Reader Calls for More Context and Comparison on CIRM Salaries

Jim Fossett filed a comment on the "Salary Hooha" item that deserves more attention.

Here is one key paragraph from his remarks:

"The coverage of CIRM salaries is a cheap shot calculated, and quite successfully so, to incite public outrage without providing any context or consideration of what other people doing similar kinds of jobs get. None of this context appeared in any of the original coverage and it should have."

Fossett makes a good point about the need for context by the mainstream media in reporting public salaries. We differ with him about inciting public outrage. There is no need to incite public outrage about public salaries. It has existed in abundance for years, for good and bad reasons. It is not likely to vanish, no matter how much context and comparison is provided.

CIRM is not alone in being targeted in the media in the past week or so. A proposal to pay the president of San Diego State University $400,000 and a press release on state salaries statewide also triggered hostile public commentary.

For the record, here is a list from The Sacramento Bee of the top five public salaries in California in 2009, all of which seem dubious to the California Stem Cell Report, particularly the coaches' salaries. However, that's because we believe the UC system has no business in bigtime intercollegiate athletics – that despite enjoying many football and basketball games while at UCLA. But that is a topic for another web site.

• Jeff Tedford, UC Berkeley football coach, $2,338,409.39
• Benjamin Clark Howland, UCLA basketball coach, $2,135,188.22
• Timothy H. Mccalmont, UCSF professor of medicine, $1,902,464.33
• Philip E. Leboit, UCSF professor of medicine, $1,854,158.22
• Ronald Busuttil, UCLA professor of medicine, $1,782,044.62

Fossett's comment can be seen in full at the end of the "Hooha" item.

Politics and the Price of Defiance

The California stem cell agency last month had a bit of instruction in politics when directors chose a new chairman.

Both California Gov. Jerry Brown and state Treasurer Bill Lockyer made an extra effort – beyond their nominating letters – to assure the election of their man, Jonathan Thomas, a Los Angeles bond financier, as chairman. We noted a few days ago that such episodes are not uncommon when an enterprise is reliant on public funding.

Implicit in some of the lobbying by Brown and Lockyer was the likelihood that failure to follow their lead could endanger bond funding for CIRM.

Some might think that possibility was remote, that Tamany Hall tactics are just a part of the past. Those who favor that view might want to consider the case of Democratic Assemblyman Anthony Portantino. He voted no on the recently passed state budget in defiance of legislative leaders in his own party.

Now he is being punished. His staff is being sent home for a month of unpaid leave, and he is being threatened with a cutoff of both his mail service and office supplies, according to The Sacramento Bee. Such are examples are not uncommon in California politics in one form or another.

It is something to think about as readers ponder the wisdom of CIRM directors in electing Thomas as their new chairman.

Correction

On June 23, Robert Klein, then chairman of the California stem cell agency, said that the new chairman of the enterprise would be paid $390,000 to $395,000. However, the agency says the correct figure is $400,008.

Hooha over CIRM Salaries: Cheap Shot or Legitimate News?

High government salaries are a tender, tender subject.

But are they legitimate news? An anonymous reader on Wednesday raised the question in a comment on the "public salary outrage" item on the California Stem Cell Report. The article dealt with a news story about the $400,000, part-time salary for new CIRM Chairman Jonathan Thomas.

The reader said, among other things,

"Media coverage like this has to be counted as something of a cheap shot."

The reader went on to say that the salary is not out of line with what medical school deans and top level researchers are paid.

The reader's remarks are somewhat ambiguous. It is not clear whether he or she is focusing on the Los Angeles Times story, the California Stem Cell Report's items on the subject or the public reaction based on comments on the Los Angeles Times' web site.

Let's assume that the main focus is the original Times story, which portrays Thomas' salary as excessive, comparing it unfavorably it to the much lower pay of the governor and the head of the NIH. The public reaction on the subject flows from that article by reporter Jack Dolan.

A case can be made that Thomas and CIRM President Alan Trounson ($490,000 annual salary) are paid at roughly the same level as a University of California medical school dean. Sam Hawgood, dean of the UC San Francisco medical school and a member of the CIRM board, for example was paid $572,896 in 2009, according to a Sacramento Bee database. However, CIRM's Thomas and Trounson preside over a staff of about 50 with a budget of about $18 million. Contrast that to Hawgood's staff of about 10,000 employees and budget of $1.52 billion.

However, those sorts of facts are somewhat beside the point when it comes to the news value of high state salaries. What makes them news is how they affect the public debate about government spending, perceived bureaucratic waste and ultimately the future of CIRM. Substantial segments of the California public exhibit an intense, visceral and hostile reaction to what they view as excessively generous compensation. In this case, it is a public that may well be asked to vote to give more billions to the stem cell effort in a few years. That's a reality, however unpleasant, that CIRM must deal with.

How the agency handles the issue is news as well. If CIRM cannot reframe the discussion, the entire campaign for the bond ballot measure may well center on CIRM salaries. The result could be "extinction" of CIRM, as the Los Angeles Times said Thursday in an editorial.

The California Stem Cell Report has discussed on more than one occasion both the nature of the public reaction to generous government salaries and the predilection of the mainstream media to zero in on them. Last July we wrote,

"What is important here is what the voters perceive as lavish or greedy – not the perceptions of recipients or the perceptions of those who approve the pay."

Last spring, the entire CIRM board of directors indirectly acknowledged the public relations problem with the salaries when it approved a dubious scheme to paper over them by channeling $250,000 in funds from private donors to Thomas' paycheck. If the salary is a mistake, the second mistake is trying to hornswoggle taxpayers into believing that they are not paying for it when all the funds come from public coffers.

To one former longtime newspaper editor, John M. Simpson, now stem cell project director for Consumer Watchdog of Santa Monica, Ca., coverage of CIRM salaries is not only appropriate but necessary. In a statement to the California Stem Cell Report, he said,

"It's not a cheap shot to report what salaries taxpayers are paying their public servants. It's simply basic watchdog journalism. If this sort of reporting had happened in the mainstream media before the vote, perhaps the outcome would have been far different."

Simpson continued,

"Perhaps the (medical school) deans on the (CIRM) board weren't troubled by the eye-popping salary because they make so much themselves. They need to think like the average person when evaluating salaries. It's clear that a well-qualified candidate was available at a fraction of the cost."

Nonetheless, in some ways, the hooha about salaries is a sideshow. The money amounts to only a tiny fraction of the $3 billion that CIRM is handing out. Meanwhile, other difficult issues remain unexamined by the mainstream media including:

• Conflicts of interest on the part of scientists who make, in secret,  the de facto decisions on grants,
• CIRM's strategy, including whether CIRM has missed or is missing profitable areas of research, as well as management of its grant portfolio, including whether the agency has the stomach to pull grants from big-name, non-performing scientists and
• CIRM's grant management system, which remains a work-in-progress, and needs close attention by directors, particularly with an eye to protecting IP and proprietary information from unprincipled biotech companies and hackers.

Simpson's complete remarks can be found here. The anonymous reader's comments about "cheap shots" can be found at the end of "outrage" item.

Here is an updated reading list on CIRM salaries. More information can be found by searching on the Internet used the terms "cirm salaries" or "california stem cell salaries."
CSCR Reading List: Compensation at the California Stem Cell Agency

Simpson on Salary Coverage: Basic Journalism

Here is a statement by John M. Simpson, stem cell project director for Consumer Watchdog of Santa Monica, Ca., concerning questions about news coverage of the $400,000 salary of the chairman of the California stem cell agency. Prior to joining Consumer Watchdog, Simpson had a long career as a newspaper editor. His statement came in response to an anonymous comment on the "salary outrage" item on the California Stem Cell Report. The comment can be found at the end of that item. What follows here is Simpson's statement.

"It's not a cheap shot to report what salaries taxpayers are paying their public servants. It's simply basic watchdog journalism. If this sort of reporting had happened in the mainstream media before the vote, perhaps the outcome would have been far different.

"The comparison to medical school deans' salaries is inappropriate.  CIRM is a 50-person state agency dedicated to funding research. It does what NIH does, except on a much smaller scale. Being the dean of a medical school is far more complex and demanding than being the Chair of CIRM, a part-time job, that should be an oversight function.

