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.)

Cashing in on California: Opportunities for Non-State Businesses

The California stem cell agency is offering another round of grants that is open to firms headquartered outside the state – a $20 million program aimed at developing tools and technology for stem cell research.

And this time, a non-California firm can submit up to four applications for grants.

The latest proposal comes as some in the California biotech industry and state lawmakers are attempting to compel CIRM to follow through on the Prop. 71 requirement to give preferential treatment to California businesses.

The grant program and the California supplier issue are operating on different tracks but both affect state businesses by either restricting or increasing competition from non-state firms.

First the new tools and tech proposal. It is open to both education and research institutions in California as well as businesses.

The key catch for businesses is that a research site must exist in California at the time the grant application is submitted, which may or may not be on application deadline July 10.

If CIRM holds to past practice, it will not check on whether the research site exists until after the grants are approved, in this case next December or even later. Nor does CIRM define what it means by research site. So there is plenty of time to pick up some likely property in California and prepare it for use.

The application does, however, require a short description of facilities in which the work will be done and the major equipment and resources available.

The grant proposal came up after CIRM was pressured in March to follow through on the Prop. 71 requirement to give preferential treatment to California firms.

Assemblyman Gene Mullin, D-San Mateo, is carrying a bill to define the term "California supplier" as it applies to CIRM. His legislation, AB 2381, has already passed the Assembly 75-0 and is now before the Senate Health Committee.

Under the push from legislators and industry, CIRM directors have moved ahead on their own regulatory definition of California supplier. It is more open than Mullin's proposed law to enterprises from out-of-state and declares that a California supplier is any that employs at least one-third of its employees, with a minimum of 100, in the state.

Or, a California supplier could also be one that "produces, builds, or manufactures a product or products in California for the specific product or products which are used by CIRM grantees."

At the CIRM directors meeting earlier this month, Duane Roth, one of the directors who helped draw up the language, said that the wording is intended to deal "with a product that's manufactured in California, but the headquarters of the company who owns them is not in California. That product would qualify as a, quote, California supplier, just that product, not the company, but the product."

Tony Lakavage of Beckman Dickinson, a global medical technology company with operations in San Jose, Ca., spoke on the supplier issue at the directors meeting. He said the firm has 1,500 employees in the state but 30,000 worldwide. He said that products made in California by his firm would apparently qualify for purchase but other global companies might have difficulty qualifying.

He urged a definition that relied on the economic impact of a company in California, according to the transcript of the meeting.

James Harrison, outside counsel to CIRM, presented the California supplier issue to the directors. Alan Trounson, who is in his fifth month as president of CIRM, told directors that neither he or the CIRM staff had seen the definition proposed by Harrison and that "there are issues we would have with this." CIRM Chairman Robert Klein apologized to Trounson for not bringing the matter to him.

CIRM directors indicated that more work needed to be done on the definition as it moves through the regulatory process.

While the application deadline for the tools and tech grants is July 10, potential applicants must file letters of intent by June 11. Otherwise, they will not be considered. Actual funding is scheduled for no sooner than March of next year.

The first round of grants open to out-of-state firms was a $25 million offering on new cell line proposals. Those grants are scheduled to be approved late in June.

Fresh Comment

JimL has posted a comment on the Geron "harsher reality" item. I have responded to his comment, which concerns the motivation of the FDA on the Geron hold. .

Ballyhoo, Economics and California Stem Cells

In an exuberant essay in the leading newspaper in Silicon Valley, an official of the California stem cell agency has touted its $271 million in lab construction grants as bold evidence of "the economic might of the little stem cell."

David Lichtenger (see photo), chairman of the Facilities Working Group at CIRM and head of Integrated Facilities Solutions of Palo Alto, Ca., wrote the op-ed piece that appeared May 16 in the San Jose Mercury News.

He said,

"Stem cells are tiny. In fact they are microscopic. Yet, they might prove to be the mighty engine not only for medical advances, but also for the ailing California economy.

"The economic might of the little stem cell was boldly evident earlier this month when the California Institute for Regenerative Medicine (CIRM), the state's stem-cell agency, awarded $271 million to 12 universities and research institutions to build new stem-cell laboratories."

