Friday, April 07, 2006

CIRM Garners Greenbacks and Flack From Critics

San Francisco Bay Area venture capitalists and a baseball mogul are among the folks who are making $14 million in bridge loans to the fiscally strapped California stem cell agency.

The names of the lenders were disclosed earlier this week at a meeting in Sacramento that approved the initial round of what is promised to be $50 million in bond anticipation notes for CIRM. Currently it cannot float general obligation California bonds because of lawsuits against it. The notes authorized this week will not be paid back if the state loses its case.

Reporters Terri Somers and Bill Ainsworth of the San Diego Union-Tribune made an extra effort to identify the players behind the charities that are buying the first round of the notes.

Here is what they wrote:
"The Jacobs Family Trust, founded by Qualcomm Chairman Irwin Jacobs and his wife, Joan, has agreed to buy $5 million in bond anticipation notes. The Moores Foundation, founded by San Diego Padres owner John Moores, has agreed to buy $2 million.

"Other investors include Blum Capital Partners ($1 million), headed by Richard Blum, husband of (U.S. Democratic)Sen. Dianne Feinstein (of California); the Beneficus Foundation ($2 million); the William K. Bowes Foundation ($2 million); and the Broad Foundation ($2 million). Beneficus was founded by John Doerr, a partner at the large Bay Area venture capital firm Kleiner Perkins Caufield & Byers, which has invested heavily in biotechnology. William Bowes, whose foundation bears his name, is also a Bay Area venture capitalist."

Moores was a catalyst in the creation of an embryonic stem cell consortium in San Diego that is touted as having the potential for being tops in the world.

Broad donated $25 million to USC earlier this year for stem cell research, among other things. CIRM President Zach Hall was a key figure in initiating the Broad effort when Hall was at USC.

Terms of the CIRM loans call for a variable interest rate capped at 5 percent. First year interest costs are estimated at $600,000. Stem cell chairman Robert Klein said the money will be enough to fund the first year of the grants approved last September by the agency.

The funding is a significant step forward for the agency, which appears to be making headway after a shaky start last year. However, not all the critics are happy. And they have a very good point about the lack of transparency that still troubles CIRM despite Klein's repeated promises to adhere to the highest and best standards of openness and transparency.

In an editorial earlier this week, The Sacramento Bee, which is the flagship of the nation's second largest chain of newspapers, said the bridge loan process was "mired in secrecy."

The Bee continued:
"Among other things, Klein's negotiations with these potential lender-donors set a vexing precedent. Never before has a state official spent so much time negotiating with private financiers to keep a public agency running. While Klein says these bridge loans will be a lifesaver for the institute, they also could plunge it into a deeper legal and political thicket.

"Although the fine print of Prop. 71 mentions 'bond anticipation notes,' it is unclear if state officials can legally issue them until the constitutionality of Prop. 71 has been affirmed. One of the lawsuits filed has asked the court to block the issuance of such notes."
The Foundation for Consumer and Taxpayers Rights of Santa Monica, Ca., warned that CIRM's leadership could be undercutting its credibility. John M. Simpson, stem cell project director for the watchdog group, said:
“At first blush it looks as though there are safeguards in place to ensure that purchasers of the notes don’t hold undue sway over the stem cell institute — they, or an affiliated entity, can’t seek a grant, loan or contract from CIRM.

“But what does it say about the institute and the secretive way it persists in doing business when the terms only became clear as the names of the first buyers were released? The stem cell institute may end up in the right place, but too often the leadership undercuts its own credibility by holding everything too close to the vest.

“A completely open, transparent process would better serve everyone. I truly wish they’d see that.”
For the record, while it still has significant transparency weaknesses, CIRM demonstrated above average openness on development of its rules for stem cell research, welcoming, at least publicly, diverse voices that did not always agree with its proposed standards.

Klein hailed the approval of the notes, saying "we've never (before) seen an aggregation of the major foundations throughout the state coming together ... as champions of research in this way," according to reporter Jim Downing of The Sacramento Bee.

A press release by CIRM quoted Eli Broad, founder of The Broad Foundation, as saying:
“California will be America’s leader in stem cell research, which will not only benefit the tremendous need of people suffering from debilitating diseases and conditions but will also help the California economy immeasurably.”
Oddly the press release did not quote any of the other investors.

We cannot provide a direct link to the CIRM press release because it appears that access to CIRM's web site and other California state web sites from this IP address in Mexico is being blocked. Some California web sites, such as the treasurer's, are accessible. We ran into this problem last fall from another location in Mexico. State computer specialists attributed the blockage to security issues and removed the block after we asked them to look into the matter. We have asked them again to make the CIRM site available.

Here are links to The Associated Press and San Francisco Chronicle stories on the bond anticipation notes. The CIRM website is www.cirm.ca.gov. You should be able to find a link on that page to the press release. Sphere: Related Content

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