"Perhaps the deans on the board weren't troubled by the eye-popping salary because they make so much themselves. They need to think like the average person when evaluating salaries. It's clear that a well-qualified candidate was available at a fraction of the cost.

"So what if the NIH director took a cut in salary when he assumed that position? That's what the idea of public service is all about.  The salary should be reasonable, but one ought not to be able to feather the nest on the taxpayer's dime.  No mater how you spin it, $400,000 for a four-day-a-week job is too much money.

"There are questions that need to be answered.  When does Jonathan Thomas vest in the state's pension fund? What will his benefit be?"

LA Times Editorial on New CIRM Chair: Tin Ears and Extinction

The Los Angeles Times said this morning that it suspects that the election of Jonathan Thomas as chairman of the $3 billion California stem cell agency "will go a long way toward assuring the institute's extinction."

In an editorial, the state's largest circulation newspaper said,

"It always annoys voters to discover that government workers make more than they do, but what especially rankles about Thomas' big paycheck is that his hiring comes at a time when most state agencies are making radical cutbacks and when the institute itself is considering a ballot measure to ask voters for billions in new funding."

The editorial is the latest in several negative pieces in the mainstream media about the choice of Thomas, a Los Angeles bond financier, to become chairman. The articles focus primarily on Thomas' $400,000, part-time (80 percent) salary.

The Times wrote,

"The new head of California's stem cell research agency, which has a staff of 50, not only makes more money than the governor, he makes twice as much as the chief of the National Institutes of Health, which has 17,000 employees. Does that make him overpaid? Not necessarily. But it does make the board that hired him remarkably tin-eared about politics."

The editorial did note that "it's possible" that Thomas "could earn his big bucks," given his background in finance, if CIRM is forced to try to sell state bonds privately.

The selection of Thomas also drew attention this week in the San Francisco Bay Area in a commentary by San Francisco Chronicle columnist Phil Matier in a report on KCBS television station.

The station picked up the LA Times news story on Thomas' salary, adding that it was one of the highest in state government. Matier said during the news story that it was all part of the "birth of a bureaucracy." He said voters shouldn't expect a stem cell breakthrough for another 10 years. He also called CIRM the "high speed rail of medicine." For non-Californians, that is a reference to another multibillion dollar California bond program that is staggering under heavy public criticism.

In another commentary on a blog called Secondhand Smoke, Wesley J. Smith, author and bioethicist, posted a video of the song "Hey Big Spender." Smith wrote,

"The state is sinking financially.  Cutbacks are being forced across the board.  But not at the CIRM....

"These people live in a different world of 'entitlement' (there’s another word) and 'luxury.'  This is just another reason for the people of California to turn off the borrowing money spigot in 2014."

Prior to the LA Times salary story, Pete Shanks of the Center for Genetics and Society of Berkeley, Ca., on June 29 wrapped up the election of Thomas on its Biopolitical Times blog, quoting John M. Simpson of Consumer Watchdog of Santa Monica, Ca. Simpson said that the selection of Thomas is "a public relations disaster from which the stem cell agency will never recover."

For other articles on the Thomas election and the situation at CIRM, see here, here, here, here and here.

Minimal Donor Restrictions on Use of Funds by CIRM

Reader Jim Fossett today raised a good point in connection with the use of donated funds by the California stem cell agency, some of which is going to pay the new chairman's salary.

Fossett said in a comment that donors may place restrictions on the use of their donations, which do not amount to a great deal of money relative to CIRM's $3 billion. (Fossett's full comment can be found at the end of the "private money" item.) The agency currently has about $2.8 million in donor funds on hand, but has committed $700,000 of that for an Institute of Medicine study of CIRM and $250,000 annually for the chairman's salary.

We asked CIRM's outside counsel, James Harrison, whether any donors had placed restrictions on the funds.

Harrison promptly replied,

"Some of the donors placed restrictions on the use of their funds. For example, donations from private foundations include a restriction on the use of funds for lobbying purposes. I don't recall any other restrictions."

The reason for the restriction on lobbying expenditures? Some nonprofits can endanger their nonprofit status if they engage in lobbying activities.

On another donated fund note, Nature magazine on June 29 carried a statement from Jonathan Thomas, the CIRM board's new chair, saying,

"CIRM has received close to $900 million in private donations above and beyond the money from private-bond proceeds."

We asked CIRM Communications Chief Don Gibbons about that figure. He replied,

"He(Thomas) was referring to the $880 million in donor and other leveraged funds that our 12 major facilities attracted. So, those were not donations to CIRM, rather donations to CIRM-backed projects that benefitted the state."

Politics and Stem Cells California Style: More to Come in the Next Few Years

Seven years ago, backers of the ballot initiative that created the $3 billion California stem cell agency promised that it would take the politics out of stem cell research.

But, as the directors of the research enterprise discovered last month, that is far from the case. California Gov. Jerry Brown and state Treasurer Bill Lockyer exercised their governmental perogatives and lobbied persuasively on behalf of their nominee, Jonathan Thomas, to chair the board for the next six years.

Some of the 29 board members looked askance at what they regarded as arm-twisting. They noted that the formal name of the CIRM governing board is the Independent Citizens Oversight Committee and placed the emphasis on the word "independent." But, like other parts of Prop. 71, the name is more of a political marketing gimmick aimed at voters in 2004 than a reflection of reality.

The fact is that when you have your snout in the public trough, you are always subject to political pressures. That is the nature of government in the United States.

Nonetheless, we should add that former CIRM Chairman Robert Klein, a real estate investment banker, and a handful of his associates who drafted Prop. 71, have been successful in isolating the stem cell agency from other political maneuvers – well-intentioned or otherwise. Under the initiative, the governor and state lawmakers cannot get their hands on CIRM funds or fiddle with its budget. Another provision of Prop. 71 mandates that even the tiniest changes in the law dealing with CIRM require the same kind of supermajority vote that has crippled California's state budget process. Some of Prop. 71's provisions cannot even be changed short of another vote of the people.

All of which has a downside. Under the ballot measure, CIRM dodged conventional state budgetary funding. Instead it required funding through state bonds – borrowed money that flows directly to the agency. But with interest, that means that a $20 million research grant really costs California taxpayers roughly $40 million. And the $490,000 salary of CIRM President Alan Trounson really costs nearly $1 million.

While some CIRM directors took umbrage at the lobbying by Brown and Lockyer, one should expect no less from public officials who have a keen sense of both their power and responsibilities. They are elected because voters generally trust their judgment – at least at the time of the election – and expect them to exercise their authority. Indeed, do-nothing lawmakers are one of the reasons the public is less than enchanted with affairs under the Capitol dome.

As for the next six years, directors of the stem cell agency will be increasingly immersed in political and electoral matters if they want to extend the life of CIRM beyond 2017 or so, when bond funds will run out.

By electing Thomas, CIRM directors clearly indicated their priorities are cash. They are concerned with both short and long term financing of the agency. "Without money, there will be no research," one director told the California Stem Cell Report. Thomas has made a career in bond financing. His scientific background was minimal when compared to rival candidate Frank Litvack, a cardiologist and medical science enterpreneuer.

Thomas is talking about raising money privately, but the main source of funds will be billions more in state bonds. That will require voter approval, and right now that is extremely unlikely given the state's financial crisis and CIRM's limited accomplishments, which have little public visibility. To persuade voters in 2014 or 2016, the agency will need results that will resonate with the public, creating a virtual rush to provide more billions to CIRM.

One of Thomas' major initiatives is do just that, through both aggressive funding of research more likely to produce a clinical therapy and better marketing of the agency to the public. A "communications war" is how he describes it. The agency is now seeking a $200,000-a-year public relations field marshal to direct it.

CIRM will be dancing close to the edge in terms of appropriate use of public funds. Electoral campaigning on the taxpayer's dollar is generally not acceptable and can even be illegal. At the same time, the agency has a responsibility to inform the public about its activities. Should the agency slip over the edge, it could generate a scandal that could doom a new bond measure.

CIRM must also move so that a bond measure will be supported by the governor, treasurer, controller and lieutenant governor, the very same Democratic political officials who nominate candidates for chairman and appoint many of the CIRM board members. The preferred position would be one of support although neutral would be tolerable. Outright opposition by the governor, which is conceivable given the state's financial condition, is likely to be fatal for a bond measure.