The economic impact of stem cell research was one of the main arguments behind passage of Prop. 71, which created CIRM in 2004. It continues to play a major role in the justification for CIRM's $3 billion in spending.

We believe the agency has a responsibility to tell the story of its work and to maintain and build public support. Call it marketing, public relations, public education or whatever. Fundamentally, it is all the same thing and quite necessary. Without continued public support, the agency becomes vulnerable to assaults from many sides.

However, long after the last Prop. 71 vote was counted, the grandiose economic claims from the campaign generated blowback, including a study from a UC Berkeley economist Richard Gilbert debunking them. The agency last year also seemed headed for production of another economic study to justify its existence. More recently the proposed $500 million biotech loan program promised handsome returns even at default rates of up to 50 percent.

All of which indicates a need for some perspective. CIRM leveraged its $271 million in lab grants into a $1.1 billion program that will certainly generate hundreds, if not thousands of construction-related job. However, the biotech industry, which goes well beyond stem cells, is a tiny player in the California economy. It accounts for something over 100,000 jobs, according to a state report, a mere piffle compared to the total workforce of 18 million in an economy that runs at around a mammoth $1.7 trillion annually.

And CIRM's $271 million does not even surpass the $356 million being spent on San Quentin's "condemned inmate complex."

That said, CIRM's lab grants have indeed generated a long overdue investment in the science side of California's infrastructure. CIRM deserves ample credit for handily leveraging its dollars. The agency is also preparing to make another substantial contribution this year to the state's intellectual capital with $66 million in training programs.

Lichtenger's essay was reasonably measured and nicely written. However, it is doubtful that stem cells will be the "mighty engine" for the "ailing California economy" any time in the foreseeable future. It behooves CIRM to exercise judicious restraint as it touts its achievements. Managing expectations is the key, and the best course is to avoid over-promising.


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CIRM Creates FDA Committee

Gern Talk, a web site devoted to discussions of matters related to Geron, has picked up a recent piece by patient advocate Don Reed along with our report, "Harsher Realities," on the FDA hold on Geron's clinical trials.

Reed raised his previous concerns regarding the most recent FDA action. But he also had a note about a discussion involving the FDA hearings last month dealing with clinical trials and stem cells.

That discussion occurred at the meeting of the board of directors of the California stem cell agency. Reed said that Robert Klein, chairman of the California stem cell agency "expressed concern" about

"...a possibility that the FDA might put in a condition that embryonic stem cell trials might only be allowed for dying patients. This would be a disaster, meaning that human trials for embryonic stem cells to heal blindness as well as paralysis and other non-life-threatening conditions could not go forward. He asked for volunteers on the board to be on a special FDA committee. Board members Jeff Sheehy and Leeza Gibbons very kindly volunteered for the chore!

"But the overall response from almost everyone (and these are supporters of the research, good people, whose opinions I respect) was that the situation would be handled on the basis of scientific merit, and the safety of the patients, nothing more. Again and again people said, no, no, everything is fine, don’t worry."

Jesse Reynolds of the Center for Genetics and Society also had something to say on the Biopolitical Times on Geron:

"Those of us who support embryonic stem cell research should urge caution, not haste. A botched clinical trial will set the field back years, if not decades."

CIRM Affordable Access Bill Easily Clears Senate

On a unanimous 40-0 vote, the California State Senate has passed legislation to ensure affordable access to CIRM-financed stem cell therapies and to require a study that could lead to reforms in the agency's complex and unique structure.

The measure (SB 1565) by Sen. Sheila Kuehl(see photo), D-Santa Monica, now goes to the Assembly for further action.

The bill was on a "special consent" calendar Thursday, indicating that no controversy existed concerning it. There is no indication that there was any debate on the measure. The California stem cell agency has taken no position on the legislation.

For more on the bill, see the "patient advocate" item below.

The Harsher Reality of the FDA Hold on Geron

At least one analyst is minimizing the impact of the FDA's hold on Geron's clinical trials for its human embryonic stem cell product.

