Will CIRM Withhold Economic Data?

The California stem cell agency today left open the possibility that the basic data gathered during a proposed $300,000 economic impact study will be withheld from the public and outside researchers.

The question of whether CIRM considers the information a public record arose in connection with the proposed contract with LECG of Emeryville, Ca., which comes before the CIRM directors' Governance Subcommittee during a teleconference meeting Tuesday.

Earlier today, we pointed out that none of the CIRM documents currently available on the proposed study provide assurances that the basic information, which will be gathered at taxpayer expense, will be considered open to the public and made available in a non-proprietary format.

We asked CIRM in an email,

“Will the data gathered under the economic impact study proposal to be considered tomorrow be public record? Will it be available in a non-proprietary format?”

Here is the verbatim response from Don Gibbons, CIRM's chief communications officer.

“We don’t quite have a final contract yet.”

CIRM's best interests would be well served in being very explicit that the data are public. The agency holds an unprecedented position in state history and is engaged in activities that reach deep into the scientific community, academia and the biotech industry. To draw a curtain over information that would allow truly independent study of CIRM's impact would be a disservice to California taxpayers and to those who would study CIRM in the future.

Just as scientists test the results of research by attempting to replicate published results, it is only appropriate to apply the same standard in the case of the CIRM economic study. That means that the basic data must be available to all researchers or interested parties, not just those consultants hired by CIRM.

The Podesta Watch: Mother's Milk, Appreciation and CIRM

Lobbyist Tony Podesta, CIRM's man in Washington, garnered some headlines this month with a stunning financial performance, heavy duty fundraising and even a note on his delinquent property taxes.

Podesta is being labelled a “king of K Street” and a powerhouse. He could be on his way to lobbying superstar status. Podesta knows the truth of the axiom that money is the mother's milk of politics. He conducts weekly fundraisers at his home. “People appreciate the fact that you have given of yourself,” he says.

His firm, the Podesta Group, is earning $240,000 for 10 months of work for the California stem cell agency. But the CIRM contract is piddling compared to the performance of his business.

Zachary Abrahamson of politico.com reported that the Podesta Group took in $11.6 million for the first half of this year, a 57 percent increase from the same period last year.

One reason is the family name. Chris Frates, also of politico.com, reported,

“Lobbyist Tony Podesta has a long history in Democratic politics and is a prodigious fundraiser. His wife, Heather, is a powerhouse lobbyist in her own right. Tony’s brother, John — a co-founder of their namesake lobbying firm — was the co-chairman of the Obama transition and is the founder and president of the Center for American Progress, which many people credit with crafting much of the Obama administration’s policy blueprints and staffing its ranks.

“With a pedigree like that, it’s no surprise that Tony Podesta’s lobbying firm has emerged as a king of K Street.”

Podesta told Frates,

“You meet people in the middle of political campaigns, and they appreciate the fact that you’ve given of yourself to get them elected. I’ve helped a lot of the folks who are in Congress politically, and helped them in many ways, and that’s a thing which people are grateful about.”

Kevin Bogardus of TheHill.com wrote that Podesta, “has bundled campaign contributions for several powerful Democratic lawmakers over the first six months of the year,” including “donations of close to $100,000 on behalf of Rep. Henry Waxman (D-Calif.), Sen. Patty Murray (D-Wash.), Senate Majority Leader Harry Reid (D-Nev.) and the Democratic Congressional Campaign Committee (DCCC).”

Andrew Miga of The Associated Press, reported that Sen. Christopher Dodd, D-Conn., one of key players on health care, was a Podesta beneficiary. Miga wrote,

“Anthony Podesta, one of Washington's best-known Democratic lobbyists, contributed $500 (to Dodd). The Alliance for Quality Nursing Home Care paid Podesta's firm, the Podesta Group, $120,000 for the quarter.

“Podesta's wife, Heather Podesta, hosted a $1,000 per person fundraiser in March for Dodd at the Podestas' home in the affluent Woodley Park neighborhood of Washington.

“Her firm, Heather Podesta + Partners, was paid $50,000 this year by HealthSouth Corp., one of the country's largest health care service providers.”

Earlier this month, Arthur Delaney of the Huffington Post wanted to take a first-hand look at a $1,000-a-plate Podesta fundraiser. The Podestas declined even to allow him to bus the dirty dishes and booted him from the premises of their 6,600-square-foot house.

As for the home, the Huffington Post carried this headline on one item: “Lobbyist Tony Podesta Among Delinquent Property Owners In D.C."