Then there is the matter of raising anywhere from $30 to $40 million or more to actually finance the ballot campaign. Who will be the major donors? Will they represent or have ties to current applicants or future applicants for CIRM's billions? Another touchy issue.

Thomas is short on political experience, but standing by is CIRM's Co-vice Chairman Art Torres, former head of the state Democratic Party. In the wings as CIRM's chairman emeritus is Robert Klein, who headed the 2004 campaign for Prop. 71, although his role is likely to be circumscribed at the agency if Thomas is to be truly effective.

The California stem cell agency has made a significant mark in the world of stem cell science, according to its supporters, although it has not fulfilled the generous and overstated promises of the 2004 campaign. Thomas' political and financial challenges are daunting. That is not to mention major scientific issues as well as the strategic direction of CIRM. If Thomas is not successful, the Los Angeles bond financier could be well be the last chairman of the California Institute for Regenerative Medicine.

CIRM Salaries Spark Outrage from LA Times Readers

"Rathole," "Alice in Wonderland," "shut the whole thing down," "they just lost my vote" – some of the reaction to the Los Angeles Times story this morning about the California stem cell agency.

By 3:10 p.m., 142 Times readers had commented – mostly angrily – about CIRM and its salaries, particularly the $400,000 pay for Chairman Jonathan Thomas for a four-day work week. The article  by Jack Dolan was among the top five most emailed stories on the LA Times web site. The article was promoted on the front page of the print edition of the Times. By mid-afternoon today, the story was "recommended" 142 times on Facebook and "tweeted" 58 times, drawing even more unpleasant attention to CIRM.

Obviously, the negative comments are coming from the people who feel the most strongly about the subject and do not necessarily represent a complete view of the sentiments of all readers. And the number of comments is not huge. But they do illustrate the serious PR problem facing CIRM as it ponders whether it should go to the ballot in the next few years and ask voters for another $3 billion to $5 billion.

One can only imagine what the opposition will do when it wraps some of these comments into a TV ad against such a bond measure.

Not all of the comments amounted to simple anti-government venom, however.

One reader wrote,

"Okay let's pretend an agency chairman's main job is fund raising and not running the agency, not evaluating the research, and not recruiting the best researchers.  Shouldn't we give him a small salary plus commission?  Wouldn't that focus him more on successful fundraising?"

Another wrote,

"The Bush-era stem-cell-research restrictions are gone. If the scientists are good enough, they will be able to compete successfully for grants from the National Institutes of Health (your federal tax dollars hard at work). If they are really good, and really lucky, they will be able to get funding from the Howard Hughes Medical Institute. There is no longer a reason for this separate California stem cell agency to exist. It's a boondoggle. But like so many government programs, it has taken on a life of its own, and it will consume vast amounts of wealth fighting for its own survival. It's time to shut them down. "

The story received front page attention in the print edition of the Times, a rare occurrence for a story about the stem cell agency. The paper carried the following tease on page one to the article. We should note that the tease may be all that many readers actually read.

"High salaries at state’s stem cell agency
"It will pay its new part-time chairman $400,000, pushing the combined annual income of its two top officials to nearly $1 million."

More media unpleasantness may be in the works for CIRM. If the Times works like most newspapers, an editorial critical of the agency is likely to appear in the next few days.

LA Times on $400,000 CIRM Chair Salary: Not a Clipping for CIRM to Parade Around

Until today, the Los Angeles Times, California's largest circulation newspaper, has remained silent on the election 11 days ago of bond financier Jonathan Thomas as the new chairman of the California stem cell agency.

The Times' first story on Thomas' election, however, was not the sort of good news that Thomas has made one of his top priorities in his new post at the $3 billion enterprise.

The piece by reporter Jack Dolan focused on Thomas' $400,000 salary for part-time work (80 percent) as well as other salaries at the agency. And they were not placed in a favorable context.

The first three paragraphs of the story said,

"California's stem-cell research agency says it needs billions more taxpayer dollars to deliver on promised cures to major diseases. Yet at a time when other departments are cutting back spending, the agency recently agreed to pay its new boss one of the highest salaries in state government.

"The 50-person grant-making body will pay a Los Angeles investment banker $400,000 to serve as its new part-time board chairman, pushing the combined salaries of its two top officials to nearly $1 million per year.

"Santa Monica-based Saybrook Capital founder Jonathan Thomas - chosen over a former cardiologist who was willing to take the job for less than half the salary - said his pay is 'reasonable' because he has the background to help the agency raise the money it needs to survive. 'Without funding, everything else suffers,' Thomas said."

The story appears to be destined for publication in tomorrow's Los Angeles Times and will probably receive prominent play, perhaps even page one. But the piece first surfaced, as best we can tell, on the web site of the Bellingham Herald in the state of Washington. Presumably the paper subscribes to the Times news service, and the story was posted automatically to the Bellingham web site. (The Times has now posted the story, which can be found here on its web site.)

Dolan's story noted that Thomas' well-qualified rival for the chairman's job, Los Angeles cardiologist Frank Litvack, would have served for $123,000 a year. Dolan quoted John M. Simpson of Consumer Watchdog of Santa Monica, Ca., as saying that the decision on Thomas was "tone-deaf" in a state mired in a financial crisis. Simpson said it will come back to haunt the agency.

The last two paragraphs of the Times story said that Thomas told CIRM directors last month that "they were in a 'communications war' in which 'the world seems to be focused on internal issues instead of the grand big picture' of the institute's mission to cure disease.

"His solution? In late June the agency posted an ad for a new public relations director who will make as much as $208,520 per year."

Private Money for Stem Cell Agency: 'Not That Simple'

The new chairman of the California stem cell agency, Jonathan Thomas, is talking about raising vast sums of money from the private sector to support CIRM's research efforts – enough to significantly reduce the size of another state bond measure that could run as high as $5 billion.

The proposal may be necessary at a time when state government is slashing services for the poor, elderly and children, but it raises a number of major ethical questions. Coincidentally, the Los Angeles Times last week addressed some of those questions, albeit in a different area of government.

Here is what Thomas told Nature magazine,

"I think that the agency could put together a non-profit fund into which would go donations from individuals of high net worth or medical foundations. If it is very successful you might reduce the amount of general-obligation bond authorization that you would go for in 2014 or 2016."

On July 1, The Times editorialized on the matter of private funds going to help support the governor and schools. It also suggested some common sense rules that should be applied in such cases. The Times said,

"Last Sunday(June 26), The Times reported that Gov. Jerry Brown has been taking thousands of dollars each month from donors to pay the rent on his Sacramento loft, while refusing his official state housing stipend.

"In the same day's paper, it was reported that as part of a "public-private partnership," corporations and foundations would pay several million dollars toward the successful Summer Night Lights anti-gang program in L.A. parks this year. And a few weeks earlier, the paper noted that the Los Angeles Unified School District was taking money from developer Eli Broad, entrepreneur Casey Wasserman and the Bill & Melinda Gates Foundation to pay the salaries of about 20 top officials in the school bureaucracy.

"In each of these cases, government officials are accepting private dollars to cover the kind of costs that used to be borne by the taxpayers. And why shouldn't they? Times are tough and money is scarce. The state and city are cutting billions of dollars' worth of vital services, and struggling Californians seem strongly disinclined to tax themselves further to pay for the common good.

"So if a generous, civic-minded citizen like Broad, or a rich corporation like Wal-Mart or AT&T, offers to step forward to fill some of the gaps, it would be foolish to say no, right?

"Unfortunately, it's not always that simple."

The Times noted that donors may be seeking to curry favor with the governmental recipients. They may seek contracts or simply priority access to important governmental agencies or officials. Their donations could skew the actions on the part of the recipients. The Times did not say private donations should be barred but came up with a "few basic rules" to help address what may be a burgeoning trend in California government.

The proposed "rules" represent something for the CIRM board to consider as it moves ahead on financing issues. Here are the rules in abbreviated form.

