Klein's Fiscal Warning Does Not Match Up with State Treasurer's Account

In his bid to be re-elected, the chairman of the $3 billion California stem cell agency, Robert Klein has issued a financial warning to CIRM directors that is distinctly at odds with what the state treasurer's has told him.

In response to questions from the California Stem Cell Report, Tom Dresslar, spokesman for state Treasurer Bill Lockyer, provided an account that differs in major ways with information that Klein released in an election-eve pitch to CIRM directors. (The state treasurer manages the bond sales that are CIRM's only real source of cash.)

In a statement posted today on the CIRM Web site, Klein said that he was "just informed" by the state treasurer about a looming financial problem that needed "immediate" attention. Klein said it was “essential” for CIRM to quickly provide assurances of “reliability of our funding.”

However, the treasurer's statement did not carry that urgency or compelling weight. It primarily involved hypothetical bond sale timing matters. Dresslar said that CIRM was alerted to the treasurer's view of the state of CIRM bond financing on Dec. 2, the day before Klein gave a rosy financial assessment to the directors' Finance Subcommittee. Klein was also aware of the bond timing questions before last Wednesday's board of directors meeting and did not bring them to the board's attention.

Klein's statement today on CIRM's "financial stability,"  however, said,

“The (state) Treasurer's office has just informed us that the next California Stem Cell Research and Cures Finance Committee (the panel that authorizes CIRM bond sales) meeting must be held in January 2011. Recent applications for clinical trial rounds and the acceleration of our funding commitments on our other programs require an immediate focus on this issue, given there may not be another opportunity until late 2011 to authorize additional bond funding.”

Klein also said that early next year “our collaborative funding partner nations” will require “assurances of our future performance.”

Here is the full text of what the treasurer's office e-mailed to the California Stem Cell Report.

“On the record:

“We don't necessarily agree Klein issued an 'urgent financial alarm' in his statement of candidacy. Regardless, here's what the State Treasurer's Office told CIRM, and didn't tell CIRM:

“We did not say the Finance Committee had to meet in January to authorize additional bond sales. Additionally, we did not tell CIRM there was a possibility the Finance Committee, if it didn't authorize additional bonds in January, would have to wait until late 2011 to do so.

“We told CIRM that, under existing Finance Committee resolutions, the Institute effectively has zero bond authorization remaining. That means, in order for us to sell more stem cell bonds, the Finance Committee has to meet and approve additional authorization. We told
CIRM we could have a bond sale as early as next February. We said if CIRM wanted to get some of the proceeds of any February sale, the Finance Committee would have to meet in December or January.

“This communication with CIRM occurred Dec. 2.

“It's important to stress we have set no firm bond-sale schedule for 2011. Hypothetically, if the State conducted a bond sale in February 2011, and stem cell bonds were not included in the deal, the CIRM Finance Committee could meet in any subsequent month of the year and authorize additional bonds that could be sold in any subsequent 2011 sales.”

Klein's rendition of the bond sales situation is not the first such instance in recent weeks. He earlier announced that his hand-picked candidate to succeed him had to drop out because he was not a U.S. citizen. Klein, who is an attorney, based that assertion on an antiquated state law that the state attorney general has officially declared is unconstitutional.

CIRM directors meet tomorrow afternoon at 4 p.m. PST at Stanford University to deal with the chairmanship question. The public can participate in the meeting there or at teleconference locations in Los Angeles (2), La Jolla(2), Burbank and Duarte. The specific addresses can be found on the agenda. The meeting is also scheduled to be audiocast on the Internet(directions also on the agenda).

Business Reporter Pokes Fun at Stem Cell Agency Election Process

Reporter Ron Leuty of the San Francisco Business Times today offered himself up as a candidate for chair of the $3 billion stem cell agency. Leuty's “statement of candidacy” included this paragraph:

“I am a resident of California — if that matters — and I have been in the hospital, which I believe would fulfill the requirement that the ICOC Chair be a patient advocate. One time after knee surgery, I was in some serious pain and there were no nurses around to give me a painkiller — you should have heard me advocating then!”

You can read more here.

CIRM Director Lansing Backs Klein Re-election

Former Hollywood studio chief and CIRM Director Sherry Lansing today endorsed Robert Klein for re-election as chairman of the $3 billion California stem cell agency.

In a two-paragraph statement posted on the CIRM Web site, Lansing said she enthusiastically supported Klein as well as the re-election of Art Torres and Duane Roth as co vice chairs.

