Robert Klein, Rube Mayors and Arrogrance

Los Angeles Times business columnist Michael Hiltzik began his piece on the California stem cell agency by saying it was the "offspring of perhaps the most misleading initiative campaign of 2004.

That was just the warm-up. The agency has "behaved not like the state agency it is, but with the arrogance of a private corporation that happens to be playing with the taxpayers' cash," he wrote.

It dangled "a theme park project (the stem cell HQ) in front of a bunch of rube mayors." And the agency's reaction to lawsuits is "overwrought."

Hiltzik attributes much of the "mess" to Robert Klein, chairman of the agency.

"The agency's attitude reflects the personality of its chairman, the Bay Area real estate developer Robert Klein II, who supervised the drafting of Proposition 71 and spearheaded the electoral campaign. Klein often seems to assume that anyone who criticizes himself or his agency must be fanatically hostile to embryonic stem cell research, or worse.

"Here's how he characterized the lawsuits during a board meeting last month: 'It is very clear that the people filing the litigation do not respect the democratic process and the mandate of 7 million voters. It is important, if they won't respect the democratic process, that they at least respect the suffering of over half of all California families who have a member' who might benefit from stem cell research.

"He's talking about litigants who, following all legal niceties, presented a legitimate petition to the California Supreme Court. Evidently judicial review has no place in Klein's world: The actions of voters, even if they might be based on misinformation and contradict the state Constitution, trump the principle of checks and balances. Who's really disrespecting the democratic process here, Mr. Klein?"

Hiltzik said he intended to put this question directly to Klein, "but at the last minute he canceled our scheduled interview."

While this blog can't say it concurs with everything Hiltzik has to say, it was a mistake for Klein not to talk to him. The Los Angeles Times has more than 900,000 subscribers. Typically newspapers have about two readers or so for each subscriber, making a total readership of something like 1.8 million. Most do not read the business page but let's say about 35 percent do, which is probably low. That means roughly 500,000 business page readers, who are the demographic cream, did not hear Klein's rebuttal to Hiltzik.

The Worst of Beasts or The Best of Beasts?

Picture the California stem cell agency as an elephantine chimera. Then picture the blind men groping our elephant to come up with pronouncements about the nature of the beast.

That was a bit what it was like in two op-ed pieces in the San Francisco Chronicle. The persons making the pronouncements were State Treasurer Phil Angelides and Jesse Reynolds, program director for the Center for Genetics and Society. Both certainly have their eyes wide open but one could hardly tell they were talking about the same government bureaucracy.

To Reynolds, our elephant "best resembles a publicly funded, privately managed venture capital firm."

He said, "Prospecting for high-risk investments is appropriate in the private venture-capital model, but it is no way to lead a public agency. The institute would be giving out grants with one hand and asking for loans with the other. Too many likely "philanthropic sources" would have an interest in where the grants go, and could expect favors in return for a risky loan. The potential for conflict is just too great.

"Unfortunately, this is part of a pattern by the institute's leadership. Its excessive haste and reluctance to act like a public agency have led to decisions that are inappropriate and put the institute at risk. The "independent citizens" board is neither -- it is dominated by individuals who have a stake in the research. Many have major investments in the biotechnology industry. The top leaders of the California Institute for Regenerative Medicine continue to resist applying California's open-meetings laws, the Public Records Act and effective conflict-of-interest provisions to its powerful advisory groups, from which they were exempted by Prop. 71."

To Angelides, the agency is the source of funding for "groundbreaking stem-cell research, which scientists believe holds the key to curing and treating debilitating and life-threatening diseases and injuries that affect nearly every California family."

The folks who have sued the agency, he said, are "(hurting)the millions of people in our state who every day live with AIDS, Parkinson's, diabetes, Alzheimer's, heart disease and spinal-cord injuries. It threatens the hope of so many families who look forward to the day when a scientific breakthrough will ease the pain of their loved ones."

Further, Angelides holds the litigants in mighty low regard. "The legal firm of record in the lawsuit -- the Life Legal Defense Foundation -- has a clear ideological agenda that includes outlawing a woman's right to choose. The organization is committed to pursuing its agenda at any expense -- even if it means that their lawsuit threatens to prolong the suffering of more than 8 million Californians with heart disease, more than 500,000 with Alzheimer's disease, more than 30,000 afflicted with spinal- cord injuries, and countless more. Sadly, these tactics are emblematic of the kind of ideological warfare that Californians rejected when they spoke out so clearly against President Bush's efforts to block stem-cell research."

The two men's views are not entirely incompatible but the real question may be whether CIRM will be successful in its efforts to become more than some sort of government/political/venture capital chimera that is viewed with distaste by even some of its supporters.

(For more on chimeras, see the item on this blog, "The Yuck Factor" April 12.)

Battey To Stay at NIH

The NIH stem cell chief has confirmed that he has withdrawn his name from consideration as the new president of the California stem cell agency.

In response to a query from this blog, James Battey said in an email: "I believe serving as President, CIRM, is an exciting and important way to further the progress of regenerative medicine. However, I plan to continue as Director, National Institute on Deafness and Other Communication Disorders, which is also an important opportunity to further the progress of biomedical research in the normal and disordered processes of hearing,balance, smell, taste, voice, speech, and language."

Battey Withdraws

NIH stem cell chief Jim Battey has withdrawn from consideration as the new president of the California stem cell agency, according to a usually reliable source.

Battey earlier disclosed his retirement in September from NIH and the plans to seek the CIRM position. He said he was leaving the NIH because of new conflict of interest standards at the federal body. He said, "I manage a family trust...which supports the education of my father's seven grandchildren, and it contains assets I'm told I'd have to divest. That would cost a lot of money, and I can't do that to my family.”

We have sent an e-mail to Battey asking him for comment on the report that he has withdrawn.

For more on Battey, see "Conundrums of Conflict" April 11 on this blog.

More on CIRM Presidential Candidates

The Johnson & Johnson scientist being considered for the presidency of the California stem agency apparently is Per Petersen – not Per Pedersen.

Petersen is chairman of research and development of the J&J Pharmaceuticals Group in New Jersey, according to normally reliable sources. He was formerly with Scripps in San Diego.

Earlier reports spelled the man's last name as Pedersen. The latest information on him is not backed by the full and credit of the U.S. Government but it does appear to be relatively sound.

California Stem Cell Legislation Amended

California State Sen. Deborah Ortiz has modified her legislation to tighten controls on the stem cell agency and protect egg donors.

According to the office of the Sacramento Democrat, the measure, SB18, has been amended to:

"Reduce the scope of the audit required by the bill by deleting 2 of the 5 requested items and limiting the review of contracts to a sample of contracts, and defer the deadline for the initial audit by three months.

"Extend the timeline for follow-up audits, if further review by the auditor finds they are needed.

"Clarify that the informed consent procedures contained in the bill for physicians who administer assisted oocyte production (AOP) for purposes of facilitating donation of eggs for medical research supplant and do not replace existing informed consent requirements."

As amended the bill does the following:

"Requires the (State) Auditor to conduct an initial audit of the Institute and ICOC by June 30, 2006.

"Requires the audit to include a review of the strategic policies and plans developed by the Institute and ICOC and policies and procedures for issuing contracts and for protection of intellectual property rights associated with research funded by the Institute and ICOC.

"Expresses intent that further audits be commissioned if the auditor's analysis of the implementation of recommendations from the initial audit indicates that further audits are necessary.

"Requires physicians who administer assisted oocyte production, as defined, to women for purposes of donating eggs for medical research to provide a standard written summary of health and consumer issues associated with AOP and to obtain written informed consent.

"Places limits on the sale or transfer of human oocytes or embryos and limits compensation to women to encourage them to produce human oocytes for the purposes of medical research.