Ren Benjamin, an analyst with Rodman & Renshaw in New York, told Bloomberg News earlier this week said that he thinks the company will "be able to work through the issues with the FDA."

However, the reality is likely to be a tad harsher. The hold is the second pronounced signal in two months from the FDA that it wants to proceed with extreme caution on hESC trials. And the action has stirred some concerns in the patient advocate community, which has pressed for more speed on the research.

Even prior to the Geron hold, Don Reed, vice president for public policy for Americans for Cures, worried about the FDA posture on his blog, stemcellbattles.com. He wrote on May 6,

"The FDA hearings on embryonic stem cells have been (in my view) deeply politicized, setting the stage to block human trials, an enormous setback."

He continued,

"A laundry list of new conditions may send...Geron, Advanced Cell Technology, and Novocell, and the entire embryonic stem cell research field back to the drawing board, conceivably for
decades."

Reed referred to the FDA hearings last month during which the bugaboo of teratomas was raised by the FDA. Monya Baker of Nature's Niche stem cell blog covered the meeting. On April 11, she wrote that the consensus from attendees at the meeting was that the FDA "seems cautious about moving forward, but not spooked."

But then came the FDA hold this week. It had to be a bitter pill for Geron. Thomas Okarma, CEO of the company, said that the company had spent four years working with the FDA and amassed 21,000 pages of documents to alleviate the agency's concerns.

Geron's stock took a big hit on the day the hold was announced, dropping to a 52-week low of $3.76. It stood at $3.97 at the time of this writing, compared to a 52-week high of $9.85.

Geron has been mum since Okarma's statement along with Novocell and Advanced Cell Technology, although we have asked for comments from all three. We are likely to hear more from Geron after it receives the FDA's written concerns.

As for analyst Benjamin's somewhat optimistic position, his firm is a market maker in Geron stock, which means that it has a stake in the company's well-being.

Affordable Access to CIRM Therapies: A Patient Advocate's Position

For a patient advocate's take on legislation aimed at ensuring affordable access to CIRM-financed therapies, take a gander at the May 13 posting by Don Reed on his blog, stemcellbattles.com.

Earlier this week, Reed (see photo) was the only person to testify before the state Senate Appropriations Committee on the measure, aside from the bill's author, Sen. Sheila Kuehl, D-Santa Monica.

Reed's view is that CIRM's regulations, which can be easily changed unilaterally by CIRM, are sufficient to provide affordability. He also contends that an outside study of CIRM's structure is unnecessary and that its built-in conflicts are only a "convergence of expertise." We should note that last week most of the experts on the panel were barred by law from even discussing -- much less voting on -- $271 million in grants because of their conflicts of interest.

Reed is a regular at meetings of the board of directors of the stem cell agency and is vice president for public policy for Americans for Cures, the private advocacy group directed by CIRM Chairman Robert Klein.

Kuehl's bill, SB 1565, was approved 14-0 by the committee and is now on the Senate floor. In addition to codifying in state law affordable access, the measure would require an independent study of CIRM by a state agency known as the Little Hoover Commission with recommendations for reform.

A note on the analysis from the Appropriations Committee says that the Little Hoover staff contends that the legislature does not have the legal authority to direct its work. An opinion as been requested from the Legislative Counsel's office on the question. However, the Legislative Counsel works for the legislature and is inclined to find ways for lawmakers to do what they want.

Here is a link to the floor analysis available to California state senators as they consider the measure.

(Editor's note: After this item was posted, we learned that the bill passed the Senate on Thursday on a 40-0 vote. It nows goes to the Assembly.)

Complete Okarma Statement on FDA Hold

Here is the full text of the statement by Geron CEO Thomas Okarma(pictured) on the FDA's "verbal" hold on the firm's proposed clinical trials.

"We have not yet received a letter from the FDA explaining the decision to place the submission on hold, so we are unable to comment specifically. Once we have the letter and have had a discussion with the agency, we will communicate our findings and our thinking to shareholders. We are disappointed with this action given the interactions we had with the FDA over four years leading to the filing, and the breadth and depth of the submission, some 21,000 pages, predicated on those discussions with the agency."

The company's entire four-paragraph press release can be found here.