No other members of the CIRM board have posted endorsements of Klein.

Lansing is chair of the CIRM Governance Subcommittee. She said she would not be able to attend tomorrow's CIRM board meeting at which the question of Klein's tenure will be taken up. Lansing said she will be in transit from China at the time.

Klein's term expires this month. He once said he would not seek re-election, but changed his mind after his closed-door attempt to hand pick his successor failed in a flurry of negative news stories.

Klein's Fiscal Warnings at Odds With His Rosy View 11 Days Ago

Less than two weeks ago, CIRM Chairman Robert Klein told directors of the California stem cell agency that its financial situation was rosy and no problems existed with its bond financing, its only source of cash.

His statements on Dec. 3 stand in sharp contrast to his election eve warning today that the agency must act swiftly to stave off a looming funding problem.

Klein made his comments at a meeting of the directors Finance Subcommittee, chaired by Michael Goldberg. Only a handful of the 29 CIRM directors attended the meeting. Here is the text of what Klein said, according to the transcript.

“Chairman Goldberg: Okay. Thank you. I'd like to in the time that remains briefly address the climate for california bond issuance since we're going as an agency dependent on their bond authority. And there's been articles in the press in the last two weeks in connection with the last large series of bond financings the state has done about some of the challenges and difficulties. And without getting into any of the specifics of those issues, I'd like to ask Chairman Klein, who's maintained contact with the issuing authorities, what the general perspective or view is over the course of the next 12 to 24 months and whether or not there's any cause for action on the part of the ICOC (CIRM's board of directors) with respect to anything we can or should be doing being mindful of that.

“Chairman Klein: Thank you, Chairman Goldberg. So given that over the last three years we've tried to always look forward at least a couple of years and foreseeing the difficult environment particularly with some of the initiatives that passed in this last session, this last electoral cycle, we've been fortunate, by doing advanced planning, to make sure we could cover our strategic plan advances we would need to make over the running 24-month period going forward. At this point we've achieved that objective, and we have a little less than 24 months, but approximately that level of cash funding that's available to us. So our programs are very stable during this period. It's hopeful that in that time period California will return to a much stronger bond position.

"Nevertheless, for our scientific partners and our international partners and our individual scientists within the state, it's important to again remind everyone that under the state institution, the top 40 percent of the revenue of the state goes to education, and then bond debt service is the next priority ahead of harbors, ahead of major new highway construction, and other projects to the extent they come out of state funds versus federal funds. So California will retain the ability, even if this difficult period is a full two years or longer, to fund this agency on a timely basis. And institutions and the scientists will be covered in the time period of our commitment. So we're very thankful for the support of the state treasurer's office and for the support of the governor and the director of finance, for the work of (CIRM staffer) Lynn Harwell, who has been instrumental in executing on this plan, for (CIRM directors) Ted Love and Marcy Feit, who have been on the bond finance credit committee of the state with me. And we are thankful and very appreciative of the fact that we'll be able to honor our strategic plan and have the flexibility during that time to use reserves that are set up specifically to respond to new scientific developments that are certainly expected to arise at various times during that cycle.

“Chairman Goldberg: Thank you, Chairman Klein.”

Eve of the CIRM Election: Klein Invokes Sudden Financial Warning

CIRM Chairman Robert Klein today sounded an urgent, financial alarm in his bid to be re-elected to a new term at the $3 billion California stem cell agency.

In a “statement of candidacy” on the CIRM Web site, Klein indicated he was needed at the agency to handle a sudden, new quasi-crisis that requires action next month. And in an effort to make it easy for directors to choose him at their meeting tomorrow at Stanford University, he also reduced his proposed term to three to six months, down from 12 months. However, he did not renew his pledge not to take a salary, which could hit $529,000 annually.

Several items concerning Klein's candidacy were fresh in the statement. One was the financial warning from Klein, who portrays himself as something of an expert on government bond financing. He said that the agency needed to move swiftly on new issuance of new state bonds, CIRM's only source of financing.

At their meeting just last Wednesday, CIRM directors heard no mention of the problem, only a routine budget presentation with no indication that quick action was needed.

But in his message dated yesterday, Klein said it was “essential”for CIRM to quickly provide assurances of “reliability of our funding.” He wrote,

“The (state) Treasurer's office has just informed us that the next California Stem Cell Research and Cures Finance Committee meeting must be held in January 2011. Recent applications for clinical trial rounds and the acceleration of our funding commitments on our other programs require an immediate focus on this issue, given there may not be another opportunity until late 2011 to authorize additional bond funding.”

