Shameful Conflicts of Interest Involving California’s Stem Cell Agency

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Alan Trounson, until very recently president of the California Institute for Regenerative Medicine (CIRM), has accepted a position on the board of StemCells, Inc., a company that has had $19,399,504 in grants from CIRM. If the clinical trials that CIRM is partly funding pay off, he could make a bundle on stock options (details of his compensation are not available). David Jensen, of the California Stem Cell Report, brought this to light, and much more.

That looks bad, but there is much more. Jensen's dogged reporting over the last two years established that the $19m "forgivable loan" was only approved after controversial lobbying by former CIRM chair Robert Klein that resulted in the main board overruling the recommendation of their scientific advisers.

Financially, the $19m is the least of it. Irving Weissmann, the cofounder (and still an active board member) of StemCells, Inc., has had four grants from CIRM totaling $35,420,939. Weissman was an active pitchman for Proposition 71, which set up CIRM, appearing in TV ads that mentioned his work at Stanford (he directs the Institute of Stem Cell Biology and Regenerative Medicine) but not his entrepreneurial efforts.

But $55m is far from the end of the money involved. Stanford University has had more awards for more money than any other institution: 80 grants totaling $280,768,314. UCLA is second, at $215m, and no other institution has received close to that amount. One anonymous researcher emailed Jensen:

Are they really more than twice as good as UCSF ($132,650,363), and three times better than USC ($104,858,348) and UC Irvine ($98,591,836)?

Let's be blunt: This looks like a pay-off. Technically, what Trounson and Weissman and StemCells, Inc., just did may not be illegal. But it's shameless.

Trounson is well aware of conflicts of interest, which have swirled around CIRM before. Indeed, he has in the past recused himself from discussions of grant applications from StemCells, Inc., and Jensen has documented other scandals. All of which were thoroughly predictable. They were baked into the structure of the agency. The potential for conflicts of interest was one of the main critiques of Proposition 71, as shown in this September 2004 Nature report:

Critics slate ethical leeway in California stem-cell proposal

Which quoted one of the proposition's authors saying that any such charges were baseless:

"We want to avoid even the appearance of a conflict," says Weissman.

Yup, same guy. Just a month later he was refusing to comment on reports that his stock options in — yup — StemCells, Inc. could benefit from passage of the proposition. Richard Hayes, then Executive Director of CGS, put the problem tactfully to Science:

We're concerned that Prop 71 gives interested parties enormous power over a huge sum of public funds and restricts public accountability.

We were right. (The full 2004 CGS analysis is here.)

Trounson, who made $490,008 a year as President of CIRM, quit his job to return to Australia and spend more time with his family; the StemCells, Inc., press release confirms that he is returning to Melbourne. Nevertheless, his "unique combination of leadership experiences make him a very valuable addition to our board at this transformational time for our Company." Doing what?

Of course, Trounson was also aware that CIRM has been approaching a critical turning point, as articles in both Nature and the San Francisco Chronicle (which featured StemCells, Inc.) pointed out last week. This kind of revolving-door appointment can only hurt the agency, not to mention Trounson's personal reputation.

The Chronicle ran another story when this news broke, confirming that Trounson will receive cash and stock. It also quoted John Simpson, of Consumer Watchdog, who wrote in an email:

"A reasonable 'cooling-off period' — say two years — would have been appropriate before Trounson joined the board of a private company enjoying CIRM's largess. I can only hope Trounson sees his error and steps down from StemCells Inc.'s board."

CIRM should take a long look at its practices and procedures, which have never served the agency well — and especially should consider its obligations to the public, who fund it. There can be practical difficulties in balancing expertise and objectivity; the best scientists in any field do tend to know each other well. All the more reason to be especially careful. This kind of obviously problematic conflict of interest can and should easily be avoided.

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