The article was written by
Pulitzer prize winner and author Michael Hiltzik, who has been
critical of the agency in the past. The piece was the first in the major
mainstream media about a $20 million award to StemCells, Inc., that was approved in September by the agency's board. The bottom line of the
article? The award was “redolent of cronyism.”
Hiltzik noted that
StemCells, Inc., now ranks as the leading corporate recipient of cash
from the agency with $40 million approved during the last few months.
But he focused primarily
on September's $20 million award, which was approved despite being
rejected twice by grant reviewers – “a particularly
impressive” performance, according to Hiltzik. It was the first
time that the board has approved an award that was rejected twice by
reviewers.
Hiltzik wrote,
“What was the company's secret? StemCells says it's addressing 'a serious unmet medical need' in Alzheimer's research. But it doesn't hurt that the company also had powerful friends going to bat for it, including two guys who were instrumental in getting CIRM off the ground in the first place.”
The two are Robert Klein,
who led the ballot campaign that created the agency and became its
first chairman, and Irv Weissman of Stanford, who co-founded
StemCells, Inc., and sits on its board. Weissman, an internationally
known stem cell researcher, also was an important supporter of the
campaign, raising millions of dollars and appearing in TV ads. Klein,
who left the agency last year, appeared twice before the CIRM board
this summer to lobby his former colleagues on behalf of Weissman's
company. It was Klein's first appearance before the board on behalf
of a specific application.
The Times piece continued,
“But private enterprise is new territory for CIRM, which has steered almost all its grants thus far to nonprofit institutions. Those efforts haven't been trouble-free: With some 90% of the agency's grants having gone to institutions with representatives on its board, the agency has long been vulnerable to charges of conflicts of interest. The last thing it needed was to show a similar flaw in its dealings with private companies too.”
Hiltzik wrote,
“(Weissman) has also been a leading beneficiary of CIRM funding, listed as the principal researcher on three grants worth a total of $24.5 million. The agency also contributed $43.6 million toward the construction of his institute's glittering $200-million research building on the Stanford campus.”
CIRM board approval of the
$20 million for StemCells, Inc., came on 7-5 vote that also required
the firm to prove that it had a promised $20 million in matching
funds prior to distribution of state cash.
Hiltzik continued,
“The problem is that StemCells doesn't have $20 million in spare funds. Its quarterly report for the period ended June 30 listed about $10.4 million in liquid assets, and shows it's burning about $5 million per quarter. Its prospects of raising significant cash from investors are, shall we say, conjectural.
“As it happens, within days of the board's vote, the firm downplayed any pledge 'to raise a specific amount of money in a particular period of time.' The idea that CIRM 'is requiring us to raise $20 million in matching funds' is a 'misimpression,' it said. Indeed, it suggested that it might count its existing spending on salaries and other 'infrastructure and overhead' as part of the match. StemCells declined my request that it expand on its statement.
“CIRM spokesman Kevin McCormack says the agency is currently scrutinizing StemCells' finances 'to see what it is they have and whether it meets the requirements and expectations of the board.' The goal is to set 'terms and conditions that provide maximum protection for taxpayer dollars.' He says, 'If we can't agree on a plan, the award will not be funded.'"
Hiltzik wrote,
“The agency shouldn't be deciding on the spot what does or doesn't qualify as matching funds. It should have clear guidelines in advance.
“Nor should the board overturn the judgment of its scientific review panels without clear-cut reasons....The record suggests that the handling of the StemCells appeal was at best haphazard and at worst redolent of cronyism.”
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