Klein also said that “our collaborative funding partner nations” require early next year “assurances of our future performance.”

It is not the first time Klein has sprung a January financial surprise on directors. In January 2009, he unveiled a critical bond funding problem that directors also had not been informed about earlier.

(See here, here and here.)

Another new item in the candidacy statement was Klein's promise to only serve three to six months, although it is not clear that the board can elect a chairman for anything less than the six years specified by law. Previously Klein promised to serve only 12 months. Significantly, in the otherwise fairly detailed document, he did not renew his promise not to take a salary. Currently he receives $150,000 for halftime work and is entitled up to $529,000 annually

Klein, a Palo Alto real estate investment banker, additionally backed away from his position that he can only be replaced by a nationally known scientist. Instead, he said he would work with the board to develop criteria for selection of a new chair.

Klein also pledged to “change the communications paradigm,” which encompasses the agency's public relations efforts. He cited an example of a 3 million, “affinity group” email effort during the 2004 election campaign for Prop. 71 as something he would like to replicate. Klein said that CIRM's communications should be changed “from our highly refined scientific focus (with emerging, quality public components) to a broad and innovative program that will be meet our obligation to inform all Californians of the milestones of progress we have achieved.”

More Coverage of Call for Delay in CIRM Chairman Election

The San Francisco Business Times late yesterday carried a story on the “strong” recommendation by the state's top fiscal officer to cancel tomorrow's scheduled election of a new chairman of the California stem cell agency.

You can find the article by Ron Leuty here.

Klein's Collateral Damage: Delay Needed in CIRM Chair Election

Fans of the editorial pages of the leading newspaper in California's capital this morning read a piece denouncing the “shenanigans” of the chair of the state's $3 billion stem cell agency, Robert Klein, and urging him to step aside.

The op-ed article in The Sacramento Bee was written by John M. Simpson, stem cell project director for Consumer Watchdog of Santa Monica, Ca., a longtime observer of and participant in CIRM affairs. He said,

“As his six-year term comes to an end, Bob Klein should be high-fiving his way around a victory lap, basking in accolades for his substantial accomplishments as the first chair of the California Institute for Regenerative Medicine.

“Instead, unable to transcend a propensity to micromanage, he tried to pull strings behind the scene to anoint his successor. Inevitably the effort blew up in his face embarrassing him and his choice for the job, and causing collateral damage to the image of the agency’s governing board, the Independent Citizens Oversight Committee(ICOC).”

Simpson said that Klein's conduct and the election of a new chair are not minor matters to be shunted into a convenient closet at CIRM headquarters in San Francisco. He wrote,

“Indeed, how CIRM is governed and whether the board steps up and exercises appropriate oversight could spell the difference between CIRM’s successfully funding $3 billion in cutting edge research or becoming a boondoggle that is a monument to wasteful spending.”

Simpson continued,

“So what should the ICOC do to restore a modicum of reason to the succession process?

“Do not take Klein at his word. When Proposition 71 was passed he vowed to serve only a couple of years as chairman, without pay. Six years later, he is in the job, now officially defined as a half-time position, drawing $150,000 and re-nominated to a second term.

“There is no reason for the ICOC to act now; Wednesday’s vote should be canceled. All pending nominations should be withdrawn. If the board doesn’t elect a successor, Klein continues until a successor is selected. If he is elected to a second term, based on past history, he’ll likely be around in six years.

“The ICOC and its governance committee must have a serious public discussion about the sort of candidate required; it’s clear the constitutional officers would welcome the input. New nominations can be made and an election held by March.”

Simpson concluded,

“There are two eminently qualified candidates: Current vice chairs Art Torres and Duane Roth. Bob Klein needs to get out of the way so one of them can ultimately be elected.”

Simpson's article followed a letter to CIRM directors by the state's top fiscal officer calling for cancellation of tomorrow's election of a new CIRM chairman. Controller John Chiang, who heads a CIRM financial oversight committee, said the current process is fundamentally flawed.

CIRM Director Prieto Weighs in on Letter From Scientists

Another member of the governing board of the $3 billion California stem cell agency today questioned a letter from 11 leading stem cell scientists supporting the re-election of Robert Klein as chairman.

Francisco Prieto, a Sacramento physician, commented on remarks by David Serrano Sewell, a CIRM board member and San Francisco deputy city attorney, in the “11 Scientists” item earler today. Prieto also said that the chairman of the agency did not need to have substantial scientific experience as proposed by the 11 scientists.