Fresh Comment

"Anonymous" has posted a new comment on the "CIRM BANs" item.

FDA Says Whoa to Geron

The FDA slammed on the brakes today on Geron, which had been hoping to launch clinical trials this year on a treatment for persons with spinal injuries.

News reports said it was unclear why the FDA imposed the clinical hold on the test, but it is good bet that the action could be linked to the FDA's hearings last month on stem cell clinical trials. Cautionary notes seemed to be the order of the day at the session.

Geron said it was disappointed in the action. The company's stock plummeted nearly 20 percent following the news, closing $3.94.

Steve Johnson of the San Jose Mercury News and Monya Baker of the Niche blog for Nature magazine both wrote today about the FDA action.

Baker covered the FDA hearings last month and produced the most comprehensive reports on the proceedings. She has links to all her coverage in her Geron item today, plus a link to her interview with the Marie Csete, chief scientific officer for the California stem cell agency, concerning the issues involved in placing stem cells in persons.

Media Play: Harvesting Organs vs. Building Stem Cell Labs

One of the top five stories last week on Bioethics News was the New York Times report on California's awards of $271 million to build new stem cell labs, according to the site's blog.

The story ranked No. 3 in popularity. However, the blog reported that the piece lagged well behind the No. 1 story, a USA Today article on a New York City plan to equip ambulance crews to prep bodies for organ harvest -- before receiving consent from families.

Half-Billion-Dollar Biotech Loan Proposal Moves to Finance Committee

How do you turn $500 million into as much as $1 billion over 10 years? Loan it to struggling biotech companies that could default on the loans at a rate of up to 50 percent.

Sound too good to be true? Maybe, but that's what the California stem cell agency is projecting for what appears to be the most optimistic scenario for its proposed biotech loan program.

The program came up for discussion last week at the CIRM directors meeting. John M. Simpson of Consumer Watchdog attended the session and filed an item for his group's blog. Simpson wrote that the concept "appears promising" but he still had questions.

"The main one is with CIRM's limited staff, how will loan applications be adequately vetted? Robert Klein, chairman of the stem cell agency's Independent Citizens Oversight Committee (ICOC), has suggested using outside 'designated underwriters.' Lots more needs to be made clear about how that would work and how conflicts will be avoided."

We have written previously about the same concerns. But with the new economic models that were laid out last week, a need has arisen for a sharp-eyed, detached business analysis of the plan. It would also be useful to see that analysis in a form that is reasonably accessible. The documents available so far on the latest agenda of the Biotech Loan Task Force are fairly technical and somewhat incomplete. For example, they do not explicitly lay out a range of scenarios from the best to the worst.

Two fundamental questions are yet to be addressed about the biotech loan program: Is it a "good way" to turn $500 million into $400 million or less -- instead of $1 billion? And what is the likelihood that might occur?

Risk cannot be removed from this intriguing plan, but it should be fully understood.

The biotech loan program has been sent to the CIRM Finance Committee, which could hold hearings over the next couple of months. The hope is that the biotech loan program could be launched in the disease team program grants in the spring of 2009.

Fresh Comment

Zach Dicker of Biotech Science News has posted a new comment on the "biotech loan" item.

CIRM Response on Audit

Earlier this afternoon we asked Don Gibbons, chief communications officer for CIRM, if the agency had any comment on the state controller's audit(see item below). Here is his response.

"We are thrilled that the auditor found that our policies and procedures are working. The one minor issue related to specialists who call in to assist in grant review and signed conflict forms prior to the call, but not afterward, and that fix was put in place already at the April 9-11 grant review session."

New CIRM Audit and Foxes and Chickens

California's top financial officer today said the "administrative processes and expenditures" of the state's stem cell agency are "proper" and in compliance with the Prop. 71, the ballot initiative that created the agency in 2004.

The audit by the office of state Controller John Chiang made one recommendation. It involved CIRM's grants working group, where specialists failed to follow a policy requiring them to sign post-review certification forms that cover conflicts of interest, confidentiality and non-disclosure of information. CIRM said it agreed with the recommendation and has taken steps to correct the situation.