• "When private donors give money to help government do its job, the law should require that the donor's name and affiliation be disclosed. (In the case of CIRM, it should simply disclose the names as it has in the past and not wait for passage of a new law.)
• "Private donors should be required to disclose whether they have any direct interest in pending legislation or are seeking government contracts or other assistance. Transparency is essential so the public can make judgments about potential conflicts of interest."
• "If private money is accepted, it should be used to advance the goals of the government, not the giver."
• "Private money shouldn't pay the personal expenses of public officials or enrich them in any way."

The Times concluded:

"All in all, the system works best when government pays for government. Not only is it ethically complicated to rely on private dollars, but even Bill Gates and Eli Broad don't have enough money to fund California for very long. The state's voters have to acknowledge eventually that if they still want to live in a first-class state with the kind of services they've long been used to — great and affordable state universities, safe streets, magnificent parks, public schools that rival any in the nation, and a safety net for those who fall on hard times — they're going to have to pay for those things. For too long, Californians have been encouraged by politicians to believe that they can have all the services they want without the responsibility of paying for them. That myth has been shattered. And there aren't enough white-knight billionaires to make up the difference."

Thomas: No Conflicts of Interest with Bond Investment Firm

Jonathan Thomas, the newly elected chairman of the $3 billion California stem cell agency, plans to continue his financial ties to a Southern California bond investment firm.

Thomas, who is being paid $400,000 annually by CIRM for four days of work each week, said no conflict of interest exists in his relationship with Saybrook Capital of Santa Monica, Ca. Thomas co-founded the firm and is currently a partner.

In response to an inquiry from the California Stem Cell Report, Thomas said in an email,

"I checked with Board counsel again on the Saybrook issue.  My relationship with Saybrook does not create a real or perceived conflict for me as Chair of CIRM's Governing Board.  Saybrook is not involved in the issuance or underwriting of State General Obligation bonds.  Indeed, Saybrook stopped underwriting muni bonds altogether over 10 years ago when it raised its first distressed muni fund. That fund and the subsequent funds in the series are focused principally on distressed corporate-backed or project-backed municipal bonds.  Furthermore, even if we were still in the underwriting business (which we're not and will not be in the future), the State Treasurer, not CIRM, decides who the State will work with to issue bonds on behalf of CIRM and other state agencies.  In light of these facts, I do not believe there is a perceived conflict, much less a real one.  I will, of course, work with CIRM's counsel to ensure that I comply with the letter and spirit of California's conflict of interest laws."

CIRM's New Chair to Sell Stem Cell Stocks Shortly but Continue Link with Bond Firm

The new chairman of the $3 billion California stem cell agency, Jonathan Thomas, says he will soon sell his interests in a California stem cell company but will retain his financial ties to a bond investment firm, pending a double-check with the agency's outside counsel.

As part of his pitch for the $400,000 post as the chair of CIRM, Thomas, a bond financier and partner in Saybrook Capital of Santa Monica, Ca., said he led an earlier round of financing for Advanced Cell Technology, also of Santa Monica, Ca. He said he still owned a "small portion" of the company's stock and was prepared to liquidate it to avoid any conflicts. He also said he has no other "actual or potential conflicts."

The California Stem Cell Report queried Thomas via email concerning the timing of the sale and also his relationship with Saybrook. The firm posted a news release this week congratulating Thomas and declaring that it was looking forward to a continuing and flourishing relationship with him.

In response to our query, Thomas, who is being paid $400,000 a year for 4/5 time by CIRM, said,

"With respect to ACT, I will be selling my interests very shortly.  Re Saybrook, we don't buy or underwrite (nor have ever bought or underwritten) any State of California GO's (state general obligation bonds).  No conflict of any kind there.  Re severing ties with Saybrook, I have been previously advised that there are no conflicts maintaining affiliations with the firm.  Just to get additional input on both issues, though, I will check again with (the CIRM) Board counsel and advise."

(Thomas later said that no conflicts existed with Saybrook and indicated he was continuing his financial relationship with the firm.)

Advanced Cell Technology reportedly applied for a loan in the $50 million CIRM clinical trial round this spring. No action was reported on the application, but financial scuttlebutt has it that ACT is line for a CIRM loan later this year.

As for the California state bonds, the stem cell agency relies on the state to borrow money for its funding and has no other real source of cash. Saybrook specializes in distressed government bonds. Currently California has the lowest bond rankings of any state in the nation.

Prior to the election for chairman, we asked the CIRM board counsel, James Harrison of Remcho Johansen & Purcell of San Leandro, Ca., whether the board required the chair candidates, including Thomas, to file a written disclosure of financial interest. Harrison said,

"We have discussed the state's disclosure and disqualification rules with both candidates."

But he said no written disclosure was required in advance of board action.

As of this year, the stem cell agency has begun posting the state-required financial disclosure forms of its board members and top officials. Thomas is required to file his within 30 days of assuming office, which would be July 23.

As chair, Thomas will be working with the office of state Treasurer Bill Lockyer, who controls the sale of state bonds. One of the mechanisms Thomas will operate through is the California Stem Cell Research and Cures Finance Committee, a six-member body created by Prop. 71, which also created the stem cell agency. The committee determines whether it is "necessary or desirable" to sell bonds for CIRM. In addition to sitting on the committee, Thomas can appoint two members. The other members are the state treasurer, state controller and state director of finance.

In its press release on Thomas, Saybrook said,

"'JT (Jon Thomas) is the best man for the job. I’ve known him since our high school tennis days and he brings an impressive skill set to the position,' said Jon Schotz, partner at Saybrook Capital, LLC and Jon Thomas’s graduate school roommate at Yale.

"Jonathan Rosenthal, also a partner at Saybrook Capital, LLC says: 'I couldn’t be happier for JT. We’ve had a wonderful partnership and friendship for the past 20 years and expect that it will continue to flourish.'"

Fix on Bad Link to San Diego Editorial

We had a bad link to an editorial in the San Diego Union-Tribune in the media coverage item yesterday. You can the piece here.

CIRM Media Coverage: PR Problems, Salary Issues and Bond Election

The California stem cell agency has picked up additional media coverage this week, including a Q & A on Nature magazine's web site in which CIRM's new chairman stressed the need for better PR.

Also appearing this morning was an editorial in the San Diego Union-Tribune and, earlier this week, an item in a political column in the San Francisco Chronicle.

But first the piece in Nature, written by Erika Check Hayden. It consisted of questions and answers from Jonathan Thomas, who was elected chairman last week.

Here is the first question and answer:

"Name one thing that needs to change at CIRM and one thing that the agency is doing well.

"The agency is doing a fantastic job of developing projects that are on the cutting edge of science, and going after a wide range of currently incurable diseases. The science side is a huge success.

"But the public-communication and information efforts need to be dramatically improved. The agency has done a very good job of informing the scientific media about the projects that it has funded, but I don't think it has given sufficient attention to educating the public or the elected officials that oversee the agency. So I am starting a robust public-communication programme."

Hayden also asked about Thomas' $400,000 salary, which is part of the public relations problem facing CIRM. Nature wrote,

"You will be paid US$400,000 a year. Why do you deserve a higher salary than the governor of California or the director of the National Institutes of Health?

"The voters approved the maximum salary for the position to be a little over $500,000. (clarification: Proposition 71 did not state a salary for the CIRM chair; it directed the board to set the chair's salary. The board did this 2008. See 'Salary for CIRM head despite deficit') The board felt that it was a job that would take up 80% of the incumbent's time. My feeling is that if there's somebody that you really want in the position, that somebody should be paid commensurate with what the voters approved. So 80% of $500,000 is $400,000, and I believe that salary is in keeping with voter intent."

The parenthetical clarification is from Nature – not the California Stem Cell Report – but it is an accurate description of how salaries are set at CIRM. If a $500,000 salary had been included in the ballot measure, it probably would have doomed the initiative's chances at the polls.

Thomas also discussed a possible bond election, perhaps as much as $5 billion, to provide more funds for CIRM. He also briefly discussed creation of a nonprofit organization to help reduce the size of the proposed bond issue. CIRM will be making its last grants in just four years or so, depending on its burn rate.

The San Diego editorial said that the stem cell agency is "at its most critical stage since its creation." The newspaper wrote,

"And it is our guess that many who have followed CIRM would agree that the institute’s awkward overlapping management structure, the controversies over conflicts of interest, its internal and external politicking, and the lack of legislative oversight were not what they bargained for when they voted for it."