The reference was to a Washington Examiner story by Michael Neibauer in which he reported that Podesta owed paid only $33,935 of his $34,483 property tax bill, a shortfall of $696.32. Podesta was quoted as saying,

“We don’t even pay the taxes. They’re paid by the bank. If they sell my house, I’m going to sue the bank.”

It is unusual for a state agency to have a lobbyist in Washington, although the governor's office does have a staffer in the capital to watch out for statewide issues. Some CIRM directors have expressed reservations about CIRM's lobbying efforts, suggesting that it is an exercise in hubris and a bit of mission creep.

New Info on CIRM's Grant Management Problems

More details are now available on the latest attempt to solve major problems in the efforts to monitor $760 million in grants from the California stem cell agency.

The subject comes up at a teleconference meeting tomorrow morning of the Governance Committee of the agency's board of directors.

We wrote last week about the issue, which has troubled CIRM since 2006. The agency has not publicly disclosed the full nature of the difficulties, but discussed part of the problem briefly in a recent item on its Web site.

The latest posting shows that CIRM staff is seeking the directors' approval of a $350,000 contract with Kutir Corp., up $150,000 from $200,000 authorized for Nov. 20, 2008, to Nov. 20, 2009.

The staff memo says Kutir was brought aboard when Ed Dorrington resigned from CIRM in December 2008 as its director of grants managements systems. The staff memo says,

“When he departed there was no one on staff capable of taking over his responsibilities. Kutir now supplies those services, which include creating an application for each new RFA along with a matching review module. The review module takes data that are sorted and transferred from the application and uses this information to manage the Grants Working Group process, including conflicts of interest.”

The memo continues,

“Kutir now supplies (Dorrington's) services, which include creating an application for each new RFA along with a matching review module. The review module takes data that are sorted and transferred from the application and uses this information to manage the Grants Working Group process, including conflicts of interest. These tasks require progressively more time and effort for each RFA as CIRM has evolved and added new complexities to its programs, including collaborative funding partners, pre-application review and loans.

“In addition, CIRM is in the process of assessing and installing new grants management systems in order to meet its growing reporting and portfolio requirements. The IT developers from Kutir are assisting with this project by advising on how best to integrate CIRM’s existing custom-built software with the commercial products being purchased.”

Tomorrow's meeting begins at 11 a.m. And can be heard at teleconference locations in San Francisco (2), Los Angeles(2), La Jolla, Stanford and Irvine. Specific locations can be found on the agenda.

Candidates Bid to Handle CIRM's $500 Million Loan Program

Directors of the California stem cell agency tomorrow will examine proposals from five financial firms that appear to be seeking millions of dollars to basically run the agency's ambitious and unprecedented $500 million biotech lending program.

The proposals come from Comerica Bank in San Diego, Orix Venture Finance in Palo Alto, Square 1 bank in East Palo Alto, Adjuvant Capital Partners in San Francisco and Silicon Valley Bank of Santa Clara.

Their plans were received by CIRM on June 8 after the agency posted an RFP for underwriters for the loan effort. The responses from the five financial firms were not made public until 16 days later.

Their posting late Friday on the CIRM web site came only two business days before the teleconference meeting of the directors' Finance Subcommittee at which they are to be discussed. The directors had asked to receive the material at least five days before tomorrow's meeting. One director said he preferred 10.

The winning underwriters are likely to be No. 1 on CIRM's list of outside contractors – in terms of dollars from CIRM. Outside contracting – at more than $3 million annually – is the second largest item in CIRM's $13 million annual operational budget. (Salaries and benefits are first.)

CIRM is expected to select more than one underwriter because of conflict of interest problems. It is a small financial world in the biotech community.

The Finance Subcommittee discussed the process of selecting underwriters at its June 11 meeting. According to the transcript, the CIRM staff initially proposed that it select the underwriters, but directors said no.

Directors asked for a staff analysis of the proposals that would include thoughts from CIRM Chairman Robert Klein, who originated the concept for the biotech lending program, and CIRM Vice Chairman Duane Roth, who headed the biotech loan task force.

The staff analysis posted Saturday on the CIRM web site is six sentences long, which seems a bit paltry.

Perhaps someone at CIRM knows the cost of each of the competing proposals, but it was not presented in the staff analysis. Their cost is nearly impossible to calculate from the proposals themselves because of their complexity and the lack of a common basis.

One applicant, Adjuvant Capital Partners, declined to use the fee options proposed by CIRM. Peter Barton Fair of Adjuvant wrote,

“Both of the proposed fee structures compensate the delegated underwriter based on the number of closed transactions they underwrite. As we have seen recently in the mortgage industry, incentivizing an underwriter based on volume creates a conflict of interest and can result in the underwriting of poor quality loans. The fee structure we proposed eliminates this conflict of interest.”