Prieto said,

“I have to agree with David. This decision is a board responsibility, and our concern is what is best for the future of CIRM. These scientists have the right to weigh in as does any other citizen, but I question at least part of their premise: We may indeed need ' substantial scientific and medical experience,' but there is no particular reason that this expertise must be in the person of the chair. I would argue it more appropriately rests with a VP for R&D, a position we have been trying to fill for much too long now. Bob Klein has an impressive fund of scientific and medical knowledge, but it is largely self-taught, and we may decide that our ongoing division of responsibilities at CIRM should change as the agency matures and evolves.”

Top California Official Urges Suspension of CIRM Chair Election

The state's top fiscal officer, who has a special role in connection with the California stem cell agency, this afternoon called for cancellation of this week's election of a new CIRM chair, declaring that the current process is fundamentally flawed.

John Chiang, who heads a Prop. 71-created committee that reviews the financial practices and performances of CIRM, said in letter to the agency's governing board,

“It is clear that the current selection process is fundamentally flawed. The taxpayers who provide the funds for CIRM must be assured that the chair and vice chair are selected in an open, transparent process – not through a backroom deal or by default because a deal has fallen apart.”

CIRM directors are scheduled to meet on Wednesday to consider the choice for a chairman to replace Robert Klein, a Palo Alto real estate investment banker, whose term is expiring. The only other candidate besides Klein is Art Torres, one of two vice chairs at CIRM. However, Torres withdrew from the running last week, clearing the way for Klein to continue to serve.

Chiang's letter referred to the ruckus over Klein's attempt to hand pick his own successor. The move failed following reports of closed-door meetings and conflicts of interest. The flap attracted attention in the international stem cell community, attention that CIRM did not welcome.

Chiang, a Democrat, said he was strongly recommending that the CIRM board suspend the selection of the chair and vice chair and ask that the nominations be withdrawn. Chiang said,

“The first step in a new process should be for the (directors')Governance Subcommittee to have a full, public discussion of the necessary criteria for a new Chair. The first question the Board should examine is the role of the Chair of the ICOC and how it differs from the role of the President. While I understand that Proposition 71 provides for a unique, co-leadership model, it is critical from a good governance perspective that there is a clear delineation of duties and decision-making.

“What makes a governing board effective is long-term transparency and accountability. The ICOC's most important role - to provide independent oversight of CIRM management - is compromised when the ICOC chairman is essentially serving as the CIRM CEO.

“It also is important to keep in mind that the Chair is but one member of the ICOC Governing Board. Good governance must rely on the actions of the whole Board, not a single member. While the current structure may have been necessary as CIRM was in start-up mode, as the Institute moves into the next phase, it is important from a good governance perspective that it be driven by a fully participating oversight board rather than a single individual, regardless of how talented that individual may be.

“The ICOC has a responsibility to the taxpayers of California to conduct its business in an open and transparent manner. The most effective way the ICOC can assure the public that the Chair and Vice Chair selection process was fair and resulted in the best candidates is to restart the process in a transparent manner.”

The committee that Chiang heads is the only state entity that is charged legally with regularly examining the operations at CIRM.
State Controller Calls for Suspension of Stem Cell Agency Election

Bad Link to Letter Fixed

In the "11 Top Scientists" item today, we had a bad link to the letter that they wrote. The link is now fixed. If you want to go straight to the letter, here is the link.

Eleven Top Stem Cell Researchers Back Klein for Re-election

A who's who of California – if not global – stem cell science is lobbying directors of the state's $3 billion stem cell agency to go along with Robert Klein as its chairman despite the disclosure of his now failed, closed-door efforts to hand pick his successor.

The letter may not necessarily have its desired impact. One CIRM board member, David Serrano Sewell, said,

"Honestly, I'm not sure anyone really cares what they think, they should focus on research and finding cures, not dwelling on board matters."

The 11 signatories to the letter include two Nobel Prize winners, one of whom, David Baltimore, is a former member of the governing board of CIRM. All but one of them have tens of millions of dollars at stake in grants from the stem cell agency and are heavily invested in basic research, as opposed to translational efforts to push research into the clinic.

Irv Weissman of Stanford, one of the signers, for example, has $23 million in grants from CIRM. Another, Larry Goldstein of UC San Diego, holds $14 million in grants. Most of the institutions employing the scientists also have representatives on the CIRM board of directors. (For additional information on Goldstein's grant, see here.)