"Expresses intent that the ICOC commission further research concerning the risks and benefits of ovarian stimulation drugs used in AOP."

The bill is up for consideration Monday in the Senate Appropriations Committee. A companion measure, SCA13, is before the Senate Elections, Reapportionment and Constitutional Amendments Committee. No hearing is yet scheduled on that measure.

For more on the Ortiz legislation, see http://californiastemcellreport.blogspot.com/2005/05/state-legislative-hearing-may-16-on.html

The Small World of Stem Cells

A scientist who works for the firm that describes itself as the “world's most comprehensive and broadly based manufacturer of health care products” is reportedly being considered for the presidency of the California stem cell agency.

The firm is Johnson & Johnson, which has 111,000 employees worldwide. The man is Per Pedersen, who San Francisco Chronicle reporter Carl Hall identified as a candidate for the CIRM presidency.

Johnson & Johnson also has stem cell investments in California. Reporter Antonio Regalado of The Wall Street Journal has reported that “Johnson & Johnson says it recently made an equity investment in Novocell Inc., a Carlsbad, Calif., company that controls several of the stem-cell supplies endorsed for funding by the White House. Novocell is trying to turn stem cells into insulin-making cells that could be transplanted into people with Type-1 diabetes, replacing tissue damaged by that disease.”

The linkage involving Pederson, Johnson and Novocell is interesting. Whether it is a serious conflict is difficult to tell. But it does illustrate the small world of stem cells. It is probably impossible to find a president for CIRM who doesn't have some sort of ties that could be construed as a conflict of interest.

A couple of footnotes to all this. Novocell, whose web site is under construction, may have moved recently since most reports place it in Irvine, which is near Carlsbad. Johnson & Johnson in Sweden reports that it has no employee by the name of Per Pedersen. And we are told that the person in question is not Roger Pedersen, a noted stem cell scientist.

We are checking further with Johnson & Johnson on Pedersen.

A Clubhouse For Cash

San Francisco blogger and political columnist Chris Nolan had little to say about the stem cell HQ affair. She explains that it was pretty much a done deal for San Francisco.

Now she says that not only will the HQ be in the Bay Area but nearly all the $3 billion as well.

“CIRM is going to usher in – with $3 billion to spend, it can hardly help itself – a new round of spending and investment up and down the state. But most of the money will stay up here,” the stand-alone journalist writes.

“The (silicon) valley's movers and shakers, its venture capitalists, don't like to travel. A plane ride to San Diego is barely acceptable. A drive up to the city is better. And two, they will keep much of their money here in the Bay area. Why? Many of these venture capitalist – particularly Kleiner Perkins Caufield and Byers which produced many of the greatest hits of the Internet, are tight with the research institutes that ring the Bay Area: University of California San Francisco and Berkeley and Stanford have been pumping out engineers for years. Biologists, too. And the biologists of the future are going to be computer geeks, if they're not already. No one has any reason to leave town; they've got the money, the resources and, now, the clubhouse.”

The Bridge to Three Billion Dollars

A web site in India the other day carried an item on the California stem cell agency. The motto of the web site is “It's All About Money, Honey.”

The stem cell agency itself has three billion reasons why that should be its motto as well.

With its bonds ($3 billion worth) under a financial cloud because of litigation, the agency is now facing substantial increased costs because of its bridge financing proposal.

During a packed meeting Monday in which opponents were critical of the agency's financing plans, the California Stem Cell Research and Cures Finance Committee approved the $200 million plan to issue short-term bond anticipation notes, according to reporter Carl Hall of the San Francisco Chronicle.

They “would fill the financing gap at least for a while, allowing the program to move forward until the lawsuit is resolved,” Hall wrote.

“If the lawsuit can't be resolved, the bond anticipation notes would become worthless, in effect putting purchasers of the notes in the position of making a grant to the state stem cell program.

“Officials envision charitable organizations stepping forward to pick up the notes, knowing full well they may never be repaid. No such organizations have been identified as yet, but Robert Klein, chairman of the stem cell program and a member of the finance panel, said he had no doubt some can be found.

“The use of bond anticipation notes is one of several options being investigated to prevent the California Institute for Regenerative Medicine, created by Prop. 71, from shutting for lack of funds before making its first grant.”

Hall said that “Anne Sheehan, representing state Department of Finance Director Tom Campbell, abstained from the 5-0 vote authorizing the short-term notes, suggesting that it's unclear whether the notes would be the best way to structure an interim finance scheme.”

State Treasurer Phil Angelides, who has responsible for issuing the state bonds, chaired the meeting. In a joint statement with California Attorney General Bill Lockyer, Angelides said, “We are concerned that a few, narrow anti-choice interests are attempting to thwart the will of California’s voters, who voted decisively to make funding available for this important research. With today’s decision by the Stem Cell Research and Cures Finance Committee, we will do everything possible to implement the voters’ desire to fund research that will help people suffering from debilitating diseases.”

Angelides indicated he would hold more hearings within a month or so to consider the bond anticipation notes and their interest costs.

Charles Halpern, a Berkeley attorney and former law school dean, told this blog following the meeting, “Klein had said that he intended to discuss his alternative financing plan at today’s meeting. Angelides steered the discussion away from this because of the Bagley-Keene (public notice) problem.

“It was unclear whether Klein has in mind passing the hat for charitable contributions, or trying to actually sell bond anticipation notes —BANs— in the commercial bond market with a high interest rate to reflect the extra risk that investors will be shouldering. Very confusing and Tom Campbell’s surrogate abstained on the vote about BANs because it seemed premature.”

“Jesse Reynolds of the Center for Genetics and Society in Oakland told committee members that conflicts of interest may arise if Klein or other leaders of the California Institute for Regenerative Medicine solicit contributions from organizations with a stake in future stem cell research grants,” Hall wrote.

Klein said in a statement he is working with other state officials to “look at alternative structures for bridge financing by charitable donors or other funding methods and to come to a consensus decision on the best way to ensure funding for the Institute while access to the critical research funding approved by California voters is temporarily blocked by groundless lawsuits.”

Here are links to other stories on Monday's meeting: Alexa Bluth, The Sacramento Bee; Sandy Kleffman, Contra Costa Times; Paul Elias, The Associated Press; Andrew Pollack, New York Times.

State Legislative Hearing May 16 on Stem Cell Measure

Legislation to tighten controls on the California stem cell agency is scheduled for a hearing May 16 in the state Senate Appropriations Committee, where it is expected to be approved.

The measure would then go to the Senate floor for a vote before moving on to the Assembly.

The bill, SB18, has bipartisan support. The chair and co-chair of the Senate Health Committee – Deborah Ortiz, D-Sacramento, and George Runner, R-Antelope Valley -- are co-authors.

For more on the measure, see the earlier items on this blog: “Vote Again (4-15)”, “Looking For Analysis (4-19)” and “Ho-hum (4-21).

Rich and Rounded....That's the Way It Is

Charles Halpern is not a man pleased by much about the California stem cell agency. But, according to reporter Carl Hall of the San Francisco Chronicle, Halpern, a former law school dean and longtime agency critic, sounded happy that the agency settled on San Francisco for its permanent headquarters.

“He said the Bay Area's penchant for political activism will ensure 'a rich and rounded discussion' of every move the institute makes,” Hall wrote.

"'There's a whole network of civil society institutions around here that care about this stuff,' Halpern said. 'So it's a good thing the (institute) will be located in the hub of that kind of intellectual and critical discussion. That's a very positive thing. Only through a well-informed public dialog will this program be able to succeed.'"

Hall's piece also warned that folks should lower their expectations about cashing in on an immediate stem cell gold rush.