Fair's reference was to the use of delegated underwriting by Fannie Mae, which many believe played an important role in its financial downfall.

The Finance Subcommittee directed the staff to invite representatives from all five companies to attend tomorrow's meeting to answer questions.

It is doubtful that potential borrowers will appear. Some of them, however, might have questions about the fee structures. One applicant, Orix, proposed an upfront, nonrefundable fee that could total $50,000 from a loan applicant on a $10 million loan. Based on the Orix proposal, it appears that the fee would have to be paid before the CIRM board approves the proposed research. Orix also proposed $950-a-day, per person fees for “out of pocket expenses.”

Such fees may be customary and justified for this sort of work. However, CIRM's loan program ostensibly targets firms facing a “financial valley of death.” They may be a bit strapped to handle such costs.

If you are interested in hearing or participating in tomorrow's meeting, you can find teleconference locations in San Francisco, Palo Alto, Menlo Park, Irvine, Berkeley, Tucson, Az., Los Angeles and Stanford. Specific addresses can be found on the agenda.

$41 Million in Stem Cell Training Grants Look Good for CIRM Funding

The California stem cell agency today posted more information about what its board plans to do at its meeting next Tuesday, including what is close to a staff recommendation that $41 million be pumped into training programs at 15 institutions.

The training grants were approved earlier this year, but funding deferred because of CIRM's financial woes. But now that cash is available, CIRM staff urged the board to “seriously consider the resumption of funding” at the earliest possible date.

The memo supporting the move said that researchers need the trainees to continue support of research projects.

The memo said the previous training program, the first grants funded by CIRM, was well-regarded. The staff said,

“CIRM Scholars (trainees) conducted stem cell research in 219 distinct laboratories and produced 221 publications, many in high impact journals.

“Upon completing training, individual CIRM Scholars have moved on to faculty positions at top universities, to scientific positions in biotechnology/pharmaceutical companies, or to further training at laboratories of leading stem cell scientists. Many physician CIRM Scholars are now also practicing medicine with a strong knowledge base of stem cell science. Outstanding examples of CIRM Scholar achievements include: research leading to the founding of a biotechnology company and the research leading to a Phase 1 clinical trial.

“In addition to trainee success, the program has served as a focal point for stem cell research at each of the training institutions and produced an attractive stem cell research environment that has contributed to the recruitment of new faculty as well as top trainees. The research conducted by trainees has spanned the spectrum from basic to preclinical research and, importantly, has accelerated research through synergy with other CIRM funded projects.”

Also posted was a three-page justification for continuing the longstanding contract with Remcho, Johansen & Purcell of San Leandro, Ca., as outside counsel to CIRM at $450,000 a year. James Harrison, an attorney with that firm, has been Remcho's visible and unflappable representative on CIRM matters since 2005.

Remcho charges CIRM $350 an hour for work by Harrison, which the CIRM memo said “is significantly lower than the market rates for firms with similar expertise.” Work done by others at the firm is charged at lesser rates. If Remcho billed $450,000 at the $350 rate, it would amount to about six months of full-time work.

Also on tap next week is a do-over on motions for CIRM support of industry-backed legislation aimed at protecting biotech patents against development of generic biotech therapies. Now available on the CIRM Web site is a memo that summarizes the latest developments in Congress and the White House.

An updated version of the CIRM conflict of interest code is also available and has been placed on the consent calendar as a non-controversial item. Removed from the agenda are the consolidated IP regulations, which are to be considered at a later date. No reason was given for delaying the item.

Still missing are guidelines for a change in board voting procedures that could enhance the powers of the board chairman and information about the leadership and some of the membership of the directors subcommittee that will evaluate Chairman Bob Klein, the two vice chairs and CIRM President Alan Trounson.

Hear CIRM Board Live on its Financial Woes and Politically Charged Election of Vice Chair

This week's meeting of the board of directors of the $3 billion California stem cell agency, which will include an update on its financial woes, will be available live via telephone and the Internet.

The audiocast is the second for the CIRM board and provides a valuable opportunity for public and those affected by the agency's actions to hear first hand its deliberations and actions.

In addition to a briefing by CIRM Chairman Robert Klein on his efforts to peddle state bonds privately, the board is expected to choose a new vice chairman, probably two, in fact. You can find the politically charged details here involving Republican Gov. Arnold Schwarzenegger and Democratic State Treasurer Bill Lockyer.

