‘Crisis Management’ PR Firm’s Advice To Stem Cell Agency Laundered Through Law Firm To Avoid Scrutiny

Published on

February 7, 2008

CONTACT: John M. Simpson, 310-392-0522, ext. 317, or cell: 310-292-1902

Santa Monica, CA — Documents detailing the California stem cell
institute’s involvement with a well-known "crisis management" public
relations firm reveal an agency leadership worried about the state
agency’s image and committed to keeping PR advice secret by channeling
it through an outside law firm, the Foundation for Taxpayer and
Consumer Rights (FTCR) said today.

The stem cell institute, a public body formed to spend
taxpayer-approved funds on research, paid the PR agency with money
funneled through the law firm, according to documents obtained by FTCR.
The PR agency then apparently funneled its advice back through the law
firm. The stem cell agency used the tactic to claim legal
"confidentiality" on public relations strategies at a time of negative
publicity over apparent conflicts of interest among board members.

In response to a Public Records Act request from FTCR, the stem
cell agency released 54 pages of documents about its involvement with
Rubenstein Associates, a New York public relations firm that describes
its crisis management work as "a paradigm for the industry." Eight of
the 54 pages, which seem to be about specific advice on handling the
news media, were redacted because they are "documents exempt from
disclosure on the grounds of attorney-client privilege and attorney
work product," according to Tamar Pachter, general counsel for the stem
cell agency.

"What they’ve done is launder the public relations advice to a
state agency through their outside attorney, Remcho, Johansen &
Purcell," said John M. Simpson, FTCR stem cell director. "Once again
the leadership of the California Institute for Regenerative Medicine
has shown concern about image, rather than substance, and a continued
commitment to secrecy."

FTCR said CIRM should behave like the public state agency it is, not like a private corporation.

Click here to read the documents.

The documents show Rubenstein was approached last October for
advice by James Harrison, of the Remcho firm, when articles appeared in
the Australian Herald-Sun saying that a researcher in the stem cell
laboratory run by incoming CIRM President Dr. Alan Trounson was under
investigation for improprieties. There was no suggestion that Trounson
was under investigation or involved in any wrongdoing.

Although he had been hired, Trounson had not assumed the CIRM
post when the news of the investigation in Australia broke. Harrison
approached Rubenstein at the request of Richard Murphy, interim CIRM
president. He wrote Rubenstein Executive Vice President Patrick M.
Smith seeking "to retain your firm to assist us with a response to the
article and the questions it raises."

Under the deal worked out with Rubenstein, the PR firm received
$10,000 for its advice on CIRM’s behalf. However the agreement is
technically with Remcho. The letter of agreement with Remcho says, "As
part of our services, Rubenstein will provide Remcho, Johansen &
Purcell with strategic public relations advice and guidance relative to
general corporate matters affecting the California Institute for
Regenerative Medicine… Rubenstein’s work on this matter will be
considered part of your work product and will be governed, to the
extent permitted by law, by attorney/client privilege."

But the letter makes clear who is paying for the advice. It’s
taxpayer dollars: "Rubenstein recognizes and agrees that under no
circumstances will Remcho, Johansen & Purcell be liable to pay fees
to Rubenstein that it has not received from its client for such
purposes, and agrees to look exclusively to your client for payment of
any outstanding fee."

Presumably the eight redacted pages contained specific advice
from Rubenstein Associates on how to handle relations with the news
media. In addition to concern over articles about the Australian
investigation, CIRM also was facing negative publicity regarding
conflict of interest problems with some of its board members. One
suggestion that remained in the documents concerned a query from Sabin
Russell of the San Francisco Chronicle. "I agree Alan [Trounson] should
send the e-mail and enthuse that he is looking forward to meeting Sabin
and having a productive relationship," Smith wrote.

"I don’t begrudge CIRM public relations advice. Clearly they
need it," said Simpson. "They just shouldn’t wrap it up in legal
mumbo-jumbo so the public doesn’t know what it’s paying for. PR advice
is not legal advice and trying to pretend differently is just plain

Harrison said Rubenstein remains a consultant, and in that
capacity, provides advice to Remcho in connection with its
representation of CIRM. He said CIRM and Rubenstein are negotiating a
contract for the PR firm’s future services.

Proposition 71, passed by 59 percent of Californians in 2004,
created the stem cell institute. FTCR’s Stem Cell Oversight and
Accountability Project is working to ensure that California’s landmark
stem cell research program offers accessible and affordable cures and
treatments to the taxpayers who have funded it. The program will sell
$3 billion in bonds over a decade to fund stem cell research. Financing
charges mean the project, the largest source of stem cell research
funding in the world, will cost California taxpayers $6 billion.

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The Foundation for Taxpayer and Consumer Rights is California’s
leading non-profit and non-partisan consumer watchdog group. For more
information visit us on the web at:

Consumer Watchdog
Consumer Watchdog
Providing an effective voice for American consumers in an era when special interests dominate public discourse, government and politics. Non-partisan.

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