“Stem cell research is too early-stage to qualify as the next pillar of the regional economy, UCSF Chancellor J. Michael Bishop said during an interview Saturday. 'There's not much of an industry around stem cells yet,' he said. 'We haven't even figured out how to make the stem cells do what we need them to do to be useful clinically. Until that is done, it's a pretty shaky base for startups.

"'I'd like be more rah-rah, but that's the way it is.'"

Readers Write

We welcome comments and will publish them. You can respond directly by clicking on the word "comments" following each item. Or you can send them to djensen@californiastemcellreport.com. The following is from Tom Hall, a retired history professor from Berkeley:

"I've been visiting your blog site for the past week or so and very impressed with what I am finding on it. The Halpern letter was a real service. Not only does he raise some important points (the $10 million construction issue for instance) but he does a nice job of raising general issues -- does Klein have some secret agenda or is he just flying by the seats of his pants? It seems to me that politically, Klein's greatest strength is the apparent fact that no one wants to mount an initiative that would either repeal the stem cell enterprise or place it firmly under public control."

Behind the Stem Cell Scene

Columnists Matier and Ross of the San Francisco Chronicle popped up with a tidbit this morning on the stem cell HQ affair and the scientist and rag merchant who played background roles. Here is what the writers had to say:

“All the money and lofty arguments aside, San Francisco's landing of California's prestigious new stem cell research institute may have hinged on one very practical consideration.

“Zach Hall, the center's interim chief executive officer, lives in San Francisco -- and had privately made it clear to anyone who would listen that he was in no mood to move to San Diego.

“As a matter of fact, friends say his desire to be closer to home in the city -- where his wife has a full-time job at the Symphony -- was one reason he quit his last job commuting three times a week to the USC medical school and took the interim stem cell post.

“By the way, much of the credit for San Francisco's stem cell victory is being given to Gap founder Don Fisher, who -- just as things were looking a bit grim -- rallied local developers to provide rent-free space for the headquarters.

“UCSF Vice Chancellor Bruce Spaulding, who was part of the informal team that worked on the bid, said the developers needed to be convinced of the long- term financial benefits of landing the project.

“'For all the mayor did, Spaulding said, 'the guy who made the argument most eloquently and powerfully was Don Fisher.'”

The "Murkier" $100 Million Workaround

Questions are already being raised about the plan to fund the California stem cell agency with $100 million in philanthropic contributions.

Stem cell chairman Robert Klein sketched out the plan on Friday as a way to work around lawsuits that place a cloud over bonds that might be issued on behalf of the California Institute for Regenerative Medicine. (See our May 5 item "Looking for a $100 Million Helping Hand.")

Reporter Laura Mecoy of The Sacramento Bee did the most complete job of reporting on the subject in reports in the major California newspapers. But look for more in the next day or two in other newspapers.

Mecoy said that the most influential California legislator on stem cell matters, Sen. Deborah Ortiz, D-Sacramento, took a dim view of the $100 million plan.

"It would just make a murky issue even murkier," said Ortiz. "It is not the kind of openness you expect in government."

Mecoy said Klein characterized the $100 million as a bridge loan to, in his words, "make certain this momentum to develop new research and medical therapies is not slowed down."

“He refused to name the potential contributors,” Mecoy wrote, “but said they would only be repaid if the bonds sell. If the bonds aren't sold, he said the loans would become contributions.

“Klein said he plans to pursue this proposal on Monday when the stem cell agency's finance committee meets for the first time.

“(Jesse) Reynolds, program director at the Center for Genetics and the Society, called the contribution proposal 'risky,' and said it creates a 'strange relationship between a public agency and private lenders.' He also said Klein opens himself to possible conflict of interests by seeking contributions from foundations that also fund research and could be seeking state stem cell money as part of their future studies.

"'I don't think the head of a state agency responsible for giving out grants should be involved in fundraising,'" Reynolds said.

“Klein said the stem cell board's process for reviewing grants protects against conflicts of interest.

“He also said Proposition 71, the initiative that created the stem cell program, provided for contributions to be used to help fund grants and loans.

“During the election, though, such contributions were presented as matching funds that would be solicited by researchers seeking grants and loans from the state.

"'The problem here is we can't afford to lose eight or 10 months while this process (of litigation) moves forward,' Klein said.”

HQ: The Final Dissection(Maybe)

The post-mortems this morning on the stem cell HQ affair did not offer any extraordinary insights beyond what has already been reported. They did note that the San Francisco area, site of the new HQ, is an expensive place to live. Just how expensive? A 2003 study showed that family of four with two working parents needs to earn more than $70,000 a year to sustain its basic needs in that area.

You can find the study here.

Here are links to news stories on the HQ decision: Carl Hall, San Francisco Chronicle; Laura Mecoy, The Sacramento Bee; Terri Somers, San Diego Union Tribune; Steve Johnson, San Jose Mercury News; Paul Elias, The AP ; Louis Sahagun, Los Angeles Times; Marni Leff Kottle, Bloomberg.com

Flash!!! San Francisco Wins

San Francisco wins the stem cell HQ. Sacramento runs distant third. The vote was 16 for Baghdad-by-the-Bay and 11 for San Diego. Read Reporter Daniel Levine's story here in the San Francisco Business Times, filed at 4:01 PDT.

Looking for a $100 Million Helping Hand

The California stem cell agency may borrow $100 million from philanthropic organizations to start its research program.

The plan was announced after litigation raised financial clouds over the issuance of bonds by the California Institute for Regenerative Medicine.

Reporter Daniel Levine of the San Francisco Business Times quoted stem cell chairman Robert Klein as saying today, "We are looking at the potential to put together $100 million from various financial donors, to move forward and hire staff and make certain this movement to develop new research and advance medical therapies is not slowed down. As Nancy Reagan said, we cannot afford to lose any more time."

Levine also reported that “Klein said if for some reason the institute is unable to issue the bonds, the loans would be converted to grants. As such, he said the bridge financing would create no liability for the state.”

The (Almost) Final HQ Media Morsels

"It's cachet, it's reputation, and at this point it's become a sport,'' said stem cell institute vice chairman Ed Penhoet.

Today the last dog will be hung in the Affaire HQ. Here are links to morsels at the final pre-hanging media meal. Of course, we will dine again, journalistically speaking, at a post-mortem tomorrow.

Reporters Rachael Gordon, Carl T. Hall, Ilene Leichuk, San Francisco Chronicle; Paul Elias, The AP; Terri Somers, San Diego Union Tribune; Bradley Fikes, North County Times, Judy Silber, Contra Costa Times.

Looking at the Stem Cell Players

The stem cell HQ beauty contest has attracted all the attention in recent days, but other doings of the agency are more important in producing the cures that Prop. 71 promised.

Reporter Carl Hall of the San Francisco Chronicle this morning put together a good look at the selection of some key players and their significance.

Hall quoted Harold Varmus, a Nobel laureate and former head of the National Institutes of Health, who now serves as president of the Memorial Sloan-Kettering Cancer Center in New York.

"'A lot of money is involved, and people are concerned about the outcome,' Varmus said. 'If the money goes to the wrong people, that would be terrible. It would undermine confidence in the public process. But there is, in principle, no reason this can't work as well as the federal system' of dispersing money for scientific research."

While Hall focused on selection and names of members of the working groups(the scientists who will make grant recommendations to the Oversight Committee), he also wrote about the selection of a president.

"Some of the more-often-mentioned possibilities include James Battey, who has directed a stem cell task force for the National Institutes of Health and directed the NIH's National Institute on Deafness and Other Communication Disorders; Per Pedersen, who was identified as a senior staff scientist for Johnson & Johnson in Sweden; and George Daley, a top-rated stem cell researcher at Harvard University who already has agreed to be an ad hoc science adviser for the stem cell program.”