CIRM is currently involved in assessing the future direction of its research. Should it move more strongly towards business and actual use of stem cell therapies on patients, it is likely to mean that basic research will have a smaller share of CIRM's remaining $2 billion.

In the letter, the 11 said,

“In this regard, we stress, that our collective experience with the discovery of new approaches to the treatment of disease is that new solutions to currently intractable problems will come primarily from research that gives rise to new understanding of disease itself. On occasion, significant progress can also come from thoughtful application of existing knowledge, but either on its own is insufficient. Hence, it is crucial for the next ICOC Chair to have a deep understanding of both scientific and medical principles in order to balance short and long-term investment in stem cell research and clinical application.”

The group plumped for the proposal by Klein, a real estate investment banker, that he be replaced with a nationally known scientist. They said,

“We also enthusiastically support Mr. Kleinʼs proposal to find a successor who has substantial scientific and medical experience as well as personal familiarity with the burdens of disease.”

That requirement is not part of the legal qualifications for chair, which do include a familiarity with bond financing, which is the only source of CIRM funding.

The board meets Wednesday afternoon at Stanford to consider action on nominations for its chair. It does not actually have to vote, however. If it does not do so, Klein, whose term is expiring, would automatically continue in office.

One of our readers refreshed us on that last week after we wrote that Klein appears to be a shoo-in for re-election after the only other nominee, vice chairman Art Torres, said he was stepping aside for the good of the agency. Klein has offered to serve for 12 months without salary until the board picks a new chair. His decision to decline a salary (he now earns $150,000 for half-time work) apparently removes a conflict of interest and enables him to participate in board discussions about chair selection that he would be otherwise barred from. However, removal of his salary would require board action, which would seem to be an ongoing conflict for him, whether he wants the salary or not.

There is a remote possibility that another candidate for chair could surface. The state treasurer has not yet made a nomination. The state controller nominated Torres but could withdraw that nomination in favor of someone else. The governor and lieutenant governor have nominated Klein. The board's choice is limited by Prop. 71 to those nominated by the four state officials, but it does not have to accept any.

Torres Withdraws from Contest for CIRM Chair , Klein Now a Shoo-In

Robert Klein today appeared certain to be re-elected as chairman of the $3 billion California stem cell agency after the only opposing candidate, vice chairman Art Torres, dropped out of the race.

Torres disclosed his withdrawal in a statement posted quietly yesterday on the agenda for next week's board meeting, which is scheduled to consider election of a chair. Torres basically said that he is dropping out for the good of the agency. He declared,

“I believe that the board needs more time to process the qualities it needs in a chair as we move forward to the next crucial phase. We also need to recognize the hard work and accomplishments of this board, as validated by the positive review of the External Advisory Panel’s report. We cannot let our collective success be overshadowed by a leadership debate.

“I initially stepped aside when Dr. Alan Bernstein’s candidacy became apparent. The mission and funding the best science have always been my priority. We owe nothing less to patients and the taxpayers of California.”

Torres continued,

“I am taking Bob Klein at his word that he will serve only for a limited transition period. That will give time for our Governance Subcommittee, under the leadership of Sherry Lansing, to determine the qualities we need in our next chair and to report its assessment to the full board for further discussions and deliberations.”

Torres, a former veteran state legislator, also remarked on the flap in the media about Klein's attempt to engineer the selection of his successor. One longtime observer and participant in CIRM affairs, John M. Simpson, stem cell project director of Consumer Watchdog of Santa Monica, Ca., earlier described the Klein's efforts as “sleazy and inappropriate backroom tactics.”  Klein's actions drew international, unfavorable attention on the Internet and even generated an article in the Toronto Globe and Mail concerning what turned out to be Klein's specious claim that the chairman had to be a citizen of the United States.

Asked for a comment on the latest development, Simpson said,

“The entire 'succession' saga is a debacle that reflects poorly on the ICOC (the agency's governing board), but especially on Bob Klein, who tried to create new criteria for the chair's position not specified in Proposition 71, which he apparently cites when it is convenient and flagrantly flouts when it is not. He wanted to hand pick his own successor, but that effort blew up in his face.

“Art Torres is eminently qualified to serve as chair and I am sorry to see him withdraw. Klein is the one who should stand down.”

In his statement to board directors, Torres said,

“As I'm sure is true for many of you, I am saddened by the recent press and blog stories that have compromised our collective hard work, history and mission. Further, these stories embolden our opponents who seek to stop stem cell research on the federal and state level. We must stand together to confront the challenges that lie ahead.”

