Debunking California Stem Cell Agency Claims of ‘No Actual Conflicts’

By Dr. Matthew Watson

In the wake of recent considerable
criticism concerning conflicts of interest at the $3 billion California stem
cell agency, its leaders have taken to saying “no actual conflicts”
have been found at the agency.

That assertion is simply not true.

Nonetheless, the statement has been
repeated in some news stories, published in at least one agency press
release and peddled by stem cell advocates and some members of the
governing board of the California Institute for Regenerative Medicine
(CIRM), as the agency is formally known.

The reason? Conflicts of interest were
cited prominently as a major problem at CIRM by the blue-ribbon
Institute of Medicine (IOM) report. In December, the IOM recommended that a new majority of independent members be created on the stem
cell agency's governing board. The existing stem cell board has
ignored that recommendation and wants to settle for something considerably less as it tries to find a way to build support for
continued financing of its efforts.

The facts are that the agency has a
long history of problems involving conflicts of interest, “actual”
and otherwise. Here is a rundown on what has been reported on the
California Stem Cell Report.

In 2009, board member John Reed, then
CEO of the Sanford-Burnham Institute, was warned by the state's Fair Political Practices Commission about his violation of conflict of interest rules. Reed's intervention on behalf of a grant was made at the suggestion of then CIRM Chairman Robert Klein, an attorney who
led the drafting of Proposition 71, the ballot initiative that created the stem cell
agency in 2004.

In 2007, other violations involving five board members resulted in voiding applications from 10
researchers seeking $31 million. And then the agency shamefully scapegoated employees for the problem.

In 2011, the chairman of the CIRM grant review group resigned from his position as the result of another
violation, which the agency felt necessary to report to the
California legislature.

In 2009, then board member Ted Love,
who has deep connections to the biomedical industry, served as the
agency's interim chief scientific officer and helped to develop the agency's first, signature $225 million disease team round while also
serving on the CIRM board. As chief scientific officer, Love
presumably would have had access to proprietary information and trade
secrets contained in grant applications. In 2009, in response to
questions from the California Stem Cell Report, the agency said that Love would only serve as a part-time adviser to the agency president, not as chief scientific officer. Nonetheless, in 2012, the board
passed a resolution with high praise for Love and his performance as the chief scientific officer.

Since 2010, a stem cell firm, iPierian,Inc., whose major investors contributed nearly $6 million to the ballot measure that created the stem cell agency, has received $7.1
million in awards from the agency. The contributions were 25 percent
of the total in the campaign, which was headed by Klein.

Another firm, StemCells, Inc., last
fall was awarded $40 million by the CIRM board despite having one of
its $20 million applications rejected twice by grant reviewers. The
action came after the board was vigorously lobbied by former Chairman
Klein. Researcher Irv Weissman of Stanford, who founded StemCells, Inc., and
is on its board, was featured in a TV campaign ad for Proposition 71 and helped to raise millions for the ballot campaign.

In 2008, public complaints by one
applicant from industry about conflicts of interest on the part of a
reviewer were brushed off by Klein. He told the applicant the board needed to discuss naming CIRM-funded labs and then go to lunch.

The agency has hired at least two
industry consultants in positions that raise conflict of interest
problems, in 2010 and again in 2012.

Sometimes groups expect to see
increased funding as the result of the appointment of sympathetic
individuals to the board. That occurred last fall when Diane Winokur
was appointed. The chief scientist for The ALS Association, said
Winokur will be “a tremendous asset in moving the ALS research field forward through CIRM funding."

The conflict issue even surfaces in picayune ways. In 2006, board members from various institutions spent
considerable time debating a minor requirement involving press
releases. They were concerned that the proposal would make their
institutions subordinate to the interests of CIRM. At the end of the
discussion, the institutional directors prevailed and kept their PR
departments from having to notify CIRM about press releases dealing
with the hundreds of millions of dollars in state grants that they
receive.

All this, and yet on Jan. 24, 2013,
CIRM Chairman Jonathan Thomas was quoted in a CIRM press release as
saying “no one has found any actual conflicts” at the
agency.

In the media, some of the recent news
stories have reported that the IOM did not find any “actual”
conflicts at the agency. The explanation for that is simple, but
mainly omitted from the articles. The IOM did not look for any
conflicts of “inappropriate behavior,” as its report clearly
states. The California Stem Cell Report last weekend asked the
chairman of the IOM panel, Harold Shapiro, why it did not look for
conflicts. He replied,

“Our committee was given a set of
defined tasks from the IOM(which was under a $700,000 contract with
CIRM), and we followed them."

Nonetheless, the IOM report said “far
too many” board members are linked to institutions that receive
funds from CIRM. A compilation by the California Stem Cell Report
shows that about 90 percent of the $1.7 billion that the board has
awarded has gone to institutions linked to past and present board
members.

The fundamental conflict problem with
the CIRM board is that nearly all the California institutions that stood to
benefit from the agency's largess were given seats at the table where the
money is handed out, under the terms of Proposition 71.

Conflict problems are not unique to
CIRM and government agencies. They are also a matter of concern at
nonprofit, grant-making foundations, which in some ways CIRM
resembles.

The Council on Foundations, a
national nonprofit association of more than 1,700 grant-making
organizations, takes pains on its web site to explain the
importance of managing and avoiding conflicts of interests. In its advice to its members, the group makes it clear that the issue goes
well beyond simple financial conflicts. It says,

“(Board) members must represent
unconflicted loyalty to the interest of the foundation. This
accountability supersedes any conflicting loyalty such as that to
advocacy or interest groups, business interests, personal interests or paid or volunteer service
to other organizations.”

In the case of the stem cell agency,
the “unconflicted loyalty” is to the people of California. Perhaps the California stem cell agency
can convince state leaders, both public and private, and its voters
that no conflicts exist at the state agency. But it is a big bet and
probably carries with it the entire future of what the board and many
believe is an exceedingly promising scientific effort.

Perhaps it would be wise for the board
to step back and say, “Yes, there are serious conflict problems at
CIRM. We recognize that and are working on additional measures to
create an independent board as recommended by the IOM.”

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