ARTICLES

Money Down A Rat Hole

Stem-cell Research off to Rocky Start

BY BARTHOLOMEW JAMES

Last September, the Catholic bishops of California issued a statement urging a "no" vote on Proposition 71, the California Stem Cell Research and Cures Act. "Proposition 71 involves the technology of human embryonic cloning, cannot be justified from an ethical perspective, promises what may not happen, and is a financial boondoggle," the statement began. Despite the bishops' admonition, in November 59 percent of the electorate voted in favor of the measure, which allocates $295 million per year for 10 years for stem cell research. But less than four months later, it appears that at least two out of three of the bishops' warnings may be proven right.

Proposition 71 created the California Institute for Regenerative Medicine and a 29-member panel, the Independent Citizen's Oversight Committee to oversee and govern the institute. Under the provisions of the California Stem Cell Research and Cures Act, the two will collaborate to award grants and loans for stem cell research and research facilities. But before the first check has been written, both entities are already engulfed in a firestorm of controversy, including allegations of financial impropriety. Pending legislation and court actions threaten to modify significantly or completely invalidate the Act and its promises of medical miracles.

Eyebrows were raised in February when it was revealed that five of the first eleven employees hired by the Institute had worked on the Proposition 71 campaign and would be paid salaries ranging from $95,000 to $125,000 per year. It was also disclosed that at least nine of the 29 of the Institute's members served on boards or had financial holdings in biotech or pharmaceutical companies that could potentially benefit from the publicly-financed work of the institute. Critics charge that some institute members could make recommendations that would result in financial gain for themselves or their associates in the private sector. The California Stem Cell Research and Cures Act has provisions that exempt some members of the oversight committee from conflict-of-interest laws, but in February, Californians for Public Accountability and Ethical Science filed a court petition alleging that those provisions are illegal under California law. Another controversy erupted when open government advocates pointed out that three "working groups" set up to advise the Independent Citizens Oversight Committee on grant awards and medical and ethical standards for research would be operating in total secrecy.

One of the first private-sector watchdogs to challenge the secrecy of the working groups was Terry Francke, executive director of Californians Aware, a non-profit, open-government advocacy organization. Francke is arguably the godfather of public-records law in California; he served as legal counsel to the California Newspaper Publishers Association, taught media law at Stanford University, and drafted the 1994 revisions to the Brown Act — California's original open-meeting and public-records-disclosure law. Franke has pointed out that, since the institute and the oversight committee are funded by the public, they, and the working groups, must comply with state open-meeting laws. Among other things, those laws require that meeting agendas and supporting documentation for each agenda item be provided to the public at least ten days before the meeting is held.

The first organizational meeting of the oversight committee did not comply with these requirements, and Franke attempted to bring the problem to the attention of the officers and members of the committee by sending them a letter outlining the law and why they were in violation of it. "What is at risk is something notoriously difficult to recapture once lost — public confidence," Franke wrote in the January 3 correspondence. More than three months later, he has not received a response. Franke explained that the institute is apparently attempting to justify the clandestine operation of the working groups on the grounds that they are advisory in nature and only make recommendations, not final decisions. But no other government funded advisory groups in the state are allowed to operate in secret, he said. "There is no other advisory group in California which is outside the open-meetings ambit," he explained.

The transparency problem has now led to new legislation from state senators Deborah Ortiz (D-Sacramento) and George Runner (R-Lancaster). The bipartisan team has proposed a state senate constitutional amendment that will require the institute and its working groups to comply with open-meeting laws and heightened conflict-of-interest requirements. Unlike Ortiz (who is Catholic), Runner was initially opposed to Proposition 71 on moral and ethical grounds. "I think there is a lot of science available out there with other kinds of stem cell research that was available, [and] I struggle with the issue of the whole concept of the embryonic portion of stem cell research on a moral and ethical level," he said. He also objects to using taxpayer dollars to fund the research and says that the proposed constitutional amendment will result in more transparency. "Proposition 71 had a series of problems that we're seeking to cure, such as the open-meeting aspects and some kind of sunshine to how it operates, those kinds of issues," he said.