Technically another challenger to Klein could arise but that is highly unlikely given Torres' statement, which undoubtedly reflects board sentiments as expressed during closed door board meetings last Wednesday.

Torres' reference to future actions by the Governance Subcommittee concerning selection of a new chair could mean that Klein's attempt to lead the process will be shunted aside. Earlier, Klein, a real estate investment banker, indicated that he thought it was necessary to find a nationally respected scientist to replace him. He said he would engage in a major search to find such a candidate. The board, however, has never said that it thought a scientist was necessary to fill the post.

Simpson said today,

“CIRM does not need a $500,000-a year scientist to serve as chairman when it already as a $500,000-a-year president. If this attempt was prompted by the belief the president is not performing adequately as CIRM's chief executive, the solution is simple. You fire the president and hire a new one. You do not spend another $500,000 of taxpayers' money to create a new position of "executive chairman."

Klein has said he will not serve for more than 12 months. He also recently said he would forego his $150,000, halftime salary, a move that allowed him to take part in the closed-door discussions involving selection of a chair. The action removed an economic conflict of interest on his part.

The Odd Business of Electing a New CIRM Chair, Plus Klein Says No to Salary

CIRM Chairman Robert Klein will not accept a salary if he is re-elected as chair of the $3 billion California stem cell agency.

Klein's new position was disclosed today by James Harrison, outside counsel to the CIRM board, as part of  a response to queries dealing with executive sessions and election of a new chairman. Previously Klein said he would continue with a half-time, $150,000 salary. The top of chair's salary range hits $529,100 annually.

Klein's decision to not take a salary could allow him to take part in board discussions about a new chair that he would otherwise be excluded from on the basis that he has a conflict of interest involving a possible salary from CIRM

We posed several questions to Harrison in the wake of yesterday's two executive sessions by the CIRM board at its meeting in Irvine. However, before we go into Harrison's response, let's first look at some of the conditions that the CIRM board must deal with in electing a chair, all of which are dictated by Prop. 71, a measure written by Klein, Harrison and a handful of others. The measure also contains terms that make it nearly impossible to change even when it is obviously necessary to do so.

The 29-member CIRM board faces an odd situation. It cannot simply vote one of its members into the office of chair, as most boards might do. Under the terms of Prop. 71, four state officials nominate candidates for the job, if the officials so desire. No penalty is provided if they fail to do so. The board chooses between the four, if it so desires. If it does not, the existing chair continues in place, if he so desires. Or he could walk out the door. Or the board could make it clear that it wants the sitting chair to depart, either informally or by taking a vote of no confidence. In such a situation, presumably the statutory vice-chair, Art Torres, would assume responsibilities until the board approves a new chair.

The board has no deadline for action, other than what it self imposes. If it fails to elect a new chairman by Jan. 3, the new governor and the new lieutenant governor could withdraw the old nominations for Klein, which would take him out of the running. That would leave Torres as the only candidate, assuming that the new governor and lieutenant governor do not offer nominees of their own. Other permutations exist, but I hope readers understand that the process is – how should I say it – goofy?

The Little Hoover Commission, the state's good government agency, last year noted that the process is less than salubrious and recommended changes. However, those proposals have yet to gain much traction.

On top of all this are the state's open meeting laws. They are well-intentioned and serve to protect the public against backroom dealings, but they do make it difficult to make decisions on such sensitive and personal matters as selecting a chairman. Especially for such an ungainly and large board as CIRM's, some of whose members do not know each other well. Ordinarily, in a non-government situation, board members could chat informally and work out a choice. But not at CIRM. For example, its directors must exercise great care so that they do not inadvertently engage in a serial meeting. According to the state attorney general, a serial meeting is “a series of communications, each of which involves less than a quorum of the legislative body, but which taken as a whole involves a majority of the body’s members.” Serial meetings can even occur when surrogates (aides, staffers, etc.) are used to carry messages between board members. It almost means that a board member who wants to talk to another director about a matter must consult an attorney to be sure no law is violated by having the conversation. (Here is more on serial meetings.)

CIRM's board clearly skirted the edge of the ban on serial meetings in connection with Klein's recent unsuccessful efforts to engineer the selection of his successor. But to determine whether the edge was crossed would require an examination of all the email and phone records (home and office) of all the board members for a specific period.