Just Say No to $200 Million

The California stem cell agency should be prevented from issuing $200 million in bonds because it is not “necessary or desirable” under state law, according to Berkeley attorney, Charles Halpern.

In a letter to the California Stem Cell Research and Cures Finance Committee, Halpern said, “The ICOC does not have a plan for spending such money and has no criteria for making grants or monitoring the uses of the bond proceeds. As of today the ICOC has not even adopted an operating budget....”

Halpern requested the committee to reject the bond request by the agency and not approve more than $25 million in bond sales.

The former dean of the law school at the City University of New York also said, “It should be noted that tantalizing press reports in recent weeks have suggested that (stem cell chairman Robert) Klein has a secret plan to finance Prop. 71 without selling bonds. This morning (May 5) the CIRM has posted on its website a notice that it is working with state officials 'on an interim financing program that does not use state funds. This will be discussed at the May 9 Finance Committee.' This alternative financing program has never been discussed by the ICOC in an open meeting, and it does not appear on the Agenda for tomorrow’s ICOC meeting.”

Halpern said discussion of such a plan would be in violation of state law because the public did not have enough notice.

We are seeking comment from the stem cell agency on Halpern's letter, which follows below.

Text of the Halpern Letter

Here is the text of Charles Halpern's letter:


To Members of the California Stem Cell Research and Cures Finance Committee
Dear Chairman Angelides and Committee members:
The California Stem Cell Research and Cures Finance Committee
(“the Committee”) plays a critical role in the structure of Proposition 71. It is charged by Section 125291(a) to “determine whether or not it is necessary or desirable to issue bonds authorized pursuant to this article…and, if so, the amount of bonds to be issued and sold.” In other words, the Committee has gatekeeper responsibility -- deciding when and if bonds will be issued, and in what amounts, based on its determination regarding necessity and desirability.
The “necessary or desirable” determination is particularly important in this instance because the Treasurer, the Controller, and the Finance Director are the only officials answerable to the electorate who have a role in overseeing the expenditure of public funds by the California Institute for Regenerative Medicine (CIRM). The voters who supported Proposition 71 expect that no bonds will be issued until the Committee has concluded that it is necessary and desirable to do so, after giving careful consideration to the justifications offered by the Independent Citizens Oversight Committee (ICOC).
Remand to ICOC to make the case that issuing $200,000,000 in state bonds is necessary and desirable
In this case the ICOC has given the Committee no factual basis to support the conclusion that it is “necessary or desirable” to issue $200,000,000 of bonds at this time. The ICOC does not have a plan for spending such money and has no criteria for making grants or monitoring the uses of the bond proceeds. As of today the ICOC has not even adopted an operating budget, though it has been hiring and incurring expenses for four months. The CIRM has sufficient funds to continue operations until November.
This is not a typical bond issue, where a highway has been planned and designed in detail, and the bond proceeds are necessary to buy concrete and begin construction. In this case, no one knows where the bond proceeds will go. For example, ten percent is earmarked for capital construction. Where will the buildings be? Will the state’s participation be debt or equity? How will the state be assured that the buildings will only be used only for Prop. 71 purposes, and for how long? Moreover, since Prop. 71 grants are not limited to stem cell research, bond proceeds could be channeled into any as yet unspecified medical research that seems promising to the members of the ICOC.
The statutory context indicates that the terms necessary and desirable should be read in the conjunctive, but matters of close interpretation are unnecessary in this case. The ICOC has not submitted any information to the Committee to support a conclusion that the issuance of $200,000,000 is either necessary or desirable. Oral assurances made by Mr. Klein or the other Committee members who also serve on the ICOC cannot substitute for ICOC policy and factual presentation, and do not constitute a basis for an informed Committee judgment.
This Committee does not meet its statutory obligation by presenting the ICOC with a blank check for $200,000,000, to be repaid over thirty years by the state’s taxpayers . The Committee’s decision is not a technical matter, of interest only to experts in public finance and bond traders. It goes to the core of government accountability.
The oversight responsibility of this Committee is especially important in light of the recent unanimous vote of the state Senate Health Committee putting forward a Constitutional amendment to strengthen the accountability of the ICOC process. (See SCA 13.) Ten Senators across both parties voted their belief that the present governance system provides inadequate oversight and needs strengthening, In light of this legislative concern and commitment to crafting a stronger governance structure (a time-consuming referendum process), the Committee must be particularly attentive to its statutory oversight responsibility under the present Prop. 71 governance scheme.
I request the Committee to remand the matter to the ICOC to give it an opportunity to deliberate on its resolution requesting the issuance of bonds in the amount of $200,000,000, and to present a justification for that number along with a plan for its grant-making program over the next year. If no such plan is forthcoming, the Committee should authorize no more than $25,000,000 in bond sales, to permit the CIRM to continue to develop a grant-making program.
Revising the Agenda-- Pending litigation on the Constitutionality of Proposition 71
The Attorney General has represented to the Supreme Court of the state, in the name of the ICOC, that these bonds will be unsalable, or salable only at higher interest rates, so long as litigation is pending. Litigation is still pending. The Committee must review this issue in open session prior to voting whether to issue bonds at this time, not at the end of the meeting in connection with the possible filing of bond validation lawsuit. It is hard to imagine that it is “desirable” to issue a large amount of bonds under such circumstances. There must be a public explanation and an opportunity for public comment. According to the San Francisco Chronicle, the Attorney General has not changed his opinion.
The circulated Agenda, which indicates that the Committee will vote to issue the bonds at the outset, before considering the pending litigation, should be revised.
The alternative financing program
It should be noted that tantalizing press reports in recent weeks have suggested that Mr. Klein has a secret plan to finance Prop. 71 without selling bonds. This morning the CIRM has posted on its website a notice that it is working with state officials “on an interim financing program that does not use state funds. This will be discussed at the May 9 Finance Committee.” This alternative financing program has never been discussed by the ICOC in an open meeting, and it does not appear on the Agenda for tomorrow’s ICOC meeting.
In light of the California commitment to open process, raised to constitutional status by the voters last November in Prop. 59, this is a startling announcement. Needless to say, the discussion that the CIRM promises at this Committee’s meeting on May 9 would be in clear violation of the Bagley-Keene Open Meeting Act .
Conflict of Interest
The Prop. 71 process has received much critical scrutiny around the issue of conflict of interest, from the Senate, the press, and from nonprofit groups. Therefore, in order to reassure the public on this critical matter, it is especially important that this Committee be as free of conflict of interest as is possible. In that respect, the substantial campaign contributions made by Mr. Klein to Mr. Angelides ($19,000) and Mr. Westly ($27,000) for their 2006 campaigns present a problem. The public must have confidence that the members of the Committee are each acting with full autonomy, without gratitude for past gifts or expectations of future ones.
In order to bolster public confidence I urge that the two campaign contribution recipients—Angelides and Westly-- return past contributions to Mr. Klein and commit to accept no more contributions from him or any other member of the ICOC so long as the Committee continues to function. These steps would help to avoid even the appearance of conflict of interest and reassure the public that the Committee members are single-mindedly committed to protecting the interests of the public and that each member is wholly independent in his judgments.
Conclusion
For the reasons set forth herein, I respectfully request the Committee to:
Remand this matter to the ICOC for reconsideration with the request that the ICOC submit a record to the Committee which it considers sufficient to support the conclusion that the issuance of bonds in a particular amount is “necessary or desirable.”
Review in an open meeting, prior to authorizing the issuance of any bonds or other debt securities, the impact of the pending litigation on the sale of bonds, in light of the representations made to the Supreme Court by the Attorney General on behalf of the ICOC.
Address the problem of conflict of interest on the Committee, allowing an opportunity for public comment.
Revise the Agenda appropriately.
Set a time for discussion of the alternative non-bond financing plan with appropriate advance notice and preparation.
Respectfully submitted,
Charles Halpern
Charles Halpern was elected to membership in the Institute of Medicine of the National Academy of Sciences in recognition of his work as a public interest lawyer practicing at the intersection of medicine, biomedical ethics, and public policy. He was a Professor at Stanford and Georgetown Law Schools and Dean of the City University of New York Law School. As Founding President of the Nathan Cummings Foundation, he administered a substantial grants program in the health field.an He has been an active public participant in the administration of Proposition 71 since its passage. With Dr. Philip Lee, he filed a petition with the ICOC requesting attention to conflict of interest problems, public access issues, and other governance matters.

