Law Firm Memo on Trounson Investigation

Here is the memo provided by Remcho, Johansen & Purcell concerning its limited investigation of Alan Trounson and his contact during May and June with StemCells, Inc. It contains additional details and the names of persons interviewed.

 Here is one paragraph that deals with what CIRM might have done had they known Trounson was in contact with the firm concerning employment. The full text follows.

“Dr. Trounson contacted Martin McGlynn, SCI’s President and Chief Executive Officer, on May 1, 2014 to set up a meeting to discuss his future plans. Based on a calendar entry, it appears that Dr. Trounson and Mr. McGlynn met on June 4, 2014. On June 9, 2014, SCI offered Dr. Trounson a seat on SCI’s Board of Directors, subject to the Board’s approval. SCI made the appointment on July 7, 2014. Had SCI notified CIRM at the time of its offer to Dr. Trounson, CIRM would have taken steps to wall Dr. Trounson off from any involvement in decisions relating to SCI.”

  Remcho Memo on Trounson Investigation by DavidJensen

California Stem Cell Conflict Case Covered by Los Angeles Times

The Los Angeles Times today published a brief story on the Trounson-StemCells, Inc., affair, declaring that the California stem cell agency was taking steps deal with a “risk of conflict of interest.”

Amina Khan wrote the piece, which included quotes from John M. Simpson of Consumer Watchdog of Santa Monica, Ca., who said,

“The thing smacks as if this is StemCells, Inc., giving a payback to (Alan) Trounson(former president of the agency) after the agency awarded $19 million to StemCells Inc. That’s just the way it looks. And I think they have to explain quite clearly why that is not the case.”

Trounson was appointed to the board of StemCells, Inc., of Newark, Ca., last Monday.  StemCells, Inc.’s directors received as much as $99,000 in 2013.

Khan carried little new on the situation, although the issue was undoubtedly new to virtually all of 1.4 million readers of the Times, the state’s largest circulation newspaper.

StemCells, Inc., Still Looking for $40 Million from California Stem Cell Agency

Remember StemCells, Inc., and the $40 million it was awarded by the California stem cell agency.

The Newark, Ca., firm, founded by eminent Stanford researcher Irv Weissman, received an award of $20 million last July and then again in September. Nearly five months later, however, the stem cell agency has yet to cut a check for the company, a spokesman for the agency told the California Stem Cell Report in response to a query.

The hang-up is the $40 million in matching funds that the company promised the agency. The stem cell agency has yet to be satisfied that StemCells, Inc., can actually produce the match, although the spokesman did not offer details.

The StemCells, Inc., awards were unusual in a number of ways. It was the first time that former CIRM Chairman Robert Klein lobbied the CIRM governing board on behalf of a company(see here and here). It was the first time that the governing board approved an application that had been rejected twice by grant reviewers. It was the first time that the board said explicitly in a public session that it wanted proof of the matching funds as a condition of the award.

It was the first time that a CIRM award to a company received a careful and critical scrutiny from a major California newspaper. Michael Hiltzik, a Pulitzer Prize-winning business columnist and author, wrote in October in the Los Angeles Times that the award was “redolent of cronyism.” He referred particularly to longstanding ties between Klein and Weissman.

The CIRM board vote on the StemCells, Inc., grant in September was 7-5, which amounted to 12 out of 29 members of the board.

In December, a blue-ribbon panel of the Institute of Medicine (IOM) recommended that the agency tighten its conflict of interest standards to avoid such perceptions as have been generated by the StemCells, Inc., awards. The IOM said,

“(C)om­peting personal and professional interests com­promise the perceived independence of the (governing board), introduce potential bias into the board’s decision making, and threaten to undermine confidence in the board.”

Concerns about conflicts of interest have long been of concern to observers of the stem cell agency for years. Indeed, the prestigious journal Nature in 2008 warned of "cronyism" at the $3 billion research enterprise.

California Stem Cell Agency Still in Talks on $40 Million for StemCells, Inc.

The California stem cell agency and StemCells, Inc., are still trying to reach agreement on a deal in which the company would receive $40 million from the state's taxpayer-funded research effort.

The sticking point is the $40 million in matching funds required from the Newark, Ca., firm under the terms of the two awards approved in July and September. The latter award was okayed on a 7-5 vote by the governing board after it was rejected twice by the agency's reviewers.

On Monday the California Stem Cell Report queried the agency about the status of the awards. Kevin McCormack, the agency's spokesman, replied,

“We are still in talks with them over the terms of the funding. Hopefully, we'll have an agreement soon.”

He did not elaborate further.

CIRM staff normally reviews applications after they are approved by the agency's governing board to be sure that all conditions are being met. However, in the case of the September award to StemCells, Inc., CIRM's governing board took the unusual step of publicly stating that the firm must demonstrate it has the $20 million in matching funds before it receives any payments from CIRM. The board did not take that sort of public position on the $20 million grant approved earlier in the summer, although matching funds are required in that case as well.

The former chairman of the $3 billion stem cell agency, Robert Klein, appeared twice before the board to lobby for approval of the second award to StemCells, Inc., which is a publicly traded firm.. It was the first such appearance by Klein before his former colleagues since leaving the agency in June 2011.

Action on the StemCells, Inc., awards attracted attention from the Los Angeles Times last month. Pulitzer Prize-winning columnist Michael Hiltzik wrote that the process was “redolent of cronyism.” He said a “charmed relationship” existed among StemCells, Inc., its “powerful friends” and the stem cell agency.