The editorial concluded,

"Stem cell research remains one of the most exciting and important fields in medicine. With a new era beginning at CIRM, it is our hope that headlines to come can highlight the scientific successes and not the managerial failings."

 The San Francisco Chronicle's Matier and Ross column on Monday reported the election of Thomas. The column said Thomas' salary will include $250,000 in private funds, which is incorrect. The funds are public. They were donated to the state some years ago by private individuals to be used as the agency wished. Outgoing Chairman Robert Klein and the CIRM board are trying to avoid public outrage at the salary by using the funds from the donors and portraying them as non-public.

Stem Cell Agency Seeking High Level PR Person; Salary Could Top $200,000

The California stem cell agency is seeking to hire a public relations person at a salary of up to $208,250 to peddle the good news about its efforts and pave the way for voter approval of a $3 billion to $5 billion state bond issue.

The CIRM board approved the position last week. It was promptly posted yesterday on the CIRM web site.

The job description does not mention the bond measure, but that is clearly in the minds of the board. Last week, they chose a man to head the $3 billion agency who says it is in "communications war." Jonathan Thomas, a Los Angeles bond financier, said he is embarking on a misssion to tell CIRM's "great story" and assure its continued financing.

The new PR person will work under the direction of Thomas and Co-vice Chairman Art Torres, a former longtime state legislator and head of the state Democratic Party. Torres himself has a better-than-average understanding of PR and what it takes to win elections. Torres is also chair of the CIRM board's Communications Subcommittee.

The salary for the new position, with a range from $139,048 to $208,520, is likely raise some eyebrows. It could exceed that of the head of the NIH, who earns $200,000 and oversees a $40 billion budget, but who is obviously underpaid. It is certain to exceed that of the media director for the University of California system, who earned $110,437 in 2009 and that of the communications chief at UCLA, who was paid $156,180 in 2009.  The chief communications officer at CIRM was paid $194,409 in 2010, but the new person is virtually certain to be paid more. (The salary figures were reported by The Sacramento Bee's state salary database.)

Significantly, the position – director of public communications -- is within the chairman's office and not the office of the president of CIRM, Alan Trounson. Left within Trounson's purview, perhaps only nominally in terms of its strategic direction, is scientific communications. The California Stem Cell Report has commented earlier on the difficulty of running a PR operation with a bifurcated structure.


The job description makes it clear that the new PR person will be contracting with an outside firm for additional help. The description also indicated that CIRM expects to see "quantitative and qualitative growth" in media coverage of the stem cell research effort.

Sacramento Bee: 'CIRM Is In Trouble'

The Sacramento Bee today editorialized on the election of Jonathan Thomas as chairman of the $3 billion California stem cell agency in a commentary headlined "Salary for new CIRM chief does not bode well."

The Bee said,

"Although Thomas comes with an impressive background in the financing world, his salary adds to a management overhead that already is excessive at CIRM. Moreover, it perpetuates a dual-executive arrangement at CIRM that is unusual for a scientific institute and inevitably create conflicts."

The Bee said,

"Robert Klein II, chairman and initiative kingpin of California's stem-cell research agency, has stepped down. Given our assessment of Klein's imperious operating style, you might think that champagne corks would be flying. That is not the case.

"Although Klein no longer is acting in an official capacity, the oversight board of the California Institute for Regenerative Medicine decided last week to choose a successor with ties to Klein. To make matters worse, this new chairman – Los Angeles bond financier Jonathan Thomas – will be paid nearly $400,000 for the job."

The Bee continued,

"CIRM is in trouble. It has poured billions into research grants, but is running out of money and has shown itself to be inept at basic governmental functions. Oversight board members are frustrated that basic information about grants and board decisions can't get posted on the institute's website in a timely manner. Members of the public are even more frustrated.
Can Thomas bring a new culture to CIRM? If he can, it might – just might – justify his salary."

As of about 9 a.m. today, the editorial had drawn eight comments from Bee readers. None reflected favorably on CIRM.

Stem Cell Agency's New Chief Heads for BIO

Jon Thomas (right) presided briefly at the end of the CIRM board meeting last week on a resolution
 honoring outgoing Chairman Robert Klein (left). Co-vice
Chairman Art Torres is in the center of the photo. 

SAN DIEGO, Ca. – The newly minted chairman of the $3 billion California stem cell agency kicks off his first full week today with a trip to the mammoth BIO convention in Washington, D.C., to spread the word about CIRM and learn about the latest the biotech industry has to offer.

Jonathan Thomas, who won his $400,000-a-year post on a 14-11 vote by the CIRM board here last week, told the California Stem Cell Report last Thursday that for the next couple of weeks he will be "generally setting up shop." The Los Angeles bond financier expects to spend some time at CIRM headquarters in San Francisco following the BIO meeting.

Once past the initial stages, he estimated that he would be spending one to two days a week in San Francisco and more as needed. He said there is "no substitute for a personal presence."

One of his priorities, he said, will be trying to "get the facts out to the public" about CIRM. In a statement to the CIRM board last Wednesday, he said the agency is engaged in "a communications war." He said CIRM's successes are not well-known.

As for the BIO convention, it is the premier biotech industry event of the year with about 15,000 attendees and 17,000 "business partnering meetings." Presumably other CIRM executives will be attending the session in addition to Thomas.

'A Critical Crossroads:' California Stem Cell Agency's Finances and 'Communications War'

The new chairman of the California stem cell agency, Jonathan Thomas, last week spoke more forthrightly in public about the financial condition of the research effort than we have heard from other CIRM officials.

Thomas also addressed the "communications war" involving the $3 billion research endeavor along with the dual executive arrangement at CIRM. In a conversation at last week's meeting of the CIRM board, he took issue with the coverage of the management structure by the California Stem Cell Report.  Thomas said his prepared statement would more clearly represent his position on the much-criticized arrangement.

Here are excerpts from his remarks dealing with those three areas. The full text of his remarks, which he provided at the request of this blog, can be found at the end of this item.

Thomas summarized the "huge success" story of CIRM and then said,

"Having said all that, CIRM is at a critical crossroads in its history. As the events of the past week continue to remind us, California is in a state of full-out fiscal crisis. No one knows when it will end or how it will ultimately play out. As a result, the agency faces the real possibility that it will not have timely access to the amount of bond proceeds it expected and may be forced to look elsewhere in very short order to the full funding required to meet its projected short term needs or to evaluate how to push grants out or otherwise modify expenses if that becomes necessary. And let's not kid ourselves – this problem could last for a long time. As a result the medium and long term funding questions are no less profound. As the agency enters a translation phase with the goal of getting more and more products into clinical trials, will CIRM be able to help its grantee and loan recipients get the money they need to cover this most expensive part of therapy development? Will CIRM be able to line up funding to sustain it beyond the target last award in 2017? These are huge questions. 

"On other fronts, the agency is in the middle of a communications war. In spite of its great story, the world seems to be focused on internal issues instead of the grand, big picture. These negative impressions distract from CIRM's mission and unnecessarily create adversaries where there would be many fewer if the true story were known. For that reason, CIRM must mount a robust public communications and information effort to get the message out. Front and center in any public communications stragetgy must be the patient advocates and their vast networks. These are the people that it's all about. When you tell their stories, you put a real life face on the marvelous science and cannot help but compel public enthusiasm and compassion."

On the subject of the shared responsibilities of the chair and the president, Thomas said,

"On reading the statute (Prop. 71), the positions of chair and president are designed to be complementary, not overlapping. When carried out as defined in a collaborative and respectful manner, they should together provide 100 percent of what the agency needs to be effective.

"On this latter point, some have decried having two chief executives. I couldn't agree more. If elected, I would attend to my many responsibilities and would expect (CIRM President) Alan (Trounson) to do the same. I would not look to micromanage but would instead empower Alan to handle his considerable job duties. He and I spoke on Sunday on this very issue and agreed that a complimentary, highly collaborative relationship was the best way to bring the agency towards fulfilling its goals."

Here is the full text of Thomas' remarks.
Statement by Jonathan Thomas to CIRM governing board 6-22-11

Nature Magazine's Brief Take on CIRM Chair Election

A Nature magazine blog has carried a brief item on the California stem cell agency's new chairman with the headline reading "Bond king elected as new CIRM chief."

