Secret PR for Legal Proceedings? A Comment

Last week, the California stem cell agency was lambasted for "laundering" public relations activities through its outside attorneys.

We called the item to the attention of Jeff Raimundo, a partner in Townsend Raimundo Besler & Usher of Sacramento. Raimundo is a former political reporter and longtime PR practitioner whose operations have spanned California.

Here is his comment:

"This one is not an easy question, in my view. At some point you have to take them at their word, because it does make a difference in how I would see this. Ordinarily, I would agree that PR contracts, products, etc. should be part of the public record and available for scrutiny. Even in those situations, I believe, 'drafts' of documents are exempt from disclosure under the California Public Records Act, so they probably don't need to worry about some 24-year-old junior account executive's ruminations being mistaken for some sort of sage advice or policy recommendation (which is exactly what happens too often with premature disclosure).

"In the case of PR around legitimate, legal proceedings, however, I think it should be kept secret. When we've done this in the past, the lawyers really have been our clients. They want to be able to deal with the trial lawyers' very well-honed and experienced PR apparatus in the case of liability lawsuits and with the prosecutors' (especially federal) equally professional PR operations in the case of criminal actions. Again, I would limit that PR counsel to legal issues only and not include peripheral issues like CIRM board actions or such PR activities as the announcement of new research grants."

Last week, we also reported about an indication that the governor's office may have been involved in the matter. Ellen Rose, a spokeswoman for CIRM, said, however,

"The governor's office was not involved in formulating strategy or in hiring Rubenstein."

The governor's office has not responded to our query.

"Laundering" PR Advice at $3 Billion California State Agency

The California stem cell agency has hired a prestigious New York City PR agency and, according to one watchdog group, has "laundered" its PR advice through lawyers in order to avoid public scrutiny.

The firm is Rubenstein Associates, whose founder, Howard Rubenstein (see photo from the firm) has been described as the "godfather of New York PR." The firm's clients include Super Bowl Champions New York Giants, the New York Yankees, Bloomberg LP and Pfizer.

The Foundation for Taxpayer and Consumers Rights disclosed on Thursday the $10,000 contract with CIRM's outside counsel. The FTCR said that some of the details of Rubenstein's work can be found in 54 pages of CIRM records that the FTCR secured as a result of a public records act request.

The group said,

"The stem cell agency used the tactic (of routing the contract through an attorney) to claim legal 'confidentiality' on public relations strategies...."

The watchdog group said,

"Eight of the 54 pages, which seem to be about specific advice on handling the news media, were redacted because they are 'documents exempt from disclosure on the grounds of attorney-client privilege and attorney work product,' according to Tamar Pachter, general counsel for the stem cell agency."

John M. Simpson, FTCR stem cell director, said,

"'What they've done is launder the public relations advice to a state agency through their outside attorney, Remcho, Johansen & Purcell. Once again the leadership of the California Institute for Regenerative Medicine has shown concern about image, rather than substance, and a continued commitment to secrecy."

Ellen Rose, a spokeswoman for CIRM, said,

"Rubinstein's advice was sought in relation to the news items that appeared in the Australian Herald-Sun about a researcher under investigation for improprieties who worked in the stem cell laboratory run by CIRM's incoming President Dr. Alan Trounson. There was no suggestion that Dr. Trounson was under investigation or involved in any wrongdoing.

"Rubenstein was hired because at the time, CIRM had no communications officer to provide advice and research on the Australian articles and related legal matters. They were hired via our outside attorney because the confidential investigation taking place in Australia may have had legal ramifications for CIRM and knowledge about what was taking place in this area was important for CIRM legal counsel to understand."

The initial, documented overture to Rubenstein came on Oct. 12 last year. However, Bob Klein, chairman of CIRM, has been quoted as saying the Australian investigation was known to CIRM as early as sometime in September or perhaps even August, long before CIRM's former communications director had left.

The practice of using attorneys to cloak certain matters is not entirely uncommon, at least with Rubenstein. Howard Rubenstein told the New York Times in 2006, in connection with celebrity scandals, that if they involve any sort of illegality, he advised "hiring a lawyer who could sit in on meetings, thus giving both star and publicist the benefit of attorney-client confidentiality."

However, this a matter involving a public agency, public dollars and public trust – not some troubled Hollywood personality. The amount is picayune compared to CIRM's overall spending; it gave out grants last year at a rate exceeding $20,000 an hour. But concealing relatively innocuous PR advice can only lead to speculation about what other, more important matters are being hidden because of CIRM's unnecessary desire for secrecy.

