Burnham's John Reed, Influence and a CIRM Grant Denial

In an apparent violation of a state conflict of interest policy, an influential director of the California stem cell agency earlier this year attempted to overturn a decision by the agency's staff that ultimately resulted in the loss of a $638,000 grant to his research institution.

John Reed, president of the Burnham Institute of La Jolla, Ca., on Aug. 2 wrote a 6 ½ page letter to the agency staff, warning that denial of the grant would set a "dangerous precedent" that would impair the mission of the California Institute for Regenerative Medicine (CIRM). The letter came about as the result of a suggestion by chairman of the institute, Robert Klein.

The California Stem Cell Report (CSCR) obtained a copy of the letter from Reed (see photo) from CIRM after filing a request under the state's public records act for documents relating to the Burnham grant.

In response to questions from CSCR, Richard Murphy, interim president of CIRM, said,

"Dr. Reed called the chairman to ask how to deal with what Burnham saw as technical mistakes in CIRM’s interpretation of the application. The chairman, not knowing enough about the technical details or whether mistakes had been made, suggested that Dr. Reed write a letter to the science team, which was knowledgeable about the issues."

Murphy also said,

"After CIRM received the letter, Dr. Reed was informed that he must refrain from participating in any way in CIRM's consideration of the Burnham grant."

John M. Simpson, stem cell project director for the Foundation for Taxpayer and Consumer Rights of Santa Monica, Ca., called for Reed's resignation, declaring that he would file a formal complaint with the state Fair Political Practices Commission, which deals with conflict-of-interest violations.

Simpson, a longtime observer and participant in CIRM proceedings,said, "The law is clear....John Reed flouted the law." He continued, "When you hand out millions of dollars in public money, you have to play by the rules."

Asked whether CIRM contemplated any action regarding Reed, Murphy replied, "Dr. Reed now fully understands the conflict rules. CIRM does not intend to take any further action regarding this matter."

Klein did not respond to an email asking about his role in the Reed letter. Reed also did not respond to questions emailed to him.

Reed presides over a nonprofit research institution that has received $17 million in CIRM grants and that has an annual budget of $87 million. According to Burnham's web site, it has 750 employees and ranks 5th in the nation in NIH funding among private research institutions.

CIRM's policy on conflict of interest states:

"Members of the ICOC shall not make, participate in making, or in any way attempt to use their official position to influence a decision regarding a grant, loan, or contract with their employer.

"Members of the ICOC shall not make, participate in making or in any way attempt to use their official position to influence a decision regarding a grant, loan, or contract that financially benefits the member or the entity he or she represents."

The application for the grant in question came from David Smotrich, an adjunct professor at Burnham and founder of the La Jolla IVF clinic. The grant was highly rated by scientific reviewers, who examined it behind closed doors and made the initial decision to fund it. Their findings then went to the Oversight Committee for final action last February during a public meeting. The application was considered at that time under the board's normal procedures. The names of the applicant and institution were withheld from the public and the Oversight Committee. Reed was barred from voting and taking part in the discussion, but that fact was not known to the public at the time.

Following Oversight Committee approval, the Smotrich application and all other approved grants were scrutinized administratively to assure that they complied with terms for the grants. CIRM staffers did not question the science or the credentials of the researcher. But they indicated as early as Feb. 24, according to CIRM documents, that there were problems with the eligibility of Smotrich. The issues involved whether he was a fulltime faculty member at Burnham, was located on the Burnham site and whether he had his own dedicated lab at Burnham.

The exchange between CIRM and Burnham about Smotrich went on for seven months. The letter from Reed came just as CIRM staff was planning to announce the grant denial at the Oversight Committee meeting early in August.

He said in his "appeal" letter to Arlene Chiu, then the top scientist at CIRM, that Smotrich "rightfully deserves" the grant. He devoted the bulk of his letter to Smotrich's credentials and his research, which included an "embryo rescue program" that would salvage leftover embryos from IVF that would otherwise be discarded.

Reed wrote:

"I also wish to emphasize the potentially damaging consequences that a decision not to recognize Dr. Smotrich's legitimacy as a faculty member may have on clinician investigations, as it will surely discourage clinical researchers from participating in the CIRM mission to advance stem cell therapies. Finally, the particular grant recommended for funding is of great strategic importance to the entire CIRM effort, and therefore we urge CIRM staff to take this into consideration."

Referring to the "embryo rescue program," Reed said,

"This is a unique resource not found anywhere else in the entire state and the only source currently available in California for deriving new hESC lines with the goal to share these freely with the entire CIRM research community to advance the fundamental goals of CIRM. Thus, to abandon the grant on perceived technical grounds flies in the face of the mission of CIRM."

Reed added that denial of the grant "sets a dangerous precedent that adversely affects all clinician-scientists, most of whom will have a significant component of their time devoted to clinical activity and whom will often by supported by non-academic sources."

On Aug. 27, Tamar Pachter, CIRM general counsel, wrote Burnham concerning Reed's Aug. 2 letter. She said his request to appeal the staff decision was rejected because no right of appeal existed for administrative findings. She said the decision did not involve the merits of the research or Smotrich's credentials.

She wrote,

"To be fair to all the applicants (as well as potential applicants who self-selected out of the applications process because they could not meet the eligibility requirements of the RFA), and to carry out its duties as a state agency with integrity, CIRM must consistently enforce eligibility requirements."

Burnham was offered an opportunity to withdraw the application but refused to do so. The decision not to fund the grant was announced late in the day in the waning minutes of the October meeting of the Oversight Committee, a move controlled by Klein in his role as chairman.

The CIRM news release the next day on the meeting did not identify Burnham as losing the grant, a decision made by Murphy, who overruled a recommendation by then chief communications officer Dale Carlson. (Prior to his appointment at CIRM, Murphy was president of the Salk Institute, another medical research organization in La Jolla.)

Carlson had submitted the draft release to Murphy for approval. Its next to last sentence said that the grant to Burnham had been denied. In an email exchange on the evening of Oct. 3 (the day of the Oversight meeting), Murphy said he did not want to mention the Burnham grant.

Carlson then emailed Murphy that the Burnham case and another grant that was withdrawn demonstrated the rigor of staff review and showed that the agency was a good steward of public funds. He wrote:

"Putting out a release in the morning that fails to note these items in light of the press coverage they'll be receiving, would seem like we're being protective and/or inexplicably secretive. Better to include the news at the bottom of the release. It shows we think the items that appear first are more important, but these are at least worth noting."

Murphy then replied to Carlson,

"From CIRM's point of view, you're right. It makes us look meticulous, as we are. But I hate to build our reputation for quality on the carcass of another institution, which no doubt will be embarrassed by the coverage. John Reed will be under fire from his board and donors for allowing this to happen, and we don't want to pile on. Let Burnham handle it anyway they want, but I don't think we suffer by remaining silent. If it hits the fan, I'll take the rap by saying truthfully that it was a technical decision, the science was great, but rules are rules. We did what we had to, and we look forward to their resubmission.

"Thanks for caring so much, but there's a balance on this one, and I think we serve the community kland CIRM best by minimizing the issue and remaining silent."

(Below is the full text of Murphy's response to questions from the California Stem Cell Report.)

(Editor's note: An earlier version of this said that news release following the Oct. 3 Oversight Committee did not contain any mention of the Burnham grant. The news release said a grant had been denied but did not identify Burnham.)