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Undue Influence at the Stem Cell Institute

by Jesse ReynoldsSan Francisco Chronicle
November 29th, 2007

"Stem cell czar" Robert Klein

Last week was a busy one for stem cell research. But amid the coverage of major technical advances, an all-too-predictable scandal erupted in California's stem cell program. The details reveal improper and potentially illegal influence on the allocation of public funds by a board member of the California Institute for Regenerative Medicine, the state body created to expend the $3 billion voters agreed to borrow and invest in research under Proposition 71.

The action was, in part, a symptom of the board's structure. Proposition 71, which created CIRM in 2004, requires that a majority of board members be representatives of the very institutions waiting in line to receive grants.

This latest revelation occurs on the heels of the announcement of a new technique for isolating fully potent stem cells, without the need for embryos, eggs or cloning. To some, this calls into question the relevance of California's enormous set-aside for embryonic stem cell research - particularly at a time of exploding deficits and tough budget cuts for state services.

The scandal began when CIRM gave initial approval for a $638,000 grant to a researcher at the Burnham Institute in La Jolla. But a subsequent review by the agency's staff found that the researcher is not qualified to receive CIRM funds because he's not a full-time faculty member.

Before this was to be announced, John Reed, who is both a CIRM board member and the president of Burnham, sent a strongly worded seven-page letter to CIRM staff, emphasizing the "potentially damaging consequences" and "dangerous precedent" of a grant denial. Reed wasn't merely assisting by clarifying a few details. To assess the grant's eligibility, CIRM staff had been in communication for months with their counterparts at Burnham. When a board member, who is also president of one of the top grant-receiving institutions, writes this sort of letter, he's sending a strong message.

But it was also an inappropriate message. Reed appears to have violated Proposition 71, which prohibits board members from trying to influence grant applications from their home institutions. He should step down as the board. But he's not the only guilty party. The state's "stem cell czar," CIRM Board Chairman Robert Klein, is at least as responsible - and maybe more so.

Before lobbying CIRM staff, Reed asked for an opinion from Klein, who recommended that he write the letter. While Reed claims that he didn't fully understand the prohibition on board members' interference, Klein can't assert ignorance. Although he now says that he's "learned something," Klein was Proposition 71's primary author - not to mention the leader of the campaign to win voter approval.

This is part of a distinct pattern by Klein, who repeatedly chooses heavy-handed tactics and misleading statements over transparency and accountability. He routinely dismisses public process, and seems reluctant to assume the ethical obligations of a public official.

For example, earlier this year, he went to bat for Angelos Tsakopoulos, the powerful land developer. A controversial development was facing a critical Yolo County Board of supervisors, and Tsakopoulos threw in a stem cell center to sweeten the deal. After he donated $125,000 to Klein's private lobbying organization, Klein used his clout to woo the board on behalf of his new friend. If successful, Klein was even to head the new center.

During the Proposition 71 campaign, he promised voters that the state would receive up to $1 billion in royalties from successful inventions and therapies. The Chronicle later revealed that Klein knowingly failed to disclose that tax consequences would erase more than half of those royalties.

Soon after the initiative passed, its biggest backer in the Legislature - then-Sen. Deborah Ortiz - called an informational hearing on controversial irregularities in the new program's launch. Klein, who had ensured his law shielded the multibillion-dollar program from meaningful oversight by the statehouse, refused to attend. For these actions, and others, it's past due for Klein to resign.

But the shortcomings at CIRM run deeper than a handful of individuals. Proposition 71 not only vested governance of $3 billion in public money in those who seek to maximize their own share, but it is riddled with exceptions to the norms of public oversight, accountability and transparency. In this context, last week's development is an unfortunate but predictable result. The good news is that there is room, albeit limited, for involvement by our elected officials. Tuesday, Controller John Chiang asked the Fair Political Practices Commission to look into Reed's letter, although the commission lacks authority to rule on potential violations of Proposition 71. And beginning next year, the initiative's prohibition on modification by the Legislature is loosened. Seventy percent super-majorities in both houses plus the governor's signature will still be required to change the law - a high threshold, but not insurmountable.

Jesse Reynolds is directs the project on Biotechnology in the Public Interest at the Center for Genetics and Society ( www.geneticsandsociety.org), a policy advocacy organization, and blogs at Biopolitical Times ( www.biopoliticaltimes.org).




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