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Altria confirms FTC probe of Juul as agency scrutinizes executive shakeup

Juul Labs signage in San Francisco, June 25, 2019.

David Paul Morris | Bloomberg | Getty Images

The Federal Trade Commission is scrutinizing Marlboro maker Altria's role in the resignation and replacement last month of the CEO of the e-cigarette maker Juul, the tobacco giant said Thursday in a regulatory filing.

Altria's $ 12.8 billion deal with Juul, which gave Altria a 35% stake in the vaping company, still needs antitrust approval from the agency.

Altria on Oct. 1 received a civil investigative demand "seeking information regarding, among other things, Altria's role in the resignation of JUUL's former chief executive officer and the hiring by JUUL quarterly filing with the Securities and Exchange Commission.

Juul on Sept. 25 Kevin Burns, CEO of Altria executive K.C. Crosthwaite. Altria paid out a "special recognition" payment of $ 2.5 million upon his departure, according to a separate filing with the SEC that detailed Crosthwaite's severance package.

Within days, Crosthwaite hired Altria colleague Joe Murillo as Juul's chief regulatory officer. The companies have said the decision was Juul's. Crosthwaite served as an observer on Juul's board of directors following Altria's investment in Juul.

"The FTC issued a Civil Investigative Demand to Altria former Altria director, executive or employee, "Altria disclosed in the filing.

The civil investigative demand for another headache for Altria related to its stake in Juul. Altria on Thursday wrote more than a third of its investment as a regulator.

Altria has no financial benefits from its investment in Juul. The FTC requested more information in April. Altria said Thursday, the first quarter of next year, Altria said.

Altria in the regulatory filing also confirmed that the FTC is investigating Juul, along with the Food and Drug Administration and "various federal and state agencies." The Wall Street Journal first reported the FTC investigation in August.

"Such investigations vary in scope, but at least some appear to include JUUL's marketing practices, particularly as such relate to youth," Altria said in the filing.

The FDA has disclosed it is investigating Juul's marketing practices. The agency conducted a surprise inspection of the company's headquarters in San Francisco last year.

Altria, Juul and the FTC declined to comment.

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