"Big deal,” said John M. Simpson, stem cell project director for Consumer Watchdog. He added,

"Under Prop. 71, none of these disclosures are open to public review. They should be."

Chiang (see photo), who is a Democrat and was elected by statewide vote, ordered the audit last year following stories about violation of conflict of interest rules by a CIRM director (first reported by the California Stem Cell Report). However, the scope of the audit was limited largely to accounting and compliance matters because that falls within the scope of the controller's office.

Simpson said in a news release that the audit ignored "fundamental flaws" at the agency.

"The problem is that Prop. 71 deliberately created an oversight board that is fraught with conflict," said Simpson.

"The board is dominated by representatives of the very institutions that will receive most of the $3 billion in research funds handed out. Controller Chiang found that CIRM is following Prop. 71’s rules, but those rules specifically put the foxes in charge of the chicken coop."

The audit did refer peripherally to the investigation by the state Fair Political Practices Commission into complaints of conflict of interest violations by CIRM Director John Reed. Chiang and Simpson asked for the FPPC probe, which is not yet complete. The controller's report said,

"The FPPC investigatory procedures may disclose additional issues, facts, and circumstances beyond the matters noted in our review, as our review was not an investigation."

CIRM President Alan Trounson, in a response to the controller's office, said that CIRM was "pleased by the many positive findings."

"It is of overriding importance to us to ensure that California have full confidence in the integrity of the processes we use to commit public funds to stem cell research."

Release of the audit came on the same day as the state Senate Appropriations Committee unanimously approved, 14-0, legislation by Sen. Sheila Kuehl, D-Santa Monica, aimed at ensuring that Californians have affordable access to CIRM-financed therapies. The measure, SB1565, would also require a study next year aimed at policy issues concerning CIRM, including its difficulties with conflicts of interest. The bill now goes to the Senate floor.

Chiang's audit will be reviewed by the Citizens Financial Accountability and Oversight Committee on July 7 in San Diego. That group was created by Prop. 71 to examine CIRM procedures.

CIRM To Invest $66 Million in Intellectual Capital

The California stem cell agency will soon embark on a new, $66 million round of training grants, including some aimed at undergraduates and possibly community college students.

CIRM directors last week approved initiation of the programs, which were overshadowed by $271 million in lab construction grants. Only one news report surfaced on the training effort.

Bradley J. Fikes of the North County Times, which circulates in northern San Diego County, reported about the $18 million effort aimed at roughly 100 students below the doctoral level. He wrote:

"State universities and community colleges got an invitation last week to join California's stem cell research program."

The "Bridges to Stem Cell Research" grants aimed at undergraduates will total roughly $18 million. The program was foreshadowed by a $31 million proposal by the state college system last year, which had the effect of jump-starting the latest effort.

Also approved last week was a $48 million continuation of the training programs already underway for CIRM Scholars. Those grants were the first ever approved by CIRM.

While the training dollars are smaller than those in the lab program, they represent an important investment in intellectual capital. And they come at a time when the state is otherwise scrimping on higher education.

The "Bridges" program triggered a light moment last week at the directors meeting chaired by Robert Klein, a multimillionaire, real estate investment banker.

John M. Simpson, stem cell project director for Consumer Watchdog, reported that Ted Love(see photo), a member of the board of directors and CEO of Nuvelo, Inc., said CIRM should not judge the success of the program by only counting the number of participants that get laboratory jobs.

"Who knows?" asked Love. "Maybe one of these students will end up being a multimillion dollar real estate mogul who supports stem cell research."

"It brought the house down," Simpson said.

Requests for applications for the training program are expected to be posted on the CIRM website in June. Cash should start flowing in 2009.

Media Coverage, Lab Needs and a Proposal for a New CIRM Mantra

Here are a few more links to some of the Internet coverage concerning the CIRM meeting this week during which directors awarded $271 million in lab construction grants for stem cell research.

Chronicle of Higher Education -- Jeffrey Brainard put together a bit of an overview, including discussion of conflicts of interest at CIRM.

The Niche, blog of Nature Reports Stem Cell – Monya Baker touches on some of the aspects of the media coverage and the need for the labs.

