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'Crisis Management' PR Firm's Advice to Stem Cell Agency Laundered Through Law Firm to Avoid Scrutiny

SANTA MONICA, Calif., Feb. 7 /PRNewswire-USNewswire/ -- 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.

Read the documents here:

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 wrong."

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.

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:

SOURCE Foundation for Taxpayer and Consumer Rights
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