Banker Selected to Lead Stem-Cell Agency

LOS ANGELES — An investment banker with an interest in biology has been chosen to be the new chairman of California’s $3 billion stem cell research program, taking over at a time when the state’s fiscal crisis could jeopardize financing for the effort.

The banker, Jonathan Thomas, replaces Robert N. Klein, who has run the program since voters established it through a 2004 ballot initiative that Mr. Klein helped write and finance. Mr. Klein, a real estate developer, is credited with getting the program up and running, but his hands-on management style had spurred controversy in recent years.

Mr. Thomas, a founding partner of Saybrook Capital in Santa Monica, Calif., was elected by a 14-11 vote of the program’s board Wednesday night over Dr. Frank Litvack, a Los Angeles cardiologist and medical device entrepreneur.

The California Institute for Regenerative Medicine, as the state agency is formally known, has so far given out more than $1.2 billion in research grants and loans. It has been the world’s largest source of financing for research involving human embryonic stem cells, which are controversial because their creation usually entails the destruction of human embryos. It supports research using other types of stem cells as well.

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.

In speeches to the board before the vote Wednesday night, both candidates stressed their business experience, with Mr. Thomas noting that he had helped arranged financing for Advanced Cell Technology, a stem cell company that is now starting clinical trials.

Mr. Thomas majored in biology and history at Yale, received a doctorate in history from Oxford and also has a law degree. He spent 15 years on the board of the Crippled Children’s Society of Southern California and also served on the board of Los Angeles’s harbor commission. He has been an investment banker for 26 years and co-founded Saybrook in 1990.

That financial experience, including dealing with government bond issues, seemed to appeal to the 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.

“Let’s not kid ourselves,’’ Mr. Thomas told the board, which met in San Diego. “This problem could last for a long time.’’

One clear difference between Mr. Thomas and Dr. Litvack was over their views of the role of the chairman.

Critics said Mr. Klein played too active a role, sometimes usurping the day-to-day management role that was supposed to be performed by the agency’s president.

“He was just too frenzied and hands on in ways that were counterproductive,’’ said John Simpson, stem cell project director for Consumer Watchdog, a consumer group. “That may have been necessary when the place was in startup mode, but that time has long gone.’’

Dr. Litvack argued that the chairman should be a part-time job mainly concerned with oversight. “An organization that has two chief executives carries with it the intrinsic potential for serious challenges,” he told the board.

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

Four state officials have the right to nominate candidates for chairman. Mr. Thomas was nominated for the chairman’s position by Gov. Edmund G. Brown Jr., Lt. Gov. Gavin Newsom and Treasurer Bill Lockyer. Dr. Litvack was nominated by John Chiang, the state controller.