Debunking California Stem Cell Agency Claims of 'No Actual Conflicts'

In the wake of recent considerable criticism concerning conflicts of interest at the $3 billion California stem cell agency, its leaders have taken to saying “no actual conflicts” have been found at the agency.

That assertion is simply not true.

Nonetheless, the statement has been repeated in some news stories, published in at least one agency press release and peddled by stem cell advocates and some members of the governing board of the California Institute for Regenerative Medicine (CIRM), as the agency is formally known.

The reason? Conflicts of interest were cited prominently as a major problem at CIRM by the blue-ribbon Institute of Medicine (IOM) report. In December, the IOM recommended that a new majority of independent members be created on the stem cell agency's governing board. The existing stem cell board has ignored that recommendation and wants to settle for something considerably less as it tries to find a way to build support for continued financing of its efforts.

The facts are that the agency has a long history of problems involving conflicts of interest, “actual” and otherwise. Here is a rundown on what has been reported on the California Stem Cell Report.

In 2009, board member John Reed, then CEO of the Sanford-Burnham Institute, was warned by the state's Fair Political Practices Commission about his violation of conflict of interest rules. Reed's intervention on behalf of a grant was made at the suggestion of then CIRM Chairman Robert Klein, an attorney who led the drafting of Proposition 71, the ballot initiative that created the stem cell agency in 2004.

In 2007, other violations involving five board members resulted in voiding applications from 10 researchers seeking $31 million. And then the agency shamefully scapegoated employees for the problem.

In 2011, the chairman of the CIRM grant review group resigned from his position as the result of another violation, which the agency felt necessary to report to the California legislature.

In 2009, then board member Ted Love, who has deep connections to the biomedical industry, served as the agency's interim chief scientific officer and helped to develop the agency's first, signature $225 million disease team round while also serving on the CIRM board. As chief scientific officer, Love presumably would have had access to proprietary information and trade secrets contained in grant applications. In 2009, in response to questions from the California Stem Cell Report, the agency said that Love would only serve as a part-time adviser to the agency president, not as chief scientific officer. Nonetheless, in 2012, the board passed a resolution with high praise for Love and his performance as the chief scientific officer.

Since 2010, a stem cell firm, iPierian,Inc., whose major investors contributed nearly $6 million to the ballot measure that created the stem cell agency, has received $7.1 million in awards from the agency. The contributions were 25 percent of the total in the campaign, which was headed by Klein.

Another firm, StemCells, Inc., last fall was awarded $40 million by the CIRM board despite having one of its $20 million applications rejected twice by grant reviewers. The action came after the board was vigorously lobbied by former Chairman Klein. Researcher Irv Weissman of Stanford, who founded StemCells, Inc., and is on its board, was featured in a TV campaign ad for Proposition 71 and helped to raise millions for the ballot campaign. 

In 2008, public complaints by one applicant from industry about conflicts of interest on the part of a reviewer were brushed off by Klein. He told the applicant the board needed to discuss naming CIRM-funded labs and then go to lunch. 

The agency has hired at least two industry consultants in positions that raise conflict of interest problems, in 2010 and again in 2012.

Sometimes groups expect to see increased funding as the result of the appointment of sympathetic individuals to the board. That occurred last fall when Diane Winokur was appointed. The chief scientist for The ALS Association, said Winokur will be “a tremendous asset in moving the ALS research field forward through CIRM funding."

The conflict issue even surfaces in picayune ways. In 2006, board members from various institutions spent considerable time debating a minor requirement involving press releases. They were concerned that the proposal would make their institutions subordinate to the interests of CIRM. At the end of the discussion, the institutional directors prevailed and kept their PR departments from having to notify CIRM about press releases dealing with the hundreds of millions of dollars in state grants that they receive.

All this, and yet on Jan. 24, 2013, CIRM Chairman Jonathan Thomas was quoted in a CIRM press release as saying “no one has found any actual conflicts” at the agency.

In the media, some of the recent news stories have reported that the IOM did not find any “actual” conflicts at the agency. The explanation for that is simple, but mainly omitted from the articles. The IOM did not look for any conflicts of “inappropriate behavior,” as its report clearly states. The California Stem Cell Report last weekend asked the chairman of the IOM panel, Harold Shapiro, why it did not look for conflicts. He replied,

“Our committee was given a set of defined tasks from the IOM(which was under a $700,000 contract with CIRM), and we followed them."

Nonetheless, the IOM report said “far too many” board members are linked to institutions that receive funds from CIRM. A compilation by the California Stem Cell Report shows that about 90 percent of the $1.7 billion that the board has awarded has gone to institutions linked to past and present board members.

The fundamental conflict problem with the CIRM board is that nearly all the California institutions that stood to benefit from the agency's largess were given seats at the table where the money is handed out, under the terms of Proposition 71.

Conflict problems are not unique to CIRM and government agencies. They are also a matter of concern at nonprofit, grant-making foundations, which in some ways CIRM resembles.

The Council on Foundations, a national nonprofit association of more than 1,700 grant-making organizations, takes pains on its web site to explain the importance of managing and avoiding conflicts of interests. In its advice to its members, the group makes it clear that the issue goes well beyond simple financial conflicts. It says,

“(Board) members must represent unconflicted loyalty to the interest of the foundation. This accountability supersedes any conflicting loyalty such as that to advocacy or interest groups, business interests, personal interests or paid or volunteer service to other organizations.”

In the case of the stem cell agency, the “unconflicted loyalty” is to the people of California. Perhaps the California stem cell agency can convince state leaders, both public and private, and its voters that no conflicts exist at the state agency. But it is a big bet and probably carries with it the entire future of what the board and many believe is an exceedingly promising scientific effort.

Perhaps it would be wise for the board to step back and say, “Yes, there are serious conflict problems at CIRM. We recognize that and are working on additional measures to create an independent board as recommended by the IOM.”