Feb. 26 (Bloomberg) -- Six years ago, Texas Governor Rick Perry persuaded voters to approve $3 billion in taxpayer-backed bonds to research cures for cancer.
Now, after the Cancer Prevention and Research Institute of Texas spent $836 million with no major advances to show, its research has been halted by allegations of favoritism toward people that contributed to Perry and other leaders. A district attorney, lawmakers and the attorney general are investigating.
The program’s disarray followed closely upon Perry’s abortive run for the Republican presidential nomination last year. That campaign capsized after the governor was unable during a televised debate to name the three federal agencies he promised to dismantle. At home, Perry had made fighting cancer a signature initiative, calling the funding “a turning point.” The state touted the agency as the second-largest source of cancer-research funding behind the U.S. government.
“It’s wonderful that the state of Texas wanted to use its money to bring an end to death and suffering from cancer,” said Jonathan Simons, chief executive of the Prostate Cancer Foundation in Santa Monica, California, which provided $30 million in research grants last year. “It’s too bad they couldn’t keep some people from getting the money based on political relationships.”
Cancer accounted for 23 percent of the 2.5 million U.S. deaths in 2011. Texas officials said the only larger U.S. government source of funding toward its cure is the National Cancer Institute in Bethesda, Maryland, which awarded more than half its $5.08 billion budget in fiscal 2012, according to the American Association of Cancer Research.
Perry, 62, campaigned for the Texas cancer agency in 2007 with Lance Armstrong, the Texan cyclist and cancer survivor stripped of his record seven Tour de France titles for doping. Perry’s idea was to expand economic development by boosting the second-largest state’s universities and bringing treatments to market.
The agency, based in an office building in downtown Austin, began unraveling last year in a dispute over whether money was steered to institutions with ties to those awarding the grants, and over whether too much was spent on basic research instead of bringing drugs to market.
Rosemary Lehmberg, the Democratic district attorney for Travis County, which includes Austin, is examining the grants, said Gregg Cox, who heads her public-integrity unit. She will take the matter to a grand jury, he said. Cox declined to say who is under investigation and what laws might have been broken.
Prosecutors began investigating last year amid staff resignations from the cancer agency and legislative probes.
A state audit last month found that the agency lacked controls to “assure the public that its award decisions are not improperly influenced.” In a dozen cases, the agency didn’t get reports showing how grants were used, the audit found.
Perry’s spokeswoman, Lucy Nashed, declined to comment on the audit and investigations. She said in e-mails that Perry had no say in funding and that he expects the agency “to fully address the concerns that have been raised about its processes and operations prior to future grants being awarded.”
The agency stopped awarding grants in December. Lawmakers of both parties are calling for legislation to promote accountability and to avoid conflicts before allowing more.
Phillip Sharp, chairman of an agency-assembled scientific panel that recommended which grants should be funded, resigned in protest after money was disbursed without his panel’s advice.
“You need to reduce the role of politics in the review of what projects get funded,” said Sharp, a professor at the Massachusetts Institute of Technology in Cambridge and the 1993 winner of the Nobel Prize for medicine. “They need to stop making decisions in closed rooms.”
Among the grants Cox said is under investigation is $11 million given in June 2010 to Peloton Therapeutics Inc., a closely held drug-development company in Dallas. It was awarded without scientific review, according to the audit.
Peter O’Donnell Jr., an 88-year-old Dallas investor who owned part of Peloton until November 2011, has given $504,500 in contributions to Perry, Lieutenant Governor David Dewhurst and House Speaker Joe Straus since 2000, according to the Texas Tribune, an Internet news organization. The three Republicans appoint nine of the agency’s 11 governing board members.
O’Donnell has also given $240,000 to the campaigns of the other two board members, Attorney General Greg Abbott and Comptroller Susan Combs, both Republicans.
Straus couldn’t recall any grant recipients asking for his help getting funding, said Jason Embry, a spokesman. Dewhurst also hadn’t been asked to intervene, said Enrique Marquez, a senior adviser.
Abbott, whose office is conducting a civil investigation of the grants, declined to comment, said Jerry Strickland, a spokesman. R.J. DeSilva, a spokesman for Combs, said the comptroller didn’t intervene on anyone’s behalf.
The O’Donnell Foundation, which the investor controls, also gave $1.6 million to another foundation created to raise money to supplement the cancer agency’s funds and subsidize salaries for those awarding grants, according to the audit.
O’Donnell invested $900,000 in Peloton because he wanted to help the biomedical industry, he said. O’Donnell said he didn’t try to influence grants.
When he realized the investment could create the appearance of impropriety, he donated his shares to University of Texas Southwestern Medical Center at Dallas, he said.
“I wanted out,” he said. “I was concerned I could be tagged with a conflict-of-interest charge.”
The executive director of O’Donnell’s foundation, Carolyn Dickson, was the registered agent and board member of a company that received the agency’s largest grant: Statewide Clinical Trials Network of Texas, which got $25.2 million to test cancer treatments.
The agency’s scientific review council didn’t recommended the grant, according to the audit.
Dickson said neither she nor O’Donnell used political connections to obtain the money.
After Texas froze funding, Statewide closed in January and fired 36 people.
The agency also awarded $20 million to the Houston Area Translational Research Consortium and the Institute for Applied Cancer Science last year without scientific review, according to the audit. Without explanation, the grant was given top priority, Sharp said.
“It leaped to the front of the line,” Sharp said.
The year before the grant was awarded, Perry said the Institute for Applied Cancer Science, which seeks to accelerate therapies, made the state “a place where academic research can come together with a very vibrant private sector.”
That grant prompted the resignation of Alfred Gilman, the state agency’s chief scientific officer, who oversaw Sharp’s review panel. Gilman, who shared the Nobel Prize in medicine in 1994, declined to comment.
Jimmy Mansour, the chairman of the Texas cancer agency’s board, declined to comment, said his spokesman, William Miller with HillCo Partners, an Austin lobbying firm.
Mansour and other board members “are not under suspicion in the investigation,” Lehmberg said in a Jan. 23 statement.
The state money has helped advance drug development, supporters said. Austin-based Mirna Therapeutics, which received $10.3 million, is to begin trials within two months on a liver-cancer medication, said Paul Lammers, president and chief executive officer.
“The funding has been vital for us,” Lammers said.
Now lawmakers are proposing ways to revamp the program, or eliminate it.
State Senator Kevin Eltife, a Republican, sponsored legislation to block the state from issuing more general-obligation bonds for the agency.
“You don’t go into debt for cancer research,” Eltife said. “We should have paid cash if we were going to do this.”
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