The Biopolitical Times, blog for the Center for Genetics and Society – Jesse Reynolds critiques stories by the Los Angeles Times and San Francisco Chronicle on the lab awards.

Consumer Watchdog -- John M. Simpson says the CIRM board of directors should begin each meeting by repeating the following quotation from Claire Pomeroy, one of its members and dean of the UC Davis School of Medicine, "All Californians are paying for Prop. 71 so all should benefit from it."

Consumer Watchdog Rethinks Stand on Klein's Private Contact with Grant Applicants

The man who probably has spent more time than any other independent observer physically watching the affairs of the California stem cell agency now believes that CIRM Chairman Robert Klein did not violate the agency's no-contact rule with grant applicants. We disagree.

It is a change of position for John M. Simpson, stem cell project director for Consumer Watchdog. Earlier he responded to questions from the California Stem Cell Report about Klein's actions, which you can read all about here, by saying there could have been a technical violation.


Simpson now says,

"Upon further reflection, I don't believe Bob Klein violated the Facilities Working Group bylaws when he played a role in negotiating discounts if applicants take all the CIRM money upfront.

"First, the applications were no longer before the Facilities Working Group. The group's work was done.

"Second, the discussions weren't focused on specific applications but on a discount rate that would apply to all equally if accepted.

"Not that it's relevant to whether there was a technical violation, it's also the case that everyone at the meeting -- including me - understood from the discussions that Klein would be involved in the negotiations."

However, the ban in the bylaws does not permit conditions. Drafted by CIRM's outside counsel, James Harrison, the single sentence states flatly:

"Members of the Facilities Working Group shall not communicate with an applicant about an application to CIRM."

The facilities group work is not really done until the CIRM board of directors act. The board has absolute authority over grant approval, as CIRM likes to point out. Directors could well send a recommendation back to a review group for reconsideration.

Another possibility: Sometimes, reviewers make a recommendation that basically says a grant should be funded if there is enough cash. Let's say a reviewer, following the review group action, decides that the applicant needs a little guidance to help bring about directors' approval. He or she could contact the applicant and give them suggestions on how to successfully approach the directors. Under Simpson's construct, that certainly would be permissible.

In this particular case, Klein's proposal to stretch CIRM funds was inventive and successful. But, in our view, he violated the bylaws to do it, although it seems at this point to have created no harm. Nobody is arguing he performed a dastardly deed.

However, bylaws are in place for a reason. If they are violated on relatively minor matters, what does that mean ultimately for CIRM's credibility and integrity.

CIRM Conflicts: Comments from the Cerberus

The California stem cell agency is bit of a strange beast politically and governmentally speaking. It was deliberately created that way by those who drafted Prop. 71, which established the agency in 2004.

While the trend in government in the past few decades has been towards minimizing conflicts of interest, the voter-approved initiative installed them in spades when it created CIRM's 29-member board of directors. And there is virtually nothing that the ordinary branches of government, such as the governor or the legislature, can do about it. To alter the law concerning CIRM requires a state constitutional amendment or a nearly equally unattainable super, super-majority vote of the legislature –70 percent.

John M. Simpson, stem cell project director for Consumer Watchdog, commented on the conflicts today in his blog after attending two days of meetings of the directors earlier this week. Here is part of what he wrote:

"Only seven members (out of the 29 positions) could vote on the overall grant awards Wednesday -- all the rest had to recuse themselves. They couldn't even talk about the proposals. Besides the members of the board who hold their seats by virtue of their academic roles, several patient advocate members were conflicted because they work for academic institutions that had requests pending. One member is a UC regent."

One of the justifications for placing persons with conflicts on the board was to tap their knowledge and expertise. Obviously, that did not occur earlier this week. Instead they were gagged by state law.

The conflicts and recusals also meant that it would only take a majority of four to hand out $271 million in taxpayer funds. No vote tally was announced by CIRM in its press release, but it is fair to assume that all seven voted in favor of the grants, a foregone conclusion since last December.

CIRM's board of directors have only overturned the positive decisions of its grant reviewers on one occasion and never on their negative decisions, which raises other good government issues. Discussion of that will have to wait for another day.