The $10,000-a-Month Stem Cell Lobbyist

In an unusual move, the California stem cell agency has hired a private and influential lobbyist at a rate of nearly $10,000 a month to represent it in the state Capitol.

Few if any state agencies hire private lobbyists. Instead they rely on civil servants to appear before legislative committees and handle the myriad of details of the legislative process. California cities and counties, however, do hire Sacramento lobbyists.

The stem cell agency has contracted with Nielsen, Merksamer, Parrinello, Mueller and Nayor of Sacramento to carry its legislative water. The five-month contract is capped at $49,900 with a monthly retainer of $9,600, billed in advance. The firm bills at rates of up to $645 an hour for attorney time.

Gene Erbin, one of two attorneys in the firm focusing on the stem cell agency, said the firm helped draft Prop. 71 and represented the campaign organization during last fall's election. Erbin indicated that some state agencies use private lobbyists, but did not give any specific examples. A spokeswoman for the California Secretary of State's office, which regulates lobbyists, said she did not know offhand of any state agency with private lobbyists.

Robert M. Stern, president of the Center for Governmental Studies in Los Angeles, said, “Obviously, the stem cell agency is unique because it was done by initiative and because the legislature (or some legislators) want to amend its law substantially (and also because it has its own budget.)

“I don’t have a problem with state agencies having lobbyists but I believe that they should be state employees, rather than private contractors. It is more efficient (they are full time and less expensive), and the employees don’t have other clients.”

The Nielsen firm has a blue chip list of clients, including some in the health industry. They include Genentech, Merck and Pfizer. The Wall Street Journal on April 12, in a story by Antonio Regalado, reported that Merck had been involved in stem cell research.

In a contract letter to the stem cell agency, Steven Merksamer, a member of the firm's management committee and one of its founders, said that it is “virtually inevitable” that the firm will work on projects for other clients that have “different governmental or political objectives or views.”

He added that because of the diversity of the firm's practice, “it is certainly possible, even likely” that the firm will represent other clients with interests that are “adverse” to those of the stem cell agency “but which are not directly related to the matters for which you are retaining us.”

Merksamer, once chief of staff to then Gov. Deukmejian, also said that the firm is not legally a “consultant” that makes a governmental decision and thus is not subject to economic disclosure.

Erbin was once a legislative consultant to Democratic legislative committee chairmen and is a specialist on initiatives. Jim Gross is the other member of the firm focusing on the agency. He is an expert on health issues.

"Nothing If Not Political"

Picture the contestants in the Miss Stem Cell beauty pageant: Sluttish San Francisco, surf-and-turf San Diego and Sacramento, the demure farm girl.

That's how The Sacramento Bee editorialized today on the process of selecting a location for the stem cell headquarters.

While the newspaper had a little fun with the subject, it said the process illuminated the political nature of the Oversight Committee.

“It has revealed how parochial interests will likely dominate the dispersal of $3 billion of public funds over the next decade.

“At Monday's meeting of the institute's site-selection subcommittee, (stem cell chairman Robert) Klein ranked San Francisco - a quick drive from his Portola Valley home - as his top choice. Richard Murphy and Dr. John Reed gave even more lavish scores to their home team, San Diego. When it was clear that the fix was in, Dr. Phyllis Preciado of Fresno asked to change her score. Her extra five points for Sacramento kept it in the competition.

“Let's fast-forward to later this year, when the oversight committee is expected to start dispersing $300 million in annual research grants. Bay Area representatives will undoubtedly direct funds to Stanford and UC San Francisco. The Los Angeles contingent will push hard for UCLA, University of Southern California, Cedars-Sinai and the City of Hope. The San Diego appointees will make sure that UCSD, the Salk Institute and the Burnham Institute get their gravy. (UC) Irvine and (UC) Davis supporters will probably need to trade votes to avoid being shut out.

"Klein says he designed the 29-member oversight committee to shield it from politics, but make no mistake: This board is nothing if not political.”

Where's The Money?

Reporter Bob Egelko of the San Francisco Chronicle follows the bond money trail at the California stem cell agency in a story that looks at the strategies in dealing with lawsuits against the institute.

His article says, “Prop. 71 committee chairman Robert Klein and state lawyers have publicly discussed filing a bond validation suit in Sacramento County Superior Court. Such a suit might be resolved within months, because courts have generally confined their review to the state's ability to pay for the bonds.” That would mean much quicker sale of the bonds than would be the case in dealing directly with the litigation from fundamentalist and right wing groups.

The subject of the litigation is up for closed-door consideration at the Oversight Committee meeting on Friday.

Poor Policy, Poor Management

In less than 48 hours, the group that will be the largest single source of stem cell research funding in the world -- $3 billion -- will meet to discuss a wide range of complex issues, including its budget and appointment of key officials.

But the public has no real idea what the Oversight Committee is considering. At the time of this posting, they only can see perfunctory statements listed on the web site of the California stem cell agency. The agenda for this Friday's meeting does not even indicate whether items will be voted on or merely discussed. "Consideration" is the term used, which can cover a multitude of possibilities.

Presumably the 29 members of the committee that is supposed to make decisions on the issues are also limited to what they can see ahead of the meeting. Some of the committee members have already expressed their displeasure at not having sufficient time to prepare for the meetings and review the issues. Rushed agendas and lack of advance background material have been a problem with the Oversight Committee since its inception.

Normal governmental procedures in California, including those of the lowliest school boards, provide for far more disclosure on subjects to be considered at public sessions than that offered by the stem cell agency.

Chairman Robert Klein has promised the highest standards in openness and transparency. That promise has not been fulfilled in terms of giving the public and Oversight Committee members adequate advance notice and material on the complex issues the panel considers each month.

It is simply poor management and poor policy to continue in this fashion. And it will continue to alienate unnecessarily Oversight Committee members that Klein needs support from.

For a more on this issue see the item “Consider This” on this blog on April 1.

Flogging Not Yet Finished

San Franciso Mayor Gavin Newsom this morning is echoing the words of the soul singer James Brown.

“I feel good,” Newsom said after his city's bid for the permanent HQ of the California stem cell agency was ranked No. 1 by the agency's site selection committee. Sacramento and San Diego ran neck-and-neck for second.

But as someone once said, “It ain't over til it's over.” The three cities make presentations to the full Oversight Committee on Friday. The candidates for the presidency of the agency will also make their views known or reaffirm them. Then there are the wishes of Chairman Robert Klein.

Backers of each city made it clear they will pitch their proposals throughout the week. For example, the most powerful legislator in California on stem cell issues, Sen. Deborah Ortiz, D-Sacramento, stressed once again that she would like to see the agency in Sacramento.

Her office released a statement late Monday that said, “While all of the proposals were outstanding, I believe Sacramento, like the state-of-the-art research authorized by Proposition 71, represents the promise and hope of the future.

“While other regions have been stagnant, Sacramento has seen a 30 percent growth in medical, health and technology sectors. We are the shiny new home to a growing hub of cutting-edge research and treatment into cancer, autism, Alzheimer’s disease, organ transplants, cardiology and spinal cord injuries. We offer an affordable, quality-of-life, the seat of state government and an integrated, world-class health care system.”

