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CIRM Court Ruling Does Little to Solve Its Problems

Genetic Crossroads
May 12th, 2006

Alameda County Superior Court

Alameda County Superior Court Judge Bonnie Lewman Sabraw ruled in April that lawsuits challenging the legitimacy of the California Institute for Regenerative Medicine (CIRM) failed to show that the voter-approved law that created it in 2004, "is clearly, positively and unmistakably unconstitutional."

The 42-page ruling came after a trial in which lawyers for the plaintiffs, anti-abortion and taxpayer groups, argued that the state agency was not accountable to state governance norms and that the institute was rife with conflicts of interests.

The groups who filed the suit will appeal to the California Supreme Court. These expected appeals will continue to block the release of state funds to CIRM, leaving it to pursue other sources of money.

CIRM continues to adamantly oppose reasonable reforms, including those proposed by state Senator Deborah Ortiz (D-Sacramento), a longtime champion of stem cell research. CIRM's allies claim that the bill Senator Ortiz has proposed, SB 401, is "premature and unwarranted" and its consideration "stands to further delay critical progress."

CIRM and Money: Creative Financing, Gala Fundraiser, and Conflicts of Interest

With the CIRM's ability to issue bonds still hampered by legal challenge, it has turned to novel methods of funding. It has not requested support from the state, a move that would likely open the door to legislative oversight. Instead, CIRM has turned to private sources for donations and below-market rate loans, an approach that increases the likelihood of undue private influence on the agency, and reinforces the perception that CIRM acts more like a private firm than a state body.

After months of hints and speculation, CIRM board chair Robert Klein announced that five private foundations will loan $14 million to the cash-strapped agency via risky loans at below-market interest rates. Although it is not surprising that the lenders who agreed to this arrangement are people who have shown past support for biomedical research, the nature of their support reveals a likely interest in how the CIRM will later allocate its $3 billion in grants.

For example, the foundation established by the founder of the biotechnology firm Amgen, William Bowes, loaned CIRM $2 million. A recent report by a venture capital firm described Amgen as a "stem cell company." Another $2 million came from the foundation created by John Doerr, a prominent venture capitalist who has investments in numerous biotechnology corporations. And Eli Broad, who previously donated $25 million to the University of Southern California for a stem cell research center, also loaned $2 million to the CIRM. It would not be surprising if he was especially eager to see CIRM research funds going to USC.

Because Proposition 71 greatly limits the portion of these loans that can go to administrative costs, CIRM is pursuing a second path of novel fundraising. In a move that appears unprecedented for a state agency, the CIRM will be the beneficiary of a gala dinner and performance, tickets for which begin at $1500 and go up to $100,000. Those who make larger donations will receive briefings and tours of research facilities, possibly conducted by CIRM scientific staff. Pressure from the Foundation for Taxpayer and Consumer Rights has caused the CIRM to release the names of donors, but not any of their affiliations, which are likely to include potential grant recipients and other beneficiaries of CIRM activities. The CIRM has explicitly stated that it will accept donations from executives of biotechnology corporations.

A Sacramento Beeeditorial spelled out the potential conflict of interest inherent in this arrangement by pointing out that the situation is "analogous to what might happen if Caltrans started seeking private donations to build a new San Francisco Bay Bridge. Funding for the bridge is stymied, so `Friends of Caltrans' hold a gala fundraiser. Out of self interest, bridge contractors rush to buy tickets. Those contributing hope they will get special status when bridge contracts are awarded, and possibly they will."


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