Hallye Jordan, spokesperson for Senator Ortiz, confirmed that Ortiz was an ardent supporter of the stem-cell research initiative. "In fact, she's the one that actually got it going. She had introduced stem cell legislation back in 2002 and then over the years has also tried to get funding for it through some bonds. But that didn't happen, so she was the one that really went and did some polling on whether this is something that Californians would support in an initiative form, so she was involved in that," she said. Jordan said that Ortiz wasn't, however, involved in the drafting of Proposition 71 and felt the initiative did have problems in the areas of open meetings, conflicts of interest, and patient protections, which is what the Oritz-Runner legislation is designed to address. "What they're trying to do is maintain the public's confidence in the research by opening up the implementation with the disclosure of financial records and the conflicts of interest, so that the public is confident that their $3 to $6 billion is being spent for this research in a neutral way and not to provide favors to someone you happen to have business dealings with or a company that you have a vested interest in," she explained.

Dana Cody, on the other hand, would not be disappointed if the entire proposition was found to be in violation of state law and declared invalid — and she is trying to do exactly that. Cody is the executive director of the Life Legal Defense Foundation, a legal representation organization that opposes abortion and assisted suicide and is involved in other right-to-life issues. In February, the foundation filed a petition in the California Supreme Court. On March 23, the Supreme Court declined to hear the case, indicating that it should be filed in a lower court, according to the foundation, and the case has been refiled in Alameda County. In essence, the suit says that since the public funds earmarked for stem-cell research are not controlled by the legislature, Proposition 71 violates Article 16 of the state constitution. In the action, Cody's foundation is providing legal representation for two unrelated groups, People's Advocate and the National Tax Limitation Foundation, both of which oppose the measure as taxpayer watchdogs, and not necessarily on moral or ethical grounds. Cody explained the unique partnership. "We're definitely a pro-life group and obviously we have moral objections to embryonic stem cell research, and that's one of the reasons we took this case," she said. "I'm sure that our clients may have a different opinion on whether or not embryonic stem cell research is something with promise or something that they would like to see done from a moral or religious standpoint; I'm sure that they have different opinions." Cody emphasizes that her group doesn't get public funding and, in the case of Proposition 71, doesn't believe the government should fund a project that private venture capitalists should bankroll. "If embryonic stem cell research had any promise, they would have no problem getting private funding. They don't get private funding because it's not a proven technology," she said.

People's Advocate CEO Ted Costa confirmed that his group doesn't object to the concept of stem cell research but does take issue with the lack of oversight with Proposition 71 and the fact that, if the Institute for Regenerative Medicine is allowed to conduct its work without government oversight, other groups will be able to do the same. "This body can spend money any way they want, and [other groups] can duplicate it," he said. "That's kind of like throwing money down a rat hole."

The man behind the development, marketing, and successful passage of Proposition 71 is attorney and real estate developer Robert Klein II. Klein is now chairman of the Independent Citizen's Oversight Committee, and as the controversy surrounding his project has escalated, he has become less accessible. In mid-March, Ortiz's senate committee held a hearing on the stem cell program and invited Klein and other program stakeholders to testify. Before the hearing convened, the California Research and Cures Coalition, a non-profit stem cell promotional organization founded by Klein, sent an e-mail urging supporters to contact Ortiz and persuade her to postpone the hearing. "The hearing will inevitably generate press which could be damaging to the efforts of the institute," said the e-mail. Many legislators were reportedly infuriated when they heard about the e-mail. Their frustration escalated when Klein himself, who was expected to attend the hearing, backed out just before the proceedings began. Klein sent as his proxy, Zach Hall, who had been hired as the institute's president just a week earlier and was unprepared to effectively address the committee's inquiries.

My own attempts to track down Klein for an interview were equally frustrating. After leaving a message at his Fresno law office, I was transferred to the Emeryville headquarters of the institute and spoke with his chief of staff, Amy Lewis. Lewis handles scheduling for Klein, and she took a message for the chairman; she suggested I get in touch with Julie Buckner at Red Gate Communications, the public relations firm for the institute. Neither Klein nor Buckner called back.

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