Klein, StemCells, Inc., and $31,000 in Consulting Fees for Torres

The Robert Klein-StemCells, Inc., affair has taken another turn with the disclosure that a vice chairman of the California stem cell agency was paid at least $31,000 over a two-year period by Klein and also voted on behalf of Klein's effort to win approval of a $20 million award for StemCells, Inc.

Art Torres received what he reported were consulting fees during 2011 and 2012 from firms controlled by Klein, former chairman of the agency. In 2012, Torres backed Klein's efforts to override grant reviewers' rejection of the $20 million application from the Newark, Ca., publicly traded firm.

Art Torres, center, with Bob Klein, left, at Klein's last meeting in
2011 as chairman of the California stem cell agency.
 Incoming chairman Jonathan Thomas is at right. 

The 29-member board of the California Institute for Regenerative Medicine (CIRM), as the agency is formally known, narrowly voted 7-5 last September for the award. It was the first time that the board has approved an application rejected twice by its scientific reviewers. It was also the first time that Klein has lobbied the board on behalf of a specific application since stepping down in June 2011. He was elected chairman in 2005 as the agency was just beginning its work and is an iconic figure to many in the California stem cell community.

Asked for comment last week by the California Stem Cell Report, Torres said,

"My decision to support an award to StemCells, Inc. to explore the use of neural stem cell transplantation to treat Alzheimer's disease was based on the merits of the application and the hope it offers to patients who suffer from Alzheimer's, a disease that affects millions, including Bob Klein's late mother. I have no financial interest in StemCells, Inc. nor does Bob Klein, and my decision to support the award has no connection whatsoever to the work I do with Bob Klein."

Kevin McCormack, senior director for public communications at CIRM, said that Torres' statement would be the only comment on the matter from the agency.

Klein did not respond to questions, declaring that personal issues were occupying his time.

The California Stem Cell Report's questions to all three dealt with the propriety of Torres' employment by both CIRM and Klein while Klein was asking the board to award a business $20 million. The governing board has a code of conduct that declares members should “maintain the highest standards of integrity and professionalism.” However, it does not speak to questions of appropriate employment by CIRM directors outside of the agency.

In January 2012, Torres authored a document discussing CIRM's conflict of interest rules. He said they are intended “to eliminate even the appearance of impropriety.” He also referred to CIRM's policy on “incompatible activities” for employees. It deals with activities that could “discredit” the agency or that are “inimical” to it. However, it does not specifically deal with the type of situation involving Torres and Klein, who is a real estate investment banker and attorney. The policy additionally does not address cases where a governing board member is also an employee of the agency.

Torres' economic disclosure statements, which are required by state law, contain only broad ranges for compensation, and the amount could be significantly higher than $31,000. Torres reported that in 2011 he was paid between $10,001 and $100,000 by both Klein Financial Corp. and K CP Cal, which share the same address as Klein's offices in Palo Alto. In 2012, Torres reported receiving between $10,001 and $100,000 from K CP Cal and between $1,001 and $10,000 from Klein Ventures LLC, which also has the same address.

Torres reported that the payments were consulting fees and that the firms dealt with real estate. He did not respond to requests for more details.

Torres earns $225,000 a year in his part-time role as one of two vice chairmen for the agency. Under the arrangement, he works four days a week.

Torres was chairman of the state Democratic Party and a longtime state legislator. He was nominated for vice chairman in 2009 by state Treasurer Bill Lockyer, among others.

Last week, another financial arrangement involving Klein surfaced in connection with the StemCells, Inc., application. Klein gave the agency $21,000 last May,two months before he pitched the board on the StemCells, Inc.,application. The donation was not reported to the board prior to Klein's appearances before the panel. The agency's regulations require such gifts to be reported to the board but do not specify a time frame. Following inquiries from the California Stem Cell Report, the agency said it would report the donation at the agency board meeting next week.

Klein's donation financed a trip by six CIRM science officers to Japan for an international stem cell conference. The agency directed the officers to give special access to Klein. Two of the officers were heavily involved in the grant round that included the StemCells, Inc., application, which scientific reviewers scored at 61 on a scale of 100.