Burnham's Reed Warned by State Ethics Agency on Conflict of Interest

California's government ethics overseers have issued a "warning letter" to a director of the California stem cell agency for attempting to influence the agency's staff to reverse a denial of a $638,000 grant to his research organization.

The attempt by John Reed, CEO of the Burnham Institute of La Jolla, Ca., was first disclosed by the California Stem Cell Report in November 2007.

Subsequently, John M. Simpson, stem cell project director for Consumer Watchdog of Santa Monica, Ca, asked the Fair Political Practices Commission to investigate Reed's action. California's top fiscal officer, Controller John Chiang, also called for an FPPC inquiry. Simpson disclosed the FPPC's warning today in a news release circulated nationally.

The FPPC said that Reed "intended to influence a decision that had the potential to affect his economic interests." The ethics agency said that Reed's action "raises ethical concerns," declaring,

"We are closing this matter with a warning letter....Dr. Reed is advised that failure to comply with the provisions of (state conflict of interest laws) can result in an enforcement action against him, including monetary penalties of up to $5,000 for each violation."

Reed recused himself from serving on the board during the FPPC investigation and appointed an alternate to fill in.

Simpson said he hoped that the 29 members of the CIRM board of directors had learned from the Reed incident. He said Reed can now return to the board and make a "positive contribution."

In response to an inquiry, Chiang's office said,

"Any conflict of interest threatens CIRM’s credibility and jeopardizes voters’ tremendous investment in stem cell research, which is why CIRM itself adopted a conflict-of-interest policy shortly after its creation.

"CIRM and the ICOC have a tremendous amount of work ahead of them – the controller hopes they can move forward and use the guidance provided by the FPPC to avoid any further conflicts in the grant process."

Simpson noted that the CIRM board is riddled with built-in conflicts of interest as the result of the language of Prop. 71, which created the $3 billion research effort.

Simpson said,

"Most of the people handing out the money are the very same people from the institutions that get the money. That means the conflict rules in place must be strictly adhered to and there must be consequences when they are violated.”

Reed wrote his letter seeking to influence the staff on the advice of CIRM Chairman Robert Klein, an attorney who wrote much of Prop. 71. Klein's action triggered calls for his resignation from The Sacramento Bee and Consumer Watchdog.