CIRM Conflict Legislation Wins Support From Key State Official

California's top financial officer, John Chiang, is backing legislation aimed at dealing with conflicts-of-interest at the state's $3 billion stem cell agency.

Alex Philippidis, editor of the BioRegion News, reported on Monday that state Controller Chiang believes that the bill by Sen. Sheila Kuehl, D-Santa Monica, is the "best hope" for eliminating conflicts of interest at the agency. The legislation, SB 1565, has already cleared the state Senate on a 40-0 vote and is now before the Assembly.

Among other things, it would require the state's Little Hoover Commission to examine CIRM and make recommendations by July 2009 for changes in its structure and operations.

Philippidis quoted Chiang spokeswoman, Hallye Jordan, as saying,

"The controller believes that the public accountability is critical to ensure public confidence in the stem-cell program, that their dollars are being spent on finding cures through stem cell research, rather than benefiting individual biotech companies or institutions that are conducting the research. Transparency and accountability to the public about how their dollars are being spent is important."

Philippidis continued:

"'If the public is not confident that their investment is being adequately protected and that they’re not going to see any financial benefits from the research as promised, then the public is likely going to be less inclined to support funding future research,' Jordan said."

Chiang, a Democrat who was elected in a statewide vote, and John M. Simpson of Consumer Watchdog filed complaints with the state Fair Political Practices Commission last year concerning a violation of CIRM's conflict-of-interest policy. The still-pending case involves CIRM director John Reed of the Burnham Institute, who attempted to influence CIRM staff on behalf of a $638,000 grant to his institution. Reed's action came at the suggestion of CIRM Chairman Robert Klein.

Philippis also took a close look at the audit that CIRM commissioned on its financial activities. He wrote:

"In January, Macias Gini and O’Connell completed its audit of CIRM’s finances for the year ended June 30, 2007. According to that audit, available here, CIRM’s net asset deficit rose by 46 percent, or nearly $7 million, to $22.2 million, “primarily due [to] expenses exceeding revenues.”

"And while CIRM generated nearly 13 times, or $4.55 million, above its 2006 fiscal year revenue — almost all of it through higher investment earnings — expenses dropped by $6.1 million.

"That $6.1 million figure reflects the difference between a $13.6 million cut in research grant expenses and two expenses that rose in FY ’07: Operational expenses that zoomed up 47 percent or nearly $2 million; and interest expenses on its bonds that rocketed 25-fold over the previous year ($5.5 million, vs. $225,416). CIRM cut another $2.1 million in operations costs, however, by cutting back on travel and meetings.

"Not recorded in the audit: The $1 million 'fair' value of CIRM’s roughly 20,000 square feet of office space donated by the city of San Francisco to the stem-cell agency free for 10 years. CIRM moved into that space in November 2005."

Access to the BioRegion News article is available through free registration, we are told, despite what appears to be a requirement for a paid subscription.

(Editor's note: The Philippides piece contains an error concerning the initial story on Reed's lobbying effort, stating that Reed's action was discovered by Simpson. In fact, the lobbying by Reed was first reported by the California Stem Cell Report.)