Reporter Laura Mecoy of The Sacramento Bee noted some regional bias on the part of the San Diego site selection committee members, John Reed and Richard Murphy. Reporter Carl Hall of the San Francisco Chronicle wrote that Phyllis Preciado of Fresno leaned heavily towards Sacramento.

Here are links to other stories: Reporter Louis Sahagun, Los Angeles Times; Sandy Kleffman, Contra Costa Times; Rebecca Vesely, Oakland Tribune, Jim Hopkins, USA Today; San Diego Daily Transcript (no byline) Paul Elias, The Associated Press, Terri Somers, San Diego Union Tribune.

Who's on Second: Sacramento and San Diego

San Diego and Sacramento emerged as closely ranked for second choice for the headquarters. Now the leading candidates for the president's job at the agency will weigh in privately with their thoughts. The Oversight Committee votes on Friday, but Paul Elias, biotech writer for The Associated Press, writes that it looks like Baghdad-by-the-Bay will the headquarters for the biggest stem cell research effort in the world.

Here is a link to his story. The agency's web site is likely to post an official version of the subcommittee's action sometime today.

Surprise: San Francisco Gets the Nod

San Francisco is the first choice recommendation for the new headquarters of the California stem cell agency.

Happy supporters of the bid released the news about 15 minutes ago on the Internet even before it was posted by the agency. Here is the item from the Bay Area Council.

"Today, Jim Wunderman, President and CEO of the Bay Area Council, released the following statement regarding the California Institute for Regenerative Medicine (CIRM) Site Search Subcommittee's decision to make San Francisco their first choice recommendation for the Institute's new headquarters.

"Today's announcement is one of the final steps towards cementing the Bay Area's role as the center of biotechnology in the world. If approved by the 29-member Independent Citizens' Oversight Committee on May 6, this may be the psychological turnaround point for the Bay Area -- a historical marker of when the economic recovery began in earnest.

"We already have the most important companies in biotechnology. We were the birthplace of the industry. We have the world's largest concentration of life sciences companies, with more than 820. If we win the headquarters of the $3 billion stem cell institute, the Bay Area's leadership in this industry will grow further.

"The message this choice would send out is that if you want to either conduct cutting-edge research, or grow a company, or find a good job in biotechnology and stem cell research, you must come to the Bay Area.

"The contest to win the Institute's headquarters has been one of the hottest and most competitive in recent California history. The site search subcommittee has been under tremendous pressure from all involved. They are to be congratulated for running the process fairly and to the letter of the law. Since they held themselves up to such high standards, the entire state can know that the committee's recommendation is in the best interest of stem cell research and the people of California.

"Locating the stem cell institute headquarters in the Bay Area will help grow an already robust industry cluster in the region -- one that pays good dividends to our residents. The biotechnology industry contributes more than $12 billion to the Bay Area economy each year and employs more than 79,000 people. Bay Area biotech jobs pay an average of $80,000, which is 35 percent higher than normal for our region. Our research institutes draw in more than $900 million a year in grants for biotechnology research. Biotech is a true engine of our economy and will likely be key to our recovery."

Managing Stem Cell Expectations

The California stem cell agency is working hard to put money in the field to find cures for everything from cancer to dementia. But Stu Leavenworth, an associate editor of The Sacramento Bee, sounded a cautionary note in an opinion piece.

It said in part:

“Now that the initiative is law, Proposition 71 supporters face a daunting challenge - how to manage lofty public expectations.

“Partly because of the P.R. campaign, many patient advocates and California taxpayers believe that medical miracles are imminent. In reality, most scientists say it will take years, and possibly decades, before embryonic stem cell treatments are proven and made widely available.”

Penhoet, Selling and Management

Now a millionaire venture capitalist and philanthropist, Ed Penhoet grew up in Oakland, the son of a piano teacher, Helene, and a hardware store owner, Etienne.

Some of the tidbits from a profile of the vice chairman of the stem cell agency in the San Francisco Chronicle. Reporter Alex Barnum wrote the piece that also tells us Penhoet learned some of his management skills that he used at Chiron from a year selling cars.

"If you have highly productive, highly trained people working for you, you can't order them around every day. ... You have to sell them on the concepts that you're trying to put forward,” Penhoet told Barnum.

The story also reported:

“Penhoet's restless ambition has led him down other paths as well. After a stint as dean of the UC Berkeley School of Public Health, he is now president of the Gordon and Betty Moore Foundation, the country's sixth largest philanthropic organization, where his job is making sure that $5 billion is put to work in solving some of society's toughest problems.”

Barnum wrote, “What's unusual, friends and colleagues say, is that someone of such ambition is also a genuinely nice guy, modest and open-minded. The same characteristics that served him in academia and business -- an ability to attract talented people, a skill at solving problems and defusing difficult situations -- will be valuable in his latest, most public role as vice chair of the stem cell board, they say.”

The Bee: Sad Situation At CIRM

“Kaiser works to prevent conflicts of interest while California's institute wimps out” reads the headline on the editorial in The Sacramento Bee.

The piece said that while stem cell chairman Robert Klein pays lip service to NIH standards, he does not seem ready to go along with the latest that have resulted in the resignation of some NIH scientists.

“Thus we have a sad situation. Weak standards in California are attracting scientists who don't want to deal with new ethics standards in Washington. This wasn't the magnet effect voters envisioned when they approved Proposition 71."

“Pants Off” in Sacramento

San Francisco took its best shot at winning the bid for the California stem cell agency's new headquarters, but Sacramento is promising a surprise during its site visit today.

Reporter Steve Johnson of the San Jose Mercury News wrote:
“Oleg Kaganovich, chief executive of the Sacramento Area Regional Technology Alliance, which helped put together that city's bid, wouldn't talk in detail about what Sacramento's backers have planned for the visiting board members. 'It's going to be somewhat of a surprise,' he said. 'We're going to wow the pants off of these people.'''

It's not clear whether he was talking about the Sacramento Kings' smashing victory over Seattle Friday night in the NBA playoffs.

Reporter Carl Hall also had an account of the site selection committee's visit to San Francisco on Friday.

“There was free Hetch Hetchy bottled water. The Giants scoreboard at SBC Park signaled a welcome. And the bus ran more or less on time,” Hall wrote.

“San Francisco officialdom did everything but hire Tony Bennett to melt the hearts of state officials shopping this weekend for a headquarters city on behalf of California's Proposition 71 stem cell program.”

Were the decision makers impressed? “Side talk among members was also ruled out,” Hall wrote. “If anyone gave a clue as to how he or she was leaning on Friday, it was well out of the earshot of the mayor and the media.”

By the way, the next Kings-Seattle game is Sunday night at 7:30 p.m. West Coast time.

HQ Countdown: Tittering and Cheesiness

As the decision approaches for the location of the stem cell agency's headquarters, San Francisco is smirking a little this morning about San Diego's mayoral follies.

Ken Garcia wrote a “personal perspective” in the San Francisco Chronicle on the behind-the-scenes tittering in San Francisco.

“No one I spoke with would comment on the record, but it's fair to say that San Francisco officials are not exactly saddened by San Diego's woes. It certainly can't help if the future capital of the world's biggest private stem- cell program is mired in scandal. With San Diego reeling from another mayor-go- round -- (Mayor) Murphy was re-elected in November after a judge threw out thousands of write-in ballots that would have elevated surfer/councilwoman Donna Frye to the post -- it's hard to see how the selection committee wouldn't at least consider it a factor.

"'It does raise some interesting questions,' one City Hall official said. 'But it's not our place to raise them.'''

Garcia skated over San Francisco's own rather checkered political history. Another minor note: Frye is not a surfer; she ran a surf shop.

