California Stem Cell Agency To Review Dealings With StemCells Inc.

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California’s stem cell agency announced Wednesday it was taking steps to deal with a “risk of conflict of interest” two days after its former president took a position with a company that the state agency had been funding.

Newark, Calif.-based StemCells Inc. announced that Alan Trounson would be joining its board of directors a week after Trounson left the top spot at the California Institute for Regenerative Medicine, according to California Stem Cell Report, a blog that follows developments related to the state agency.

The move has an appearance of a serious conflict of interest, said John M. Simpson, director of the stem cell project for Santa Monica-based nonprofit Consumer Watchdog, in an interview.

“The thing smacks as if this is StemCells Inc. giving a payback to Trounson after the agency awarded $19 million to StemCells Inc. That’s just the way it looks,” Simpson said. “And I think they have to explain quite clearly why that is not the case.”

In a statement, the state stem cell agency said it had not known of the move and learned of Trounson's new position from a press release.

“We take even the appearance of conflicts of interest very seriously,” the agency’s current president, C. Randal Mills, said in a statement, adding that they would be taking actions to address mounting concerns. “We understand that the appointment of CIRM’s former president to the board of directors of a CIRM loan recipient creates a risk of a conflict of interest.”

Under current law, it is illegal for Trounson to communicate with the stem cell agency’s board members or employees on behalf of his company to further its interests. The restriction lasts one year; Simpson argued that such a restriction should last for two years. 

The agency has also banned its employees and its governing board from communicating with Trounson about any matter regarding StemCells Inc., and will be reviewing all of its work relating to the company, which the state agency says is receiving funding for Alzheimer’s research.

Simpson praised the agency’s actions, but pointed out that conflict of interest has been a recurrent issue between the state agency and the organizations it funds. The stem cell agency was created by Proposition 71 in 2004 to distribute $3 billion of taxpayer funds to companies and institutions performing stem cell research.

“With some 90% of the agency's grants having gone to institutions with representatives on its board,” Times columnist Michael Hiltzik wrote in a 2012 story, “the agency has long been vulnerable to charges of conflicts of interest."

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