The three-paragraph story by Elie Dolgin was routine although it did point out that Jonathan Thomas' parttime (80 percent) salary of around $400,000 is well above that of the $173,987 for California Gov. Jerry Brown.

The story ran June 23 on Spoonful of Medicine June 23.

NY Times and San Diego UT on New CIRM Chair; LA Times and SF Chron Ignore Election

The New York Times and the San Diego Union-Tribune have published the most comprehensive stories on the election of Jonathan Thomas as chairman of the California stem cell agency, including brief updates on CIRM's progress.

The Times article was posted yesterday on its web site. Andrew Pollack wrote that Thomas was "taking over at a time when the state's fiscal crisis could jeopardize financing for the effort." Pollack wrote that Thomas' financial experience

"... including dealing with government bond issues, seemed to appeal to the (agency's) board. The stem cell effort is financed through bond sales so it has actually been quite well insulated from the budget deficits that have forced huge cuts to many other state programs, including the University of California system.

"Still, the state’s fiscal crisis is now impeding the ability of the state to sell new bonds. That could eventually leave the stem cell agency short of funds, though probably not until next year."

Pollack also mentioned differences between Thomas and Frank Litvack, the other candidate for CIRM chair and a Los Angeles cardiologist, concerning the dual executive arrangement at CIRM. Litvack said the chair's job should be parttime and concerned mainly with oversight. Pollack continued,

"But Mr. Thomas said there was enough work for the chairman to do full time, without conflict with the role of the president."

Pollack's story summarized the current state of CIRM's efforts with three paragraphs:

"Scientifically, it is still too early to determine how successful the program will be. Certainly, it has not yet produced the cures for various diseases that were promised to voters, but realistically it is too early to expect that.

"But from a governance point of view the agency has been criticized by consumer groups, a state commission and newspaper editorials for lack of accountability, an unwieldy structure and conflicts of interest. Many members of the board represent universities and hospitals that receive funding from the agency, though members are not allowed to vote on items that concern their employer.

"The agency is now shifting its emphasis from basic research toward testing potential new therapies in clinical trials, which means it will be giving more of its money to biotechnology companies in the future."

Darce's piece covered more of the debate about the chairmanship. Additionally, Darce wrote:

"The new chairman said he also will try to clean up the institute’s image by launching a public relations campaign focusing on the scientists who have received state funding and the work they have produced.

"'If the true nature of what CIRM does became common knowledge, then the people of California would see this as the amazing success story that it is,' Thomas said. 'They would be very proud to know that California has become the largest center for stem cell research in the world.'"

The Los Angeles Times, the state's largest circulation newspaper, and the San Francisco Chronicle (CIRM's headquarters is in San Francisco) so far have not published any stories on Thomas' election.

Science magazine has carried a brief item by Greg Miller on the election.

Here is CIRM's press release on the election. It does not mention Thomas' $400,000 salary or the actual vote, which is not unexpected for a press release, but which is basic information for a news story.

The Sacramento Bee's story yesterday has triggered 44 comments as of this morning, mostly hostile because of Thomas' salary. But the number of comments is modest compared to other, more high profile stories.

Public Already Commenting Negatively on $400,000 Salary for New CIRM Chair

Initial mainstream media reports about the $400,000 salary of the new chairman of the California stem cell agency, Jonathan Thomas, today promptly triggered compaints from the public.

By late afternoon, the story on The Sacramento Bee website had attracted 39 comments, many of which remarked quite unfavorably on the pay. Torey Van Oot wrote The Bee story.

One anonymous reader said, "'We' the tax payer getting screwed again with this high salary."

Also posting a story on the election of Thomas was Katie Worth of the San Francisco Examiner.

Hand-Off at The Top

Jonathan Thomas takes oath of office. (left to right, Robert Klein, Thomas, Melissa King, executive
director of  CIRM board, James Harrison, outside board counsel)

It was a statement that could be taken in more ways than one.

It came from outgoing CIRM Chairman Robert Klein today as he swore in his successor, Jonathan Thomas, a Los Angeles bond financier.

Thomas read the prescribed oath for all state employees. Then Klein shook his hand and said,

"I congratulate you on a journey that you will never forget."

Klein said one reason he is leaving his post is to spend more time
 with his wife and family.
 (left to right, Klein and his wife, Danielle, and Thomas, following the swearing in. 

CIRM Directors Adjourn Meeting

CIRM directors just concluded their meeting in San Diego this afternoon with the swearing-in of newly elected Chair Jonathan Thomas. His first responsibility was to preside over the unanimous approval of a resolution honoring Robert Klein for his work and then adjourn the meeting.

Consumer Watchdog: $400,000 CIRM Chair Salary Will Incense Public

Consumer Watchdog's John Simpson, a longtime observer of the California stem cell agency, today said that the public will be outraged by the salary of its new chairman, damaging the prospects of a new multibillion dollar bond measure for stem cell research.

Simpson, stem cell project director for the Santa Monica, Ca., organization, supported the candidacy of Frank Litvack, writing an op-ed piece May 31 in The Sacramento Bee. Jonathan Thomas, a Los Angeles bond financier, was elected last night on a 14-11 vote.

Asked for comment on the outcome of the election, Simpson said in an email,

"The election of Bob Klein's successor was an opportunity for the board to end the dysfunctional dual executive model that has plagued CIRM since its launch and move to a structure where the chair serves in an oversight capacity. All outside evaluators have advocated this.

"Instead, after considerable arm-twisting from some of the state's top Democrats, the board picked a $400,000-a year candidate, Jonathan Thomas, who plans to be deeply involved in the agency's day-to-day operations. CIRM already has one executive who makes a half-million-dollar salary, President Alan Trounson. It's pure folly to spend nearly that much again so that two overly paid executives can trip over each other in a 50-person state agency.

"By comparison Dr. Francis S. Collins, director of the National Institutes of Health, gets a salary of $199,700, according to the NIH Department of Human Resources.

"The public outrage that will result from hiring a $400,000-a-year chairman will prove to be a public relations disaster from which the stem cell agency will never recover. Those contemplating going to the public in the future to seek another bond issue should have considered the negative impact such a salary will have. Opponents of a bond initiative will have a field day.

"The board had the chance to correct CIRM's management structure and put the agency on the right track for the future. They squandered that opportunity, opting instead to select the candidate with the best political connections, and did so at considerable unnecessary expense to the public."

More Info on Roll Call on New CIRM Chair

We have added the following information to the earlier item today on the roll call vote on the new chair of the California stem cell agency.

Absent last night were CIRM directors Leeza Gibbons, Eugene Washington, Marcy Feit and Sam Hawgood. Feit attended the meeting this morning and said she would have voted for Thomas. She said had planned to be available to vote from a teleconference location, but could not reach it because of a transportation hang-up.

CIRM Board Puts Off Changes in Review of Big Ticket Grants

Directors of the California stem cell agency this morning put off major proposed changes in the review process for high profile grant applications in clinical trial and disease team rounds.

Director Jeff Sheehy, chair of the directors' Science Subcommittee, sought the delay because, saying that the leadership of the committee and CIRM staff had not been able to reach a consensus on the language. There was no discussion on the matter.

Earlier this month, CIRM staff indicated some urgency existed concerning implementation of the plan.

Trounson's Report Available Online

The California stem cell agency this morning posted the presentation of CIRM President Alan Trounson. In it, Trounson reviews recent stem cell research and briefs the board on his current priorities. During the meeting, board member Jon Shestack noted the importance of posting the material and its importance in communicating about CIRM's direction.

Roll Call on Election of New CIRM Chair

Here is the roll call on the 14-11 vote last night electing Jonathan Thomas as the new chair of the California stem cell agency. All members who were available voted. There were no abstentions.

Voting for Thomas were Floyd Bloom, Jacob Levin (alternate for Sue Bryant), Michael Friedman, Michael Goldberg, Philip Pizzo, Stephen Juelsgaard, Robert Klein, Sherry Lansing, Robert Quint, David Serrano Sewell, Jeff Sheehy, Jon Shestack, Oswald Stewart, Art Torres.