Reporter Terri Hardy of The Sacramento Bee wrote that local officials there staged a “cheesy” news conference Thursday to support the Sacramento bid but were quite unified when they did it. She quoted Sacramento Mayor Heather Fargo as saying, "Sacramento is in fact the best location, and location should be critical. The Capitol is where stem cell decisions are made."

Reporter Rachael Gordon of the Chronicle covered the perspective from all four cities. The San Diego Union Tribune did not appear to carry a story on the matter this morning.

Not Even Bread, Only Water

The selection process for the HQ of California's stem cell agency is no graft-riddled process a la the Olympics.

“So cautious is the (selection) committee that cities were warned they could provide no food or gifts during site visits. Said one staff member, 'Only coffee or water can be served,'" wrote reporter Terri Hardy in The Sacramento Bee.

Reporter Carl Hall of the San Francisco Chronicle pretty much says Baghdad-by-the-Bay has it in the bag. But he also reported, “San Francisco officials made it clear they are not yet ready to start celebrating -- and not only because they want to avoid looking too smug in advance of the key votes.

“The reason the subcommittee is recommending a runner-up city is that a separate group from the institute is now searching for a permanent chief executive. Officials want a couple of possibilities in the event that person has a strong preference on location.”

Is the River City Bid Underwater?

Can the city that is the home to virtually every state department win the bid for the HQ of the California stem cell agency?

Reporter Laura Mecoy weighed that question in a story on the competition for the site. She wrote that Sacramento “is closest to state government and has the lowest cost of living.

“Problem is, neither point is getting much attention from the site selection panel that will visit Sacramento and the three other finalists over the next four days.

“The panel plans to use the site visits to help advise the full stem cell board when it picks the headquarters city on May 6.

"'We are working against the notion that the Legislature should have no role in the stem cell program,' said Sen. Deborah Ortiz, D-Sacramento.

“Tom Zeidner, Sacramento's senior economic development project manager, said the stem cell agency's chairman also told him 'rather curtly' that cost of living didn't matter.

“Most of the employees at the California Institute for Regenerative Medicine are expected to earn more than $100,000 a year. Its board is considering paying up to $600,000 to hire a president.”

The Sacramento News and Review offered up an editorial touting the Big Tomato's bid. But the editorial may have actually been a disincentive. “What better location than Sacramento--with its taxpayer attentiveness, watchdog organizations and capital press corp--to keep this agency above reproach in its role to safeguard the public's interest in all things stem-cell?” the newspaper wrote. Given the agency's sketchy relations with Capitol denizens, it may not want to be any closer than San Francisco, at the very least.

Erratic Fallout

Postings on this blog are likely to be a tad more erratic than normal during the next few days. A friend and fellow sailor down here in Romantic Old Mexico fractured his pelvis when he fell from a 15-foot ladder on his boat, which was on the hard. He was flown to the US for surgery. We are helping to deal with some of the fallout, so to speak, from the accident.

Venturing into the Stem Cell Business

Venture capitalists are expanding their role in stem cell issues all across the country.

Their actions follow last fall's approval of Prop. 71 in California, which had major support from some venture capitalists in that state. Robert Klein, chairman of the California stem cell agency, told thedeal.com that his venture capital supporters had personal reasons for supporting the measure.

One venture capitalist, Michael Goldberg, sits on the Oversight Committee of Klein's agency. The entry of successful business men and women into public life is to be lauded. They bring much energy, talent and a different perspective to difficult issues. Nonetheless venture capitalists make their bones by flinty attention to their economic self-interest. As in any business deal, it behooves public officials to exercise equally flinty attention in dealing with venture capitalists.

Here is more on what writer Alex Kash of thedeal.com had to say about venture capitalists and stem cells and their effort in Massachusetts:

“It marked the second time VCs have rallied at the state level to support
the controversial research, which creates human embryonic stem cells as
a research tool and, proponents hope, eventually as a treatment for chronic diseases such as diabetes, Alzheimer's and Parkinson's. Researchers and VCs scored a big win in California last November with the adoption of California's Proposition 71, protecting research there and providing a $3 billion state research fund. A good portion of the $24 million or more raised to support the measure came from VCs such as Brook Byers, John Doerr, Vinod Khosla and Joseph Lacob (all of Kleiner Perkins Caulfield & Byers of Menlo Park, Calif.), Gordon Gund and Amgen founder William Bowes of U.S. Ventures.

“Campaign chairman Robert Klein, a real estate investment banker, was the main political and financial force behind Prop 71. Klein, whose teenage son has juvenile diabetes, said through a spokeswoman that the VC contributors all had personal reasons for getting involved in Prop 71. The law creates a state board, chaired by Klein, that will dole out $3 billion in public funds mostly to research institutions, although startups will be allowed to apply for grants.

"'It was a role model for me,' (Massachusetts VC Chris) Gabrieli says. Prop 71 backers not only made their point about the research potentially saving lives, Gabrieli says, but also the campaign was "the first time effective arguments were made" in the stem-cell debate about economics, jobs and innovation.”

Will the New Stem Cell CEO Be a Surfer?

By the time you read this, the stem cell site selection committee will have finished its 7 a.m. meeting, but the real news this morning is found in two paragraphs buried deep in the background material for the session.

It tells us that if the top candidate likes opera, San Francisco could become the new headquarters for the stem cell agency. But if surfing and a truly wonderful climate are what matters, San Diego could get the nod. If it is professional basketball (Go Kings!) and skiing in the Sierra, Sacramento looks better.

We remarked on Jan. 27(“The CEO Reality”) that the most important factor in corporate location decisions is the desire of the CEO.

Walter Barnes, chief administrative officer of the stem cell agency, reinforced that in a letter to Julie Wright, president of the San Diego Regional Economic Development Corp. He was responding to some of Wright's concerns about the site selection process.

“At the most recent meeting of the ICOC on April 7, 2005,” Barnes wrote, “several members expressed the opinion that a decision on the headquarters site was a critical element of the recruitment for a permanent president. Your comment that the 'location of the job should not matter to the right candidate and that all postings should be viewed as interim' is disputed by Spencer Stuart – the presidential search firm hired by the ICOC. They have told the ICOC that a mid-May decision is needed. For example, a candidate with school-aged children will be able to relocate his or her family without inconvenience that might prevent him or her them from accepting an offer made at a later date.

“The Presidential Search Committee has adopted a plan of its own to make a decision on a recommendation at a meeting planned to be held on May 18, 2005. A decision on the headquarters site by May 6, 2005 will allow that Committee to ensure that uncertainty of location will not affect the finalist recommendations for the presidency of the CIRM.”

Perhaps the competing cities should plug themselves into the presidential search process for a little lobbying with the job candidates. However, some might think that would be unseemly.

On another recruitment note, some experts believe it is better to move children during the school year as opposed to summer. During the summer, displaced children have less to do – no school, etc. So they have more time to whine as they contemplate the loss of their old friends and environs.

As for the site selection subcommittee meeting, the finalist cities are seeking to have their scores changed. The recommendation to the committee was to alter the scores slightly, but that did not change the pre-meeting rankings that left San Francisco No. 1 and Sacramento No. 2.

Say Hello to Edelman

The public relations guard has changed at the California stem cell agency.

Red Gate Communications, which handled PR for Prop. 71 and some of the early months of the agency's existence, has resigned the account. Edelman, the world’s largest independent public relations firm with 1,800 employees, has been retained.

Also on board as a state employee is Nicole R. Pagano, senior communications specialist, and formerly with the Brookings Institution in Washington, D.C. She is listed at the top of the two-person contact list on the CIRM web site. Below her is Adam Silber, who is head of Edelman's Sacramento office.

