Tuesday, July 29, 2014

California Stem Cell Agency and the Revolving Door: A Need for More Safeguards

The revolving door and related conflict of interest issues remain open at the $3 billion California stem cell agency despite the pledge by its new president, Randy Mills, to refrain from taking a job with a recipient of the agency’s largess for at least a year after he leaves.  

Mills’ action last week came in response to the controversial appointment of the agency’s previous president, Alan Trounson, to the board of StemCells, Inc.(SCI),  just seven days after he left the agency.  The firm was awarded $19.3 million while Trounson was its top executive.  Last year, members of the SCI board received as much as $99,000 in stock and cash. 

Mills’ move applied only to himself and excluded other members of the agency’s staff. He said they should not be denied the ability to seek employment with businesses or research organizations that the agency has funded.

John M. Simpson of Consumer Watchdog of Santa Monica, Ca., said, 
"The high profile Trounson Affair  focuses attention on CIRM’s potential revolving door problem that the agency needs to deal with.  Randy Mills' pledge not to take a job with a company funded by the agency for at least a year after leaving is a good step.  There  should be such a formal policy covering all employees. “Serious thought should also be given to the implications of employees leaving for jobs with non-profit entities that CIRM has funded and what safeguards are necessary.”

State laws do exist to deal with revolving door situations, but some consider them weak. (See here for an explanation of the laws.) Trounson’s appointment is an example of the circumscribed nature of the laws. Mills said the agency's “severely” limited investigation into the appointment did not show any illegal activities. Simpson said a more rigorous, independent investigation was needed. 

Mills’ move did send a clear message about his own views on some ethical matters and set a tone that should be helpful at the agency. Some employees might also view it as an example to emulate.

Playing a role in the revolving door concerns is the financial future of the agency. It is facing its effective financial demise in 2017 when funds for new awards are scheduled to run out, according to longstanding calculations by the agency itself. Last week Mills cast that financial picture in a more optimistic light. (The California Stem Cell Report will have more on his analysis in the next few days.)

Nonetheless, as the money runs out and there is no assured refinancing in sight, some employees are naturally going to be considering other employment. Three employees have departed or announced they are leaving since Mills was named. The move of Natalie DeWitt, who was a top aide to Trounson, was already reported by the California Stem Cell Report. DeWitt went to work for researchers at Stanford who have received about $5 million from the stem cell agency.

Elona Baum, general counsel and vice president for business development , this month left her $298,000-a-year job to take a position at Coherus Biosciences of Redwood City. The company yesterday refused to disclose her job title or whether she had already started work. Kevin McCormack, senior director for public communication for the agency, said he did not know her job title. He said the company “has no funding from us or any other business with us.”

The Coherus Web site says the company was founded in 2010 and is “the leading biologics platform company developing biosimilar(generic) therapeutics for global markets.”

The third employee scheduled to leave is Celeste Heidler, financial services officer. McCormack said she is retiring. The agency has posted an opening for her position.

McCormack said it has not been determined whether Baum’s position will be filled.  In addition to legal matters, she played an important role in relations with the biotech and stem cell industry.

Consumer Watchdog’s Simpson said more needs to be done to clear the air concerning the Trounson appointment.

In response to a query, he said,
“There must also be a deeper probe into Trounson’s relationship with StemCells Inc, and it its executives and directors.  Margaret Prinzing’s report, a small step in the right direction, only looked back as far as May 1.  Trounson’s relationship with StemCells Inc. since at least the beginning of 2012 should be examined and the investigation should be conducted by an entity not as closely tied to the agency as the Remcho, Johansen & Purcell firm.  I think the Citizens Financial Accountability Oversight Committee, chaired by the state controller would do a good job."

The committee is the only state entity charged with oversight of the stem cell agency. The governor and legislature have no legal ability to control its operations since it was created by a ballot initiative that specifically spelled out that they had no role.
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