Voting for Frank Litvack: Robert Price (alternate for Robert Birgeneau), David Brenner, Ted Love, Bert Lubin, Sholmo Melmed, Claire Pomeroy, Francisco Prieto, Carmen Puliafito, Duane Roth, Joan Samuelson, Kristina Vuori

Absent were Leeza Gibbons, Eugene Washington, Marcy Feit and Sam Hawgood. Feit attended the meeting this morning and said she would have voted for Thomas. She said had planned to be available to vote from a teleconference location, but could not reach it because of a transportation hang-up.

Stem Cell Directors Resume Meeting in San Diego

Directors of the California stem cell agency  resumed their meeting this morning in San Diego with a presentation by CIRM President Alan Trounson on his priorities and review of recent research. He began with a report on a a piece in Nature Biotech about public perceptions of stem cell research, which shows strong support for the endeavor. Robert Klein is conducting the meeting. Newly elected Chair Jonathan Thomas is seated at the directors' tables. Klein's resignation does not officially take effect until tomorrow.

Thomas Reacts to Vote News

Jonathan Thomas was not in the room late last night when directors of the California stem cell agency voted to elect him to a six-year term as chairman of the $3 billion research endeavor. He was elsewhere in the hotel in San Diego. Directors went on to some minor business as they waited for his return. Shortly after he and his wife were seated in the audience, outgoing Chairman Robert Klein reiterated the vote and Thomas received a standing ovation. In this photo, Thomas is applauding in return. His wife is seated. In the background is Frank Litvack(with glasses), who lost the election for the chairmanship.

Race for the Chair: Political and Financial Pressure Help Thomas Win CIRM Chairmanship

SAN DIEGO, Ca. –- Directors of the $3 billion California stem cell agency late yesterday evening elected Los Angeles bond financier Jonathan Thomas as chairman of the unprecedented research enterprise as it strives to fulfill seven-year-old campaign promises to turn stem cells into cures.

The board voted 14-11 to choose Thomas over Frank Litvack, a cardiologist/businessman, also from Los Angeles. The vote came with no debate following a three-hour closed session. Each candidate appeared separately in private, followed by a discussion among board members, also in private. Only one member of the public spoke out on the election during the public portion of tonight's meeting, during which each candidate read a statement.

The California Stem Cell Report was told that Gov. Jerry Brown's office called six members of the CIRM board during the past two days and managed to switch some members from Litvack to Thomas. The governor's office did not respond to queries about the matter.

Outgoing Chairman Robert Klein said the key factor in the vote was the state's current financial crisis and its possible negative impact on CIRM, which depends solely on state bonds for cash. Earlier Thomas sounded an alarm about CIRM finances, telling directors it was necessary to move to assure financial stability. CIRM faces both short and long term financing problems. Thomas could be the last chairman of CIRM unless he and the board devise a way to finance it beyond 2018, roughly the date when the agency runs out of money.  (For more on Thomas' remarks, see here.)

Klein told the California Stem Cell Report that Thomas would be paid something in the range of $390,000 to $395,000 annually for 80 percent time on the job. (The agency later said the correct figure is $400,008.)

Thomas is chairman and co-founder of Saybrook Capital of Santa Monica, Ca. The firm specializes in distressed government bonds. The current state budget crisis in California has left the state with the worst bond rankings of any state in the nation. State Treasurer Bill Lockyer, who controls the sale of state bonds, and the governor and lieutenant governor all nominated Thomas.

On Monday Lockyer sent a strong letter to his five appointees to the CIRM board urging them to vote for Thomas. He said the bond financier was the only candidate with a "complete toolkit" for the job. Lockyer stressed Thomas' background in bond financing.

Unless CIRM receives funds from a fresh bond sale, it will run out of cash in the middle of next year. However, the state is limiting its bond sales because of its budget crisis. CIRM will face tough competition to have its bonds placed in the two sales rounds expected to come up in the next 12 months. .

Some observers interpreted Lockyer's letter as a veiled warning to the entire 29-member board to approve Thomas, with the letter implicitly raising the possibility that the agency could come up short in the next bond rounds.

Longer term, CIRM has only about $1.4 billion or so to hand out for grants or loans. Klein has touted a $3 billion to $5 billion bond measure that would be presented to voters sometime during the next few years. To win support of the proposal, the agency will need a record of substantial accomplishment that resonates with the public.

During Thomas' six-year term, the agency will also have increasing responsibilities for monitoring its massive and growing grant portfolio. The task will become more challenging with larger and more complex grants and loans that have achievement benchmarks that must be met. If not, CIRM is supposed to withdraw its cash. At the same time, the agency continues to wrestle with its computerized grant management system.

To accomplish its goals, CIRM is working ever more closely with the biotech industry. Some industry executives have been dismayed at the tiny fraction of funding that has gone to businesses. A blue-ribbon review panel last fall cited the need to bolster funding for industry. At the same time, the taxpayer-funded agency must assure that the state receives full value for its dollar.

Litvack also had a blue-ribbon business resume along with a record of scientific accomplishment. One description calls him a "serial entrepreneur." He was CEO of Conor MedSystems of Menlo Park, Ca., when it was sold a few years go to Johnson &  Johnson for $1.4 billion. More recently he has been involved with Pervasis Pharmaceuticals and Capricor, Inc.

Litvack touted his scientific and business experience in developing new products and running the FDA gauntlet. State Controller John Chiang, who recently gained national attention for cutting off the pay of California legislators because they failed to pass a balanced budget, nominated Litvack. Chiang said,

"Litvack knows from personal experience what it takes to develop new medical technologies and move them through the regulatory process to adoption in the market place."

Thomas Elected New Chairman of CIRM

Jon Thomas was elected chairman of CIRM on a 14-11 vote. More to come.

Board Resumes Public Session

The CIRM board just came back into public wsession after about three hours of meeting in private.

CIRM Directors Still Mulling Chair Selection Privately

The two candidates for the chairmanship of the California stem cell agency appeared separately and in private before the organization's directors tonight. Their appearances have concluded. Directors have now been huddled behind closed doors for about two hours. The staff and and the two candidates are all gathered in the public  meeting room, chatting in small groups..

CIRM Board Goes Behind Closed Doors

The CIRM  board has gone into executive session following presentations by the two candidates for chair. It is unclear when the public session will resume.

Thomas Stresses His Bond Expertise, Cites State's Dicey Financial Condition

Jonathan  Thomas, a candidate for chair of the $3 billion California stem cell agency, tonight hammered away at the value of his bond financing experience and what it could bring to the survival of the research enterprise. 

Speaking to the CIRM board, Thomas, a Los Angeles bond financier, hit on many of the themes sounded by state Treasurer Bill Lockyer in his letter on Monday. Lockyer nominated Thomas for the post. In his letter, he said Thomas was the only candidate who had a "complete toolkit" for the job. 

In his comments, Thomas repeatedly said he had "all" the qualifications for the job. Lockyer, in fact,  underlined all in his letter when he referred to Thomas' qualifications.. 

Thomas spoke candidly about CIRM's financial condition. He asked whether CIRM will have funds available after 2017, a reference to CIRM projections that its $3 billion will run out about then. Thomas said the state is in a "full out fiscal crisis." As a result, a "real possibility" exists that CIRM will not have "timely access to the funds it needs."  He said the the agency may have to look to other sources of funding.  

"Let's not kid ourselves. This problem could last for a long time," Thomas said. 

The board has not heard that sort of candid public comment about its finances recently, although the warning signs have been there for some time. 

Thomas also addressed the dual executive issue. He said the CIRM chairman and president should have complementary positions -- not overlapping. He said he spoke with CIRM President Alan Trounson on Sunday and would expect to have a complementary, highly collaborative arrangement with him. 

Thomas brought up the statement by Frank Litvack, the other candidate for chair, that he would serve in a parttime role. Thomas said the position demands more time than that offered by Litvack. 

We have asked Thomas for a copy of his remarks. He said his only copy was marked up and said he would provide one tomorrow. 

Text of Litvack's Statement to CIRM Board June 22, 2011

Here is the text of Frank Litvack's remarks this afternoon to the directors of the California stem cell agency. Litvack is a candidate for chair of the agency.
Litvack statement to CIRM board June 22, 2011

Race for the Chair: Litvack Discusses "Black Box" of Bond Financing

SAN DIEGO, Ca. – Los Angeles cardiologist and businessman Frank Litvack tonight made a final pitch to directors of the California stem cell agency to become the next chairman of the $3 billion research effort.