Also an issue for concern is the FTCR disclosure that CIRM is currently negotiating another PR contract with Rubenstein. Rose says, however, that it would be with CIRM directly. But given the dubious nature of the Remcho/Rubenstein arrangement, any further dealings with the New York firm would seem to require special scrutiny.

We have queried Rubenstein concerning their views on concealing PR advice to government agencies behind a legal veil. We will carry their comments when we receive them.

You can read reporter Steve Johnson's story in the San Jose Mercury News on the contract here.

Biotech Loan Program Slated for March Approval

The biotech loan task force of the California stem cell agency began work Tuesday on a plan to loan perhaps as much as $750 million to struggling stem cell companies and possibly nonprofit institutions.

Duane Roth, chairman of the task force, said he expected to present the proposal to the directors of the $3 billion agency in March. Between now and then, Roth(see photo) and the other members of the task force identified a number of issues that needed to be explored. They included legal questions, concerns about staffing at CIRM, defaults in the lending effort and even the name of the program.

Roth suggested the program should be aimed at filling the financial gap between research grant funding and venture or financial angel capital – the so-called "valley of death" where promising research dies for lack of economic support.

Roth noted that the targeted participants in the loan program cannot find normal financing so credit-worthiness should not be an issue. "Banks don't make loans to these type of companies," he said.

Roth predicted that while default rates on loans could be above what a normal lending program would suffer, they should not be high.

Nonetheless, payback on the loans was a topic on which several members of the task force expressed a concern. But like other issues raised at the meeting, solutions await more work by the task force.

Roth also said, "Let's not create a bureaucratic nightmare for the staff." It was a sentiment echoed by others. CIRM Chairman Robert Klein suggested that outside firms would be needed to administer the program.

Roth said he will be seeking from outside firms to develop the loan program, including creating a financial model that would help determine risk levels. He said two meetings will be held to seek the thoughts of industry and the financial sector.

As for the name of the program, Roth suggested it should be called something like the "product development loan program." A decision on that was deferred after a brief discussion.

The meeting in Los Angeles with two teleconferencing sites in the San Francisco Bay area attracted some attention from business. Representatives from Geron, Advanced Cell Technology, PriceWaterHouseCoopers, Capricor and DNAmicroarray were present along with a business development official from the British Consulate in Los Angeles.

Excessive Haste on $300,000 Stem Cell PR Contract

The California stem cell agency's plan to hire a public relations firm for $300,000 is a case of misplaced priorities.

It is quite clear that CIRM needs to move swiftly on its communications needs, particularly in light of the emphasis placed on public education by both its interim and incoming presidents.

But first CIRM needs to find a permanent chief communications officer. Otherwise, the agency will be signing a major contract without consulting the person who will have responsibility for overseeing it. Premature selection of a PR firm, in fact, could hinder the hiring of a top-notch person, who might look askance at the choice or at the management that chooses to take such precipitous action.

CIRM will be issuing the contract without what amounts to very necessary "peer review." And that is the kind of scrutiny that a skilled communications professional would give any prospective PR firm.

Some also question the need for a PR firm, period. One is John M. Simpson, stem cell project director for the Foundation for Taxpayer and Consumer Rights, who argues for a minimalist approach.

Simpson, who is a practitioner of the fine art of PR, among other things, told the California Stem Cell Report in part (his full comments are carried in the item below),

"People who hire PR firms are more interested in image than in substance. The way you get good media relations is simple: Do good work in an open way and answer all questions candidly.

"CIRM needs a committed and knowledgeable communications officer and an assistant completely familiar with all CIRM and ICOC activities. With the current downsizing in the news business many such talented people are available."

However, we do not believe that CIRM can fulfill its major communications responsibilities with two persons. CIRM is limited by law to no more than 50 employees; it now has about 26. Given the limit, a good communications firm would be necessary to execute the agency's ambitious public education plans outlined in the strategic plan. Without outside help, it would require a personnel commitment that probably is beyond CIRM.

And the outside help should be picked under the direction of CIRM's own communications expert, which is what that person is hired to do..

CIRM has gone through two PR firms and two staff PR persons in its short history. The largest contract $378,000) went to Edelman PR and generated some dissatisfaction at CIRM, which is at least partial evidence that the agency needs expert help in picking a new firm.

Regardless, any contract will generate negative attention. Reporters and editors in the mainstream media have a jaundiced view of highly paid PR firms. Too often they fail to serve either their masters or the media well.

(Here is a link to the request for bids on the contract, which are due Nov. 30. The request says that the contract could be awarded prior to end of the year.)