In response to questions, Fiona Hutton, president of Red Communications in Studio City, CA., said in an email, “Red Gate Communications recently resigned its representation of the California stem cell agency. As you might imagine, we are very proud of the communications and outreach efforts we so successfully orchestrated during Prop 71 and during the first few, formative (albeit challenging) months of the Institute. It has been our pleasure to have worked closely with the Institute and so many passionate stakeholders throughout both these efforts. The firm continues its stem cell research expertise and advocacy in other regions throughout the nation.”

The change at CIRM came suddenly nearly two weeks ago, leading to a certain amount of speculation and rumor. The agency put out no advisory to the media about the change, merely altering the contact names on its web site.

Only on Thursday did the agency confirm that Edelman had been hired. That was after multiple queries by this blog to the agency and, on Wednesday, to the chief of staff nationally for Edelman

In an email, Pagano said, “CIRM has engaged Edelman to assist the Institute in fulfilling its public education and media relations duties, and was selected after a competitive search process.

“The mission of the Institute is to make grants and provide loans to advance stem cell research. Edelman will assist the Institute in its mission by making its progress as transparent and understandable as possible – both to the voters of California who have funded it and to the medical research communities who share its commitment.”

Pagano did not respond to questions concerning Edelman's compensation or whether it was required to file any economic disclosures in connection with possible conflicts of interest.

The contract is not insignificant. Red Gate's contract provided for as much as $70,000 for work from Jan. 18 to April 18, which was its entire term. While it is not yet known how much Red Gate was paid, the $70,000 figure is not unreasonable given the scope of the work, which went far beyond fielding phone calls from reporters. If Edelman is working under similar terms, a year contract could mean $250,000-$300,000 compensation. However, the agency now has on staff at least one fulltime person, Pagano, so that could affect Edelman's package.

Skilled public relations, information dissemination and public education are valuable assets for any organization. It is even more important for CIRM, which has virtually no track record and which is delving into areas new to medicine and public policy as well as to the public at large. However, PR is dependent on reality. To build a great reputation and keep faith with the people of California, CIRM must demonstrate accomplishment and accountability.

The Edelman Blog and Government PR

Richard Edelman, the main man at the PR firm for the California stem cell agency, writes his own blog on the public relations business.

Recently he commented on the flap about federal government contracts for public relations. He said the PR business basically is “accused of foisting government propaganda on the American people, in direct violation of the law.”

To counter that sort of bad PR, he told his readers (others in the business) “let's start by revealing the size of our US government contracts.” Edelman also said, “The industry “ should commit to providing full disclosure on exactly what we do for Government contracts.”

“It is possible that this level of transparency will make it less attractive to the US Government to hire PR agencies. So be it,” Edelman blogged

Other advice for PR people “trying to adapt to a fast-changing environment.”
“We have to be operating in parallel universes, continuing to do a great job with traditional media, while engaging with new media,” Edelman wrote.

“We should help our clients create original content, and advise them to engender conversations on-line but be honest about our inability to control outcomes. We must be on top of the breaking news in companies, because news is being filled by the person who has the newest information. The coverage of tsunami initially came from survivors with cell phones or mini-cams, and delivered across the Web. Our tone in new media must reflect the different expectations of the audience, which is to demand authenticity, individuality and transparency.”

Ho-Hum. Stem Cell Measures Approved

California legislative action on measures to tighten oversight of the state's stem agency attracted little interest in the media today.

Reporter Laura Kurtzman of the San Jose Mercury News appeared to be the only reporter who attended Thursday's meeting of the Senate Health Committee and wrote a story on the legislation, which was approved 10-0.

The Associated Press filed a story, but did not actually attend the session. Instead it relied on a statement from the office of the Sen. Deborah Ortiz, D-Sacramento, chair of the committee.

It is not uncommon for news outlets to write stories on such a basis when they deem the subjects not to be compelling. In this case, passage of the measure seemed assured since it was co-authored by Ortiz and the Republican vice-chair of the committee, George Runner of Antelope Valley.

Kurtzman fleshed out her story with additional reporting. She wrote,“The proposal would require the California Institute for Regenerative Medicine, which was created by Proposition 71, to abide by National Institutes of Health standards that were recently revised to bar employees from holding biotech or pharmaceutical stocks.”

“While refusing formally to take a position, representatives of the Institute for Regenerative Medicine said in interviews after the hearing that the rules were too restrictive. The head of the National Institutes of Health's human stem-cell program recently cited the (NIH) rules in announcing his retirement.”

Kurtzman quoted Ortiz as saying, “There is a higher level of accountability. This is a hybrid. This is a new model. In the end, it is the taxpayers who either benefit or lose in that equation.''

The AP story appeared on the web sites of the San Diego Union Tribune, San Francisco Chronicle and The Sacramento Bee, but not on the Los Angeles Times. Here is a link to the AP story and a link to the press releases on the two measures, which now move to the appropriations committee.

The Stem Cell Agency Just Says No

The California stem cell agency has yanked one of its Oversight Committee members from a public panel on implementation of Prop. 71, reportedly because it did not want to share the same platform with one of its critics.

As a result the conference, sponsored by Political Pulse in Sacramento, was cancelled.

CIRM's withdrawal left some in Sacramento bemused, given the agency's pledge of openness. One insider said the action was “very unfortunate, and does not bode well for the ICOC creating an open dialogue with the public, much less maintaining public confidence in the institute.”

Political Pulse is an independent source of Capitol items and has been around for 20 years. It scheduled the teleconference for April 27, promising that it would explore issues and information about the agency and its startup progress.

Scheduled to be heard at the teleconference event were State Sen. Deborah Ortiz, D-Sacramento; Dr. David Gollaher, president of the California Healthcare Institute of La Jolla; Marcy Darnovsky, associate executive director of the Center for Genetics and Society in Oakland, and Dr. Phyllis Preciado of Fresno, a member of the Oversight Committee.

It was Darnovsky's presence that apparently triggered the withdrawal of Preciado. Darnovsky's organization has been a vociferous critic of the stem cell agency on issues ranging from the stem cell medical questions to conflicts of interest.

Political Pulse did not respond to questions about the cancellation nor did CIRM, including whether this was a onetime action or reflected an agency policy.

Coming Up

On Thursday, we will take a look at the leavings from today's legislative hearings on measures to tighten oversight of the California stem cell agency. Be sure to check the item.

Looking for Analysis in the Right Places

Searching for a clear, straight forward overview of the legislation to tighten controls over the California stem cell agency?

The best bet is the legislative staff analysis which can be found on the Web(here and here). It states what the law is, what is being changed and summarizes some of the issues. It doesn't, however, deal with Robert Klein's contention that the legislation is thwarting the will of the people, a dangerous political argument that goes beyond the purview of staff analysis.

The analysis of that dubious assertion can be found in a couple of items on this blog: “The Fallacy of the Will of the People” (3-23) and “Will California Vote Again on Stem Cell Research” (4-15).

Ortiz Drops Superovulation Moratorium

The leading stem cell research supporter in the California legislature is dropping a proposed moratorium on superovulation in her legislation to tighten oversight of the state's new stem cell agency.

Instead Sen. Deborah Ortiz, D-Sacramento, is going to ask the agency to fund a study of the impact of hyperovulation on women's bodies, said Hallye Jordan, director of communications for the lawmaker, who is chair of the Senate Health Committee.

Ortiz has teamed with a conservative Republican, Sen. George Runner of Antelope Valley, to co-author measures, including a proposed constitutional amendment, to require the State Auditor to audit Prop. 71 expenditures. The legislation would also require written informed consent procedures and limits on compensation for women who wish to donate eggs for medical research, among other things.

The legislation will be considered by the Senate Health Committee in Sacramento Wednesday afternoon. For more on this, see the item on this blog April 15, “Will California Vote Again on Stem Cell Research?”