In remarks prepared for delivery, Litvack stressed his business experience during which he said he raised hundreds of millions of dollars. He noted that his enterprises were all high risk ventures and were not "back-stopped by the faith and credit of the state of California," a reference to the state bond funding behind CIRM.

He also reviewed his work in developing new products and his dealings with the federal agencies that regulate them.

Litvack reiterated much of what he has told the board previously, including his commitment to serve as more of an oversight chairman rather the engaging in day-to-day management. Prop. 71, which created the stem cell effort, set up a much-criticized dual executive arrangement with overlapping responsibilities for the chairman and president.

Litvack also addressed the "black box" issues raised by state Treasurer Bill Lockyer and others concerning the need for bond financing experience. (See here and here.)

Litvack said,

"In the spectrum of financial instruments, state bonds are not considered complicated. In fact, they are among the most simple."

He reviewed the current state financial situation and how state bonds work. Come next spring, Litvack said,

"Should the unthinkable happen, as it occasionally does, and there is no (state) budget by next year, then CIRM will need to assume the mentality of a start-up venture and get creative....One might consider a private placement (of bonds) if permitted. As with any form of financing, it is not the mechanics that is rate-limiting. Rather it is the ability to clearly articulate the vision to the prospective investors."

Other new proposals surfacing in Litvack's remarks included:

• CIRM-sponsored meetings between venture capitalists and promising stem cell companies to help generate much-needed funding for the businesses.
• Possibly selling industrial development bonds, which are aimed at building businesses in a particular region, to help finance clinical trials.

For more on Litvack's background and previous statements, see here and here and here.

CIRM Directors Approve $27 Million Training Effort at State and Community Colleges

Directors of the California stem cell agency this afternoon approved a $27 million extension of a training program at California state and community colleges. CIRM staff said the program supports 160 trainees a year at 16 institutions. The extension will cover a three year period. The vote was 7-0.. Nineteen of the 29 CIRM directors were not able to vote or participate in discussion of the proposal because of conflicts of interest.

$47 Million Training Extension Approved

On a 6-0 vote, directors of the California stem cell agency this afternoon approved a $47 million extension of a scientific training program at the state's universities and research institutions.  Only seven members present at the meeting were eligible to vote on the matter. The board has 29 members. The others were disqualified because of conflicts of interest.

An Example of Conflict of Interest Issues at CIRM

The $47 million training program extension now being debated by the directors of the California represents a good example of the conflicts built into the California stem cell agency.

The board has 29 members. Twenty are barred from participating in the debate or voting  because of conflicts of interest. Here is a list of the institutions that stand to receive funding under the extension.

CIRM Directors Start Chair Election Meeting

SAN DIEGO -- Directors of the California stem cell agency began their meeting this afternoon with a discussion of a $47 million extension of a training program. The meeting is well-attended by board members but probably has less than 10 members of the public in attendance. I chatted briefly with Jonathan Thomas, a candidate for the position of chair, briefly prior to the beginning of the meeting. He said the California Stem Cell Report has not reported his position accurately concerning the responsibilities of the chair and the president. We have described the structure as a dual executive with overlapping responsibilities for the chair and president and said that Thomas supports that sort of arrangement. We did not have time to cover the subject properly before the start of the meeting.  Thomas said he will address the structure in his presentation to the board later this afternoon or evening.

Live Coverage of CIRM Chair Election Tonight

The California Stem Cell Report will provide live coverage tonight from San Diego of the election of a new chairman for the $3 billion California stem cell agency. The two candidates are scheduled to make presentations about 5 p.m., but that could change.  The public can tune into the discussions via the Internet. Directions for the link can be found on the meeting agenda. Public teleconference locations can be found in Pleasanton and Los Angeles. Specific addresses are on the agenda. The teleconference locations can be used by the public to make comments to the board. The Internet audiocast is listen only.

Race for the Chair: Blowback, Politics and CIRM Financing

A strongly worded letter from California state treasurer Bill Lockyer concerning this week's election of a new chairman of the state's $3 billion stem cell agency could be triggering a bit of blowback for the candidate backed by Lockyer.

The letter advised all five of Lockyer's appointees that he is a vigorous supporter of Jonathan Thomas, a Los Angeles bond financier who was nominated for the chairmanship by Lockyer, the governor and lieutenant governor, all Democrats. The only other candidate is Frank Litvack, a Los Angeles cardiologist and businessman, who was nominated by the state controller, also a Democrat. The 29-member CIRM board meets late this afternoon in San Diego to choose between Litvack and Thomas.

Lockyer's preferences carry more than normal weight for the entire CIRM board because he is the gatekeeper on the sale of state bonds, the only real source of cash for CIRM. Lockyer becomes even more important since the agency will need a fresh dose of funding by next spring. The state plans to limit its bond sales during the next 12 months because of its ongoing financial crisis. CIRM is likely to face stiff competition for being placed in the bond rounds when they do occur.

Lockyer's letter disturbed or angered some CIRM board members, based on what the California Stem Cell Report has learned from a variety of sources. But none of the five Lockyer appointees responded to queries.

Political inteference – and nasty at that – was one reaction. Is Lockyer trying to tell the board that CIRM financing would be endangered if his candidate is not approved, wondered another board member.

One thought Klein engineered the letter. However, Klein and Lockyer are not on the best of terms, we understand. Another thought CIRM co-vice chair Art Torres, who is close to Lockyer, could have had a hand in it. Our own speculation is that Lockyer, like any successful politician, wants to see his candidate win and is willing to do what he thinks it takes to produce a victory. Other factors as well could have entered into it.

While the letter has triggered strong negative reaction, it is not clear whether it has changed the positions of fence-sitters. It could have a reverse effect for Lockyer, given the reaction of some board members in the past to other efforts at what they regard as outside intrusions into CIRM affairs.

Rumblings persist that CIRM Chairman Robert Klein, a real estate investment banker, continues to work on behalf of Thomas. However, CIRM's outside counsel, James Harrison, has strongly denied that on behalf of the outgoing chairman. Klein, however, is reportedly once again talking about the private placement of CIRM bonds and the need to have a chairman who could do that.

One board member reflected on Klein's unsuccessful attempt last fall to engineer the selection of his own successor. The pitch then was "science science science." The CIRM director said,

"Now it is bonds bonds bonds, legal legal legal. Full time is the only way possible and paid paid paid, and the only way CIRM can be governed is as it was written in the gospel of Prop. 71."

The reference to fulltime and paid is to Thomas' reported desire for a salary in the range of $400,000-plus, working at 80 percent or more time. Litvack says he would work parttime for a salary around $137,000. Another separation point on the men is Thomas' apparent support for continuing the much-criticized dual executive arrangement at CIRM while Litvack has indicated he sees the chairmanship as much more of an oversight function. Of the two, Litvack has a stronger scientific background while Thomas has more experience in bond financing.

One question arose about the public nature of Lockyer's letter with more than one board member saying the treasurer could have delivered the same message to his appointees privately with a phone call, letter or email. Copies of the letters were emailed Monday to the California Stem Cell Report by the treasurer's office. We have a standing request into the treasurer's office and others for any information regarding the chair election.

As for the politics in the matter, Thomas is reportedly being backed by by former California state Treasurer Kathleen Brown, who is now chair of investment banking for the Midwest for Goldman Sachs. She is also sister of California Gov. Jerry Brown and a personal friend of the candidate. The governor nominated Thomas for the post in a terse, 56-word letter. Thomas also reportedly has the support of Congressman Howard Berman, a longtime West Los Angeles Democratic politician.

Klein, who controls the CIRM board agenda, has allotted only 30 minutes for public presentations and public comments by the candidates beginning about 5 p.m. tomorrow. Then comes an executive session, allotted about 60 minutes, after which the formal public vote would be swiftly taken. The CIRM board agendas are always full, but the one for the meeting this week is especially jammed with major items. Several board members are not pleased with the tight schedule and wonder whether it is part of an effort by Klein to limit discussion and ensure favorable action on Thomas.