But back to Harrison and his responses to the queries involving yesterday's executive sessions, here are the questions we asked Harrison. His verbatim response follows.

“Did the subject of selection of a new chairman come up during today's executive sessions? If so, please lay out the legal justification for private hearings on what is clearly intended to be a public process.

“Were Klein and Torres present for all or part of the executive sessions? Was Klein present during a presentation by Torres? Was Torres present during a presentation by Klein? On what basis were they excluded? Election of public officials usually takes place in public forums which can be attended by the candidates.

“Did the candidates make presentations to the board on behalf of their own candidacies or answer questions from directors concerning their views on CIRM and the chairmanship? 

“Besides today, has the subject of the selection of a new chairman come up in other executive sessions?”

Harrison's response:

“Prop. 71 permits the Board to convene in closed session to consider matters concerning the appointment and employment of CIRM officers and employees. (Health & Saf. Code, sec. 125290.40(d)(3)(D).) As you know,in addition to being officers of CIRM's Governing Board, the Chair and Vice Chair are also defined as "employees." Consistent with the practice it employed for the selection of Vice Chair in 2009 and the procedure adopted by the Board in August 2010, the Board met in closed session to discuss nominees for Chair and Vice Chair. The Board did not, however, take any action. Also consistent with past practice and the procedure adopted by the Board in August, there will be an opportunity for public presentations by the nominees, and the Board will take action in a public session.

“Art and Bob appeared separately before the Board to answer questions regarding their respective candidacies for Chair. To avoid any potential for a conflict of interest, neither was present while the other answered questions regarding his candidacy for Chair.

“The subject of nominees for Chair has not come up in a prior closed session.

“Bob Klein asked me to let you know that he will not accept a salary to underscore that, if elected, he only intends to serve during a transition period.”

More Than You Want to Know About Serial Meetings

Here is what the state Department of Justice has to say about serial meetings involving public agencies in California. The act referred to is the Bagley-Keene Open Meeting Act

“The Act expressly prohibits the use of direct communication, personal intermediaries, or technological devices that are employed by a majority of the members of the state body to develop a collective concurrence as to action to be taken on an item by the members of the state body outside of an open meeting. (§ 11122.5(b).)

“Typically, a serial meeting is a series of communications, each of which involves less than a quorum of the legislative body, but which taken as a whole involves a majority of the body’s members. For example, a chain of communications involving contact from member A to member B who then communicates with member C would constitute a serial meeting in the case of a five-person body. Similarly, when a person acts as the hub of a wheel (member A) and communicates individually with the various spokes (members B and C), a serial meeting has occurred. In addition, a serial meeting occurs when intermediaries for board members have a meeting to discuss issues. For example, when a representative of member A meets with representatives of members B and C to discuss an agenda item, the members have conducted a serial meeting through their representatives acting as intermediaries.
242 Ops.Cal.Atty.Gen. 61 (1963); see also 32 Ops.Cal.Atty.Gen. 240 (1958).

“In the Stockton Newspapers case, the court concluded that a series of individual telephone calls between the agency attorney and the members of the body constituted a meeting.3 In that case, the attorney individually polled the members of the body for their approval on a real estate transaction. The court concluded that even though the meeting was conducted in a serial fashion, it nevertheless was a meeting for the purposes of the Act.

“An executive officer may receive spontaneous input from board members on the agenda or on any other topic. But problems arise if there are systematic communications through which a quorum of the body acquires information or engages in debate, discussion, lobbying, or any other aspect of the deliberative process, either among themselves or between board members and the staff. Although there are no cases directly on point, if an executive officer receives the same question on substantive matters addressed in an upcoming agenda from a quorum of the body, this office recommends that a memorandum addressing these issues be provided to the body and the public so they will receive the same information.

“This office has opined that under the Brown Act (the counterpart to the Bagley-Keene Act which is applicable to local government bodies) that a majority of the board members of a local public agency may not e-mail each other to discuss current topics related to the body’s jurisdiction even if the e-mails are also sent to the secretary and chairperson of the agency, posted on the agency’s Internet website, and made available in printed form at the next public meeting of the board.4

“The prohibition applies only to communications employed by a quorum to develop a collective concurrence concerning action to be taken by the body. Conversations that advance or clarify a member’s understanding of an issue, or facilitate an agreement or compromise among members, or advance the ultimate resolution of an issue, are all examples of communications that contribute to the development of a concurrence as to action to be taken by the body.

