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Genetic Crossroads
January 24th, 2005

The aftermath of the passage of the $3 billion stem cell initiative in California last November has been one of mounting controversy. Over just the past six weeks:

  • The California State Attorney General ruled that the agenda for the first meeting of the new stem cell governing board, the Independent Citizens Oversight Committee (ICOC), was in violation of California's Open Meeting Act.
  • Real estate mogul and Proposition 71 author and chief contributor Robert Klein was elected Chair and interim president of the ICOC without a serious search for other candidates. It was widely presumed that Klein's key role in drafting Prop 71 was a factor in the close fit between the qualifications for Chair written into the initiative and Klein's own resume.
  • California public interest organizations began raising questions about the ICOC. Public interest lawyer Charles Halpern drew attention to multiple violations of open government laws [first, second letters to ICOC, to Attorney General], as did Californians Aware [letter, news release]. The Foundation for Taxpayer and Consumer Rights called the ICOC "rife with conflicts of interest." Two founders of the Pro-Choice Alliance Against Proposition 71 authored a blistering op-ed in the Los Angeles Times titled "The Stem Cell Chair to the Highest Bidder?" The California Nurses Associationreiterated concerns raised during the campaign about using public funds for private biotech and the lack of research safeguards, especially regarding the extraction of women's eggs.

  • California State Senator Deborah Ortiz, a leading supporter of Proposition 71, introduced Senate Bill 18 to address what she now characterized as the initiative's "flaws," including key areas in which it falls "glaringly short."
  • The release of financial disclosure statements [PDF] showed that ICOC vice-chair Edward Penhoet is "the ultimate corporate biotech insider," heavily invested in numerous biotech firms, a partner in a major biotech venture capital outfit, and a former director of BIO, the country's leading biotech lobbying organization.

Before the November election press coverage of Proposition 71 tended to reflect its sponsors' portrayal of the measure as an unmitigated blessing. But the post-election coverage has been strikingly different:

The New York Timesput it succinctly: "As California moves to begin a lushly financed program of embryonic stem cell research, medical ethicists and other skeptics are concerned that the $3 billion that state voters approved for the endeavor could become a bonanza for private profiteers."

Unfortunately, legislators in other states appear unaware of the growing controversy around California's foray into stem-cell research:

The Center for Genetics and Society played an active role in organizing pro-choice and progressive opposition to Proposition 71 and post-election challenges to the ICOC. Reforms needed to ensure that the ICOC operates in accord with the public interest include:

  • full compliance with California's Open Meetings Act,
  • meaningful conflict of interest rules for ICOC and working group members,
  • strong protections for subjects asked to participate in clinical trials and egg extraction procedures,
  • an open and accountable decision-making process for controversial research proposals,
  • effective oversight and regulation of any approved research involving human embryos,
  • ensure that any successfully developed treatments are accessible and affordable,
  • ensure that the California public receives a fair share of any financial returns, in accordance with campaign promises; limits on profit shares to biotech and facilities development companies.

The new California state agency that will fund stem cell research, the California Institute for Regenerative Medicine (CIRM), is having a troubled launch. The Center for Genetics and Society, along with other progressives who support embryonic stem cell research, opposed Proposition 71, which authorized CIRM's creation. As CIRM's work has gotten underway since the election, the concerns raised during the campaign-lack of accountability to the public and to elected officials, the conflicts of interest inherent in the structure of CIRM, inadequate protection of egg providers and research subjects, the absence of clear standards for returns to the public and the state-have increasingly been voiced by public interest groups, by several state Democratic legislators, and in news stories and editorials in major California newspapers.

The first two meetings of CIRM's governing committee have been held amid controversy about its violations of the state's Open Meetings Act, its existing and potential conflicts of interest, and the consolidation of ever greater powers over its trajectory by Robert Klein. Klein was the chief author of Proposition 71 and its largest contributor, providing upwards of $5 million of his personal funds to the campaign. Since the November election, he has become first the chairperson and then the interim president of the the so-called Independent Citizens' Oversight Committee (ICOC), which in fact is dominated by representatives of groups who hope to receive grants from the $3 billion of public funding authorized by Proposition 71.

A number of public interest groups are now carefully tracking the activities of the ICOC. Californians Aware has criticized its violations of open government laws. California Foundation for Taxpayer and Consumer Rights issued a press release calling the ICOC "rife with conflicts of interest." The California Nurses Association reiterated the concerns it had raised during the campaign about "the allocation of public funds for private biotech and pharmaceutical industry profits, the closed door process of key decision making, and lack of safeguards" and noted that "many Californians are now experiencing buyer's remorse" about the initiative.