According to the agenda, part of the vice chairman deal now involves an unspecified reduction in the salary range for the position, which currently is $180,000 to $332,000 annually.

Klein, a millionaire real estate investment banker, receives $150,000 for what the board has defined as a half-time job.

The board will also consider unspecified changes at the top of the CIRM organizational chart in connection with the new vice chairmen or whatever the designation for the posts will be.

None of the details are available on the agenda although the meeting is only three days away. Based on past performance, a strong likelihood exists that the public will be denied access to the proposals in advance of the meeting.

Also scheduled for board action are staff recommendations on research funding priorities that reflect that CIRM will run out of cash by next fall unless bonds are sold. The agency has not released anything beyond a cryptic agenda item on that matter.

Another topic before the board is the actual funding of $58 million in training grants approved in January. The board delayed delivery of the cash in light of CIRM's bleak financial situation.

Expected to be approved are additions to CIRM'S outside legal contracts that will push the total to more than $1 million for this fiscal year. The figure does not include the salaries and benefits of attorneys on staff.

John M. Simpson of Consumer Watchdog attended the directors' Governance Subcommittee meeting last week and reported that it approved a $180,000 hike (40 per cent) in the $450,000 contract with the law firm of Remcho, Johansen & Purcell of San Leandro, Ca.

It also approved a $180,000, 6-month extension on a contract with attorney Nancy Koch, Simpson said. Koch started with a $150,000 contract last April. It jumped to $245,000 sometime after Nov. 30 and now will total $425,000 by the end of September if it is not extended further, based on the Dec. 22 and March 5 outside contract reports.

No written justification for the increases was provided last week, although Simpson reported that Klein said the money was needed for legal work connected with CIRM's financial troubles and the inquiry by state's Little Hoover Commission. Koch is also supposed to help fill the gap until the new counsel to the president comes on board in July, although CIRM also has a $140,431 arrangement with the state Department of Justice.

In an email, Simpson said the additional funds were approved only after CIRM director Claire Pomeroy, dean of UC Davis School of Medicine, insisted on a written justification prior to final board action on Thursday. Klein said the justification would be forthcoming. Last year, Klein pushed through a 66 per cent hike in Remcho fees with no public, written justification.

Thursday's board meeting can be heard by dialing in 866-254-5934 or using this Internet address – http://65.197.1.15/att/confcast. The access code is 991416. The audiocasts do not provide for participation, however.

The public can hear AND participate in the Sacramento meeting at teleconference locations in Southern California, including the City of Hope, the Salk Institute and two in Los Angeles, one at UCLA and one at the office of CIRM director Jonathan Shestack. Specific addresses can be found on the agenda.

Fresh Comment

John M. Simpson of Consumer Watchdog has posted a comment on the "Obama cash source" item, pointing out that the new Podesta lobbying contract slips neatly below the cutoff line for approval by a committee of CIRM directors.

CIRM Calendar Hooha Raises Transparency Issues; Agency Says Calendars Cost $23 Each

The California stem cell agency said today that its 2009 calendar cost $23 apiece and provided figures that indicated the total expense for the calendars was about $35,310.

Based on the numbers provided by CIRM, that seems to mean that 1,535 calendars were printed. Earlier, CIRM said the calendars were sent free to its grant recipients and trainees to remind them "365 days a year where their funding comes from." The agency has 448 recipients and trainees, according to figures on its web site. Calendars were also sent to an unspecified number of "constituents."

In comments on our earlier item on CIRM's 2009 calendar, some readers of this blog said production of expensive, free calendars is a waste of taxpayer money.

Here is the current breakdown on the calendar cost, based on a CIRM report and information supplied by Don Gibbons, chief communications officer for the agency: Printing, $14,000; design, $10,200, and $11,110, which was part of a larger contract.

The $11,110 is a new figure and came today from Gibbons. He said it was part of a $45,000 expenditure with Abbott and Company that CIRM now says was for "image development, office art design and framing." The Abbott contract was initially identified as involving the calendar. After the California Stem Cell Report inquired about the calendar project, the description of Abbott contract was altered on the CIRM web site to remove any mention of a calendar. No footnote was provided on the PDF document to notify the public or directors that a change had been made from an earlier version.

Here is the text of what Gibbons sent earlier today concerning our original item on this subject.

"For the record, you never asked me for the cost per calendar. Instead you chose to make one of your usual worst-case projections. The portion of the Abbott contract that covered the calendar was $11,110, which made the cost per calendar $23. Also, this project began in July, long before the complete budget meltdown."