“Accordingly, with respect to items that have been placed on an agenda or that are likely to be placed upon an agenda, members of state bodies should avoid serial communications of a substantive nature that involve a quorum of the body. In conclusion, serial meeting issues will arise most commonly in connection with rotating staff briefings, telephone calls or e-mail communications among a quorum of board members. In these situations, part of the deliberative process by which information is received and processed, mulled over and discussed, is occurring without participation of the public. Just remember, serial-meeting provisions basically mean that what the body can not do as a group it can not do through serial communications by a quorum of its members.”

No Real Problem with Canadians as CIRM Chair

A California attorney general's opinion rendered decades ago makes it abundantly clear there was no real legal barrier to a Canadian citizen serving as chairman of the state's $3 billion stem cell agency.

CIRM Chairman Robert Klein announced last week that the candidacy of Alan Bernstein, head of HIV Global Vaccine Enterprise of New York, had to be dropped because of what Klein described as a citizenship problem. Klein's announcement came after a public ruckus erupted over his attempts to maneuver Bernstein into the chair's post.

Klein referred to a California government code section that says a person cannot hold “civil office” in California without being a citizen of the state.

However, the 1978 opinion from the attorney general said,

“This section by its requirement of citizenship for the holding of a civil office is unconstitutional in that it is not narrowly and precisely drawn so as to apply only to offices whose incumbents participate directly in the formulation, execution or review of broad public policies having a substantial impact upon the public. 61 Op.Atty.Gen. 528, 12-6-78.”

In California, such attorney general opinions are the litmus test for actions by state agencies, having the force of law for all practical purposes. The attorney general's Web site says,

“The formal legal opinions of the Attorney General have been accorded 'great respect' and 'great weight' by the courts.

As reported in a previous item, Web CIRM's outside counsel, James Harrison, told us,

“We discovered the citizenship issue when Bernstein's name was mentioned as a candidate. Given the litigation CIRM has faced over the years, there was a need to be cautious and there was not sufficient time to obtain closure on this issue before the deadline for nominations. You should know that there is an AG opinion from 1978 declaring that the citizenship requirement is unconstitutional.”

Earlier we raised the question of whether the law in question would apply to CIRM President Alan Trounson, who is an Australian, and who was hired three years ago. Our reading is that it would. However, that is moot given the attorney general's opinion.

CIRM Board Meeting Back Online

The Internet audiocast of the CIRM board has resumed with discussion of changes in the biotech loan program.

CIRM Directors Resume Public Meeting

Directors of the California stem cell agency reconvened in public after a lengthy closed-door session during which they were believed to be discussing the election of a person to replace Robert Klein as chairman of the $3 billion enterprise. 

The Internet audiocast of the event was up briefly but has now vanished. 

Trounson on Recommendations of Blue-ribbon Reviewers

CIRM President Alan Trounson was generally pleased today with the report and recommendations of a  blue-ribbon panel that reviewed the $3 billion stem agency's effort.

He made a presentation to the board at its meeting today in Irvine that was a bit truncated in the Internet audiocast. However, you can find a summary of his remarks (Power Point style) here. The bulleted points are his response.

Trounson was principally responsible for the selection of the members of the panel and orchestrated the three-day October review, which was conducted almost entirely behind closed doors.

CIRM Press Release on External Review Report

The California stem cell agency today posted a press release on the report and recommendations  by a blue-ribbon review panel that were discussed today at an Irvine meeting of its board of directors. The release contains quotes from both reviewers and board members. You can find it here.

Stem Cell Agency Board Still in Closed Session

Directors of the $3 billion California stem cell agency are still meeting in closed session following a statement by its Chairman Robert Klein defending his actions in connection with an attempt to hand pick his successor.

The board went to lunch and into an executive session about two hours ago shortly after Klein orally laid out his view of what transpired in connection with the nomination of Alan Bernstein to succeed Klein. Klein did not ask for questions from the board.

We have queried the board's outside attorney, James Harrison of Remcho Johansen and Purcell of San Leandro, Ca., whether the subject of the election of a new chair is part of the executive session discussions.

Prop. 71 does not specifically provide for closed door meetings in the selection of a chair.  About the election process, it simply says,

"A chairperson and vice chairperson who shall be elected by the ICOC members. Within 40 days of the effective date of this act, each constitutional officer shall nominate a candidate for chairperson and another candidate for vice chairperson."

However, the chair and vice chair are CIRM employees by law and are entitled to salaries. Personnel matters may be considered in executive session, under state law. Most actions involving votes of the full board must occur in public.