These concerns have been echoed in recent editorials in major media outlets, including both some that had endorsed Proposition 71 (such as the San Francisco Chronicle and the Oakland Tribune) and some that had urged a "no" vote (the Sacramento Bee, San Jose Mercury News, and Wall Street Journal). And two California legislators-Senator Deborah Ortiz (D-Sacramento), a prominent supporter of Proposition 17, and Assembly member Gloria Negrete McLeod (D-Chino)-have introduced bills aimed at fixing some of the initiative's flaws.

"The Stem Cell Chair to the Highest Bidder?"

In the weeks after the November election, members of the ICOC were appointed by the top California elected officials specified in Proposition 71. Four officials were given the authority to nominate a chairperson; all of them-Gov. Arnold Schwarzenegger, Lt. Gov. Cruz Bustamante, Treasurer Phil Angelides, and Controller Steve Westley-selected Robert Klein.

Klein's longstanding wish to head up the ICOC was clear, since the "mandatory criteria for chairperson" given in the text of Proposition 71 bore a striking resemblance to his own resume. But revelations that he had donated more than $175,000 to three of the four politicians who nominated him raised many eyebrows, and led to editorial characterizations of the first ICOC meeting as a "coronation" (San Diego Union Tribune, Dec 15) and a "consolidat[ion of] too much power (Sacramento Bee, Dec 16).

The ICOC was scheduled to vote on Klein's nomination when it convened for the first time on December 17 in San Francisco, and then to proceed to consider an ambitious agenda. But two days before the meeting, public interest lawyer Charles Halpern sent a letter to the California Attorney General and ICOC members, pointing out that the public had not been given the advance notice of the agenda required by California's Open Meetings Act.

The Attorney General's office concurred, and the meeting was held as an "emergency session," with the ICOC's election of chair and vice-chair as its only agenda items. The committee proceeded to unanimously and ceremoniously approve Klein for chair, and to select the vice-chair nominee who had received Klein's endorsement.

Amid questions about conflicts of interest, Klein pledged not to hold any biomedical stocks or investments in real estate companies that could benefit from Prop 71 monies. To date, neither vice-chair Edward Penhoet, founder of the biotech giant Chiron Corporation, nor other members of the ICOC have followed this lead.

More Power, More Secrecy, More Conflicts of Interest

The ICOC fared poorly as well at its January 6 meeting in Los Angeles. By then, criticism was mounting of the new pro-CIRM non-profit organization, the California Research and Cures Coalition, which Klein chaired. It is essentially the "Yes on 71" campaign under a new name, with largely the same staff, web address, and offices as the original operation, and has announced that its mission is to influence "opinion leaders, elected officials and policy makers, medical professionals, media and the general public." Yet it was granted the responsibility of coordinating the second ICOC meeting, and is holding a series of public forums on CIRM and "best practices" around the state.

At the January meeting, Klein announced his resignation as chair of the Coalition. But he acknowledged that, in his expanded role as the interim President of CIRM, he is likely to hire Coalition staff to help run the stem cell institute. As the Sacramento Bee points out, this "will further ensure Klein isn't challenged by anyone who has a different mind-set." The CIRM, the Bee editorialized, "is developing clone-like characteristics of Klein's nonprofit group."

As for the other members of the ICOC, they have not yet shown any inclination to question Klein's preferences. After unanimously accepting his sole candidacy for chair as legitimate, and then overwhelmingly backing his pick for vice-chair, the ICOC unanimously ceded him the additional powers of interim president. And several ICOC members were quick to defend Klein's stated intention of retaining the ill-advised provisions of Proposition 71 that allow the crucially important "working groups" to meet entirely in secret, and its members to be exempted from disclosing their conflicts of interest. Though some closed sessions to protect confidentiality are appropriate, a blanket exemption from open government rules is unacceptable.

The (Financial) Ties that Bind

As Genetic Crossroads was "going to press," the financial disclosure statements of some ICOC members became available. ICOC vice-chair Edward Penhoet is a salaried partner at a venture capital firm with extensive investments in biotechnology, has millions of dollars in investments in biotech, and has served on the board of the Biotechnology Industry Organization. Michael Goldberg is also a partner at a biotech venture capital outfit; he donated $58,000 to the Yes on 71 campaign. David Baltimore, the president of CalTech, sits on the boards of Amgen, the world's largest biotechnology corporation, and a Swiss biotech investment firm. Others, however, were clear of investments and income in areas which may pose conflicts. Philip Pizzo, for example, receives income only from his position as dean of the Stanford University School of Medicine.



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