Los Angeles Times: Flawed Investigation Magnifies California Stem Cell Scandal

The Los Angeles Times is carrying another column excoriating the $3 billion California stem cell agency, and it involves the same set of players, the agency’s former president and a San Francisco area stem cell company.

The headline on the column by Pulitzer Prize-winning columnist and author Michael Hiltzik says

 “California’s stem cell scandal gets worse.”

The piece is up on the Web site of the Times, which is California’s largest circulation newspaper, claiming 4 million readers online and in print on Sunday. Hiltzik's column is also circulated to other newspapers around the nation. 

Hiltzik dug into this week’s investigation by CIRM, as the agency is known, involving the appointment of Alan Trounson, the former president of the agency, to the board of StemCells, Inc.(SCI), earlier this month, just seven days after he left the agency. The publicly traded company has been awarded $19.3 million by the agency under unusual circumstances. Trounson is expected to receive compensation for his work on the board. Last years, members of SCI board received as much as $99,000 in stock and cash.

On Thursday, the agency’s new president, Randy Mills, reported the results of what he described as a “severely” limited investigation conducted by the board’s longtime outside counsel. Mills said there was no evidence that Trounson committed any illegal acts in May or June.

Hiltzik said the investigation itself was flawed by conflicts of interest. He wrote,

“To begin with, CIRM placed the investigation in the hands of its law firm, San Leandro-based Remcho, Johansen, and Purcell. The Remcho firm is the antithesis of an objective, independent party; its lead partner on the CIRM account, James Harrison, has been a CIRM insider from the start. He helped draft Proposition 71. He's been counsel to the agency or its governing board since 2005.

“As it turned out, Harrison couldn't conduct the investigation himself, because he was involved in some of the transactions with Stem Cells Inc. under review. Instead of hiring an independent law firm to do the job, CIRM allowed the review to be turned over to Harrison's own partner, Margaret R. Prinzing.

“Trounson hasn't been available for comment; Prinzing reported that he was back in his Australia home, and she herself communicated with him by email. Stem Cells declined Friday to our request for comment. We've reached out for comment to the law firm, and will update if we hear back.”

Hiltzik said the time frame was much too narrow. He said the probe should have gone back to the events of the summer of 2012, when StemCells, Inc., was awarded the cash with the help of the former chairman of the stem cell agency, Robert Klein.  It was the first time Klein lobbied the board after leaving it. It was the first and only time the board has approved an application rejected twice by its blue-ribbon reviewers.  

Hiltzik wrote,

 “Trounson didn't speak on the Stem Cells application during that September meeting. But he did weigh in on another Alzheimer's proposal from researchers at USC and UC Davis, which had received a higher score from the reviewing panel. That proposal, like the Stem Cells application, had already been rejected once by the CIRM board, and had come back on appeal.

“At the September meeting, Trounson told the CIRM board that the scientific reviewers had misgivings about whether the USC/UC Davis proposal was sufficiently stem-cell oriented to fit within CIRM's portfolio. He didn't speak out against the application, but merely passed along the grant reviewers' doubts. ‘It remains questionable, and I think you have to decide yourselves on it,’ he told the board.

“It isn't clear whether approval of that proposal necessarily would have killed the Stem Cells application--theoretically, both could have been approved. But the board then was looking for one Alzheimer's project to fill out its disease-therapy portfolio, and Stem Cells got the nod. The board rejected the USC/UC Davis application, 10-4.

“In any case, Trounson plainly was participating in discussions that carried possible implications for his future employer, as far back as 2012.”

Hiltzik also wrote that SCI “may be standing on shaky financial ground,” based on the details disclosed in the memo on the results of the investigation. Among other things, the memo said that the firm had failed to meet financial standards in its contract with CIRM but was still seeking a partial payment anyway.

Hiltzik’s summary:

“Here's what we know so far: A well-connected company with questionable finances and a research proposal of uncertain scientific validity has received favorable treatment from CIRM. An investigation of the relationship between the firm and CIRM's management was placed in the hands of a law firm inextricably entwined with management, and given an inappropriately narrow scope. The unanswered question burning a hole through CIRM's credibility is whether Stem Cells Inc. got its money because its research was promising, or because it knew the right people.”

(The Times also carried a short news piece late Friday dealing with the Trounson affair. The article by Amina Khan said the agency is continuing in "damage-control mode." It recounted Mills pledge not to accept employment with a CIRM grant recipient until one year after he leaves the agency. The story also referenced the Hiltzik column.)

(Editor's note: The above parenthetical material was not contained  in the original version of this item. An earlier version this item also incorrectly said the Hiltzik column was expected to be published in print on July 27.)