More than a week ago, we asked Gibbons for the total number printed. He has not provided that number. Following his latest email today, we asked again for that information as well as the number distributed and the cost of postage.

As for our "projections," you can read them here along with our assumptions. They were based on information from CIRM, which was incomplete then and remains incomplete today.

The CIRM calendar is a minor expense in the agency's $13 million operational budget. But outside contracts are not. They now total more than $3 million, up from $2.7 million, as the result of action earlier this week. The outsourcing, which often poses major oversight issues for government agencies, is the second largest category in the budget.

How the agency describes the contracts and other budget items and responds to questions about them is basic to the agency's transparency and openness. The calendar issue is not the only one. A lobbying contract with the Nielsen, Merksamer firm in Sacramento continues to be described as "public education." There may be other fanciful descriptions, but without an examination of contracts and other documents, it is impossible to tell.

Several years ago, CIRM directors initiated the requirement for regular reports on outside contracting because they felt they were not fully informed. While creative budgeting occurs in every organization, without good information it is impossible to make good decisions.

Obviously it is nice to offer gestures of good will to "constituents" and others associated with any enterprise, but CIRM's calendar project came at an impropitious time. The project began shortly after a salary freeze at the CIRM that ran through December. As we remarked then, such freezes affect those on the lower end of the pay scale much more harshly than at the top levels. Perhaps during the holidays, CIRM management could have spread that $35,310 among employees making less than $70,000 a year. That would have been a nice gesture as well.

CIRM Identifies Obama as Cash Source for Its Troubled Lab Projects

California stem cell Chairman Robert Klein says that strapped recipients of CIRM lab construction grants should attempt to tap the nearly $1 trillion Obama stimulus package.

His remarks were contained today in a piece by Ron Leuty of the San Francisco Business Times. Leuty quoted Klein as saying,

"Our grantees are perfectly situated — they’re in construction or about to go. They can clearly demonstrate that they’re going to create jobs."

Leuty wrote that CIRM intends to use its new, $240,000 Washington lobbyist, the Podesta Group, to help snag the cash. Leuty reported,

"The California Institute for Regenerative Medicine — with the help of a well-heeled Washington, D.C., lobbying firm — wants organizations like Novato’s Buck Institute for Age Research to seek some of the $1.5 billion that is earmarked in the $787 billion stimulus package for biomedical research facilities and construction."

Other institutions previously identified as needing to raise more matching funds include the Sanford Stem Cell Consortium (UC San Diego, Scripps, Burnham and Salk) and UC Santa Barbara.

The $240,000 figure is new and comes from a copy of the contract requested from CIRM by the California Stem Cell Report. The total includes expenses plus $20,000 a month from Feb. 11 through Dec. 11, 2009. The contract, which does not need CIRM board approval, can be extended indefinitely by mutual agreement.

If you are interested in a copy of the contract, please send an email to djensen@californiastemcellreport.com.

CIRM Legal Costs Climb Towards $1 Million

Legal costs at the California stem cell agency are heading towards the $1 million mark this year and could well go higher as it embarks on an ambitious and unusual plan to market state bonds to dig itself out of a financial hole.

Next Thursday, the Governance Subcommittee of the CIRM board of directors is expected to increase payments for its main outside counsel, Remcho, Johansen & Purcell, of San Leandro, Ca., and also for Nancy Koch, who deals with intellectual property issues.

According to the most recent document from CIRM, as of Nov. 30, 2008, Remcho had already been paid $237,545 out of its $450,000 contract for the 2008-09 fiscal year. Also as of Nov. 30, Koch had been paid $82,306 out of a $150,000 contract for this fiscal year.

Their contracts and possibly other legal assistance agreements are up for "amendment" at next Thursday's meeting. The use of that word generally means that CIRM needs authorization for more cash to pay the lawyers.

According to CIRM's Dec. 22, 2008, report on outside services, total contracted legal services for the fiscal year amount to $812,930, including $140,431 for the California State Department of Justice. Not all of the total has been spent, but the budget did not anticipate the need for CIRM to engage in attempting to place state bonds with private investors.

CIRM's annual operational budget, which does not include grant payments, totaled about $13 million when approved last July. The currently contracted legal expenses amount to roughly 6.2 percent of the budget. The agency has also not filled the position of general counsel, which became vacant Aug. 15. It is still looking for a person to fill that position, which is now described as general counsel to the president.

CIRM will run out of money in about seven months unless it generates additional cash. That's because the financially troubled state of California has stopped selling the bonds that CIRM relies on to finance its operations and pay for research.