire K.C. Crosthwaite was Juul’s decision.” That echoes Callahan’s response last month.

The leadership shift in question took place in September, when Juul announced Chief Executive Officer Kevin Burns would be replaced with one of Altria’s own: Crosthwaite, who had previously served as Altria’s chief growth officer and as the company’s observer on Juul’s board. Altria took a $12.8 billion stake in Juul last year.

A proposed tie-up between Altria and sister company Philip Morris International Inc. was terminated the same day Burns left Juul, a startup that has found itself at the center of a growing public backlash around youth vaping. Altria was said to have raised the potential of a leadership change at Juul to Philip Morris during the two tobacco companies’ recent talks about their merger.

Altria on Thursday also reported a $4.5 billion charge related to its investment in Juul.

“We did not anticipate this dramatic a change in the e-vapor category,” Howard Willard, Altria’s chairman and chief executive officer, said on a conference call. “The lung injury was something we hadn’t predicted.”

To contact the reporters on this story: Donald Moore in New York at dmoore71@bloomberg.net;David McLaughlin in Washington at dmclaughlin9@bloomberg.net;Ellen Huet in San Francisco at ehuet4@bloomberg.net

To contact the editors responsible for this story: Crayton Harrison at tharrison5@bloomberg.net, Anne Riley Moffat, Timothy Annett

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