No Time to Weaken 'Second Level of Oversight'

Should the public officials who monitor the financial practices of the $3 billion California stem cell agency have to disclose their financial interests as state law requires?

In a word, yes.

And it is surprising that consideration of seeking an exemption from financial disclosure is even on the board's agenda for its first meeting.

State regulations permit exemptions from disclosure only if the state entity is powerless (has no decision-making authority), has few funds (budget less than $150,000) and will own no real estate. Nominally the Citizens Financial Accountability Oversight Committee seems to meet that criteria. It can only review and make recommendations to CIRM.

That said, CIRM Chairman Robert Klein has cited the importance of the committee. He has called it "an extraordinary response" and "an unprecedented second level of oversight." Klein made his remarks at the March 1, 2005, meeting of the CIRM Oversight Committee.

State Controller Steve Westly, chair of the financial accountability group, was at the same meeting to caution the stem cell agency to mind its financial Ps and Qs. He said CIRM amounted to a kind of "public covenant" with the public making the investment and taking the risk. Westly said:

"Bob's exactly right. These are large numbers. The public wants to know there's every level of scrutiny."

As to the financial accountability committee, Westly said:

"It's a double blind check. We want to make sure we get it right for the public."

The committee was also cited by the state Department of Justice in its so far successful legal defense of the agency against those who seek to kill it off. In legal filings, the Justice Department mentioned the committee as one of the methods by which the state "generally exercises management and control of state institutions and public officials." That's important because normal state oversight of CIRM does not exist. Neither the governor nor the legislature can alter CIRM's budgets or operations.

One watchdog group, the Foundation for Taxpaper and Consumers Rights, has written to state Controller Steve Westly objecting to any exemption.

John M. Simpson, stem cell project director for the foundation, said:

"Full disclosure of interests of committee members is imperative and they must be seen to be held to the highest ethical standards."

It is not hard to conceive of genuine conflicts of interests arising involving the committee. At least two of its six members are very wealthy individuals with a wide array of financial interests. Mrytle Potter, for example, had 25 years of experience as a top executive in the biotech industry, including time with Genentech. Richard Siegal "built (an oil exploration) company that has raised, deployed and accounted for hundreds of millions of invested dollars." He also has donated large sums to various kinds of medical research.

These are extraordinarily capable people who bring valuable experience and insight to CIRM's operations. They also bring a web of financial and business ties that may or may not constitute conflicts of interest as they critique CIRM's financial practices and performance. For example, it is not hard to imagine that an enterprise favored by one of the financial committeee members could find a more friendly reception at CIRM than your average proposal.

We understand the burden that disclosure places on folks such as Siegal and Potter. They may even resign from the committee rather than make a public disclosure. But openness and transparency concerning the public's multibillion dollar investment should come first.