« How Others See Us - More on Med School Conflict of Interest Events | Main | The Conflicted Authors of the University of Minnesota's New Conflicts of Interest Policy »

Report of Inquiry Panel Regarding Dr. Leo Furcht Conflict of Interest

A disturbing document is available for download as a pdf from the Star-Tribune website. Eventually it will not be available and since it is a scan of a fax turned into a pdf - well the quality isn't too good. See an earlier post for a direct link to be found at the end of the document.

The whole thing is in the continuation below for those with strong stomachs. I give here just enough to illustrate the avarice and duplicity involved.

... the panel recommends that the Dean consider undertaking an investigation to examine whether Dr. Furcht committed misconduct under Section 10 of the Faculty Tenure Code. This section includes the following ground as a basis for suspension, termination, or other disciplinary action against a faculty member: "Egregious or repeated misuse of the powers of a professional position to solicit personal benefits or favors." Faculty Tenure Code, Section 10.21(c).

Several of Dr. Furcht's actions raise questions about possible misuse of his professional position. In particular, further review may be needed to determine whether Dr. Furcht misused his faculty and/or department head position in ways such as the following:

a) To arrange for research to be conducted at the University to personally benefit him and his commercial interests;

b) To delay or avoide addressing xxxxxxx concerns about payment of research fees for the Baxter research performed in xxxx laboratory;

c) To direct the use of University funds to cover research performed in xxxxxxxx laboratory that served the commercial interests of Dr. Furcht and MCL; and

d) To manipulate and mislead xxxxxxxx into performing research at the University that personally benefited Dr. Furcht and his commercial interests.

Document Transcipt Follows

REPORT OF INQUIRY PANEL
REGARDING DR. LEO FURCHT
CONFLICT OF INTEREST


[Note: The posted document has some names redacted.
This omission is noted in this transcipt by: xxx...]

INTRODUCTION

This is an inquiry report examining whether Dr. Leo Furcht has violated the University's conflict of interest policy in connection with a July 2000 research agreement involving Baxter Healthcare Corporation. Based on the reasons detailed below, the Panel concludes that Dr. Furcht has committed a serious violation of the conflict of interest policy and recommends that he be subject to disciplinary action. Further, the Panel recommends that the Medical School consdier proceeding with a full investigation to examine whether Dr. Furcht committed misconduct under the Tenure Code by misusing the powers of his professional position as a professor and department head to obtain personal benefits.

Panel members who conducted the inquiry were: Robert Cipolle, Professor of Pharmacy and Chair of the AHC Conflict Review Committee; Frances Larenz, Professor of Educational Psychology and member and Interim Chair of the Provost's Conflict Review Committee; and Anne Taylor, Associate Dean of the Medical School and member of the Research Relationships Review Panel. In addition, Richard Bianco, Assistant Vice President for Regulatory Affairs, and Barbara Shiels, legal advsor for the University's conflict review comittees, served as ex-offico advisors to the inquiry panel.

SUMMARY OF PANEL'S WORK


The Panel met on four occasions to carry out the inquiry. There was an initial meeting on August 18, 2003, where Gail Klatt and Allen Willie of the Department of Audits provided background factual information to the Panel. The panel inteviewed xxxxxxxxxx on September 18, 2003, and interviewed Dr. Furcht on September 30, 2003. There was a final meeting on October 10, 2003, with no witnesses present, where the Panel assessed the evidence collected in the inquiry and formulated the Panel's conclusions. Legal counsel for the Panel was not present at the Panel's inberviews of September 18 and September 30, because neither xxxxxxxxxx nor Dr. Furcht appeared with legal counsel.

EVIDENCE REVIEWED

In addition to the evidence obtained through witness interviews, the Panel reviewed numerous documents in the course of the inquiry. These documents included contracts, research reports and correspondence between xxxxxxxxxx and Dr. Furcht. A complete list of the documents is attached as Appendix A.

SUMMARY OF WITNESS INTERVIEWS


A. Audit Manager Allen Willie

Allen Willie ("Auditor Willie") indicated that xxxxxxxxxx and Dr. Furcht entered into a research agreement with Baxter Healthcare Corporation ("Baxter") in July 2000. The Agreement was between Baxter and MCL, a company formed by Dr. Furcht to commercialize stem cell technology developed by xxxxxxxxxx in which the University had waived interests. Dr. Furcht has an equity/ownership interest in MCL and is the president of the company, whereas xxxxxxxxxx has a royalty interest only in MCL.

Under the research agreement, Baxter was to pay MCL $501,000 to conduct research on whether xxxxxxxxxx could use stem cell technology to grow red blood cells. xxxxxxxxxx and Dr. Furcht signed the agreement as "investigators" and Dr. Furcht also signed separately as President of MCL. The research was preformed by xxxxxxxxxx and the employees in laboratory at the University.

According to Auditor Willie, the parties to the agreement understood the research would be conducted at the University. However, the University was not a party to this agreement and it was executed without the University's knowledge. An earlier draft version of the agreement in April 2000 listed the University as a party, but Dr. Furcht maintained he didn't need to continue to involve the University once the University had waived its interest in the technology in May 2001. The University became aware of the agreement in the fall of 2002 when the issue arose in connection with a proposed sale by Furcth of MCL to another company called Athersys. Also, around this time xxxxxxxxxx asked the Office of the General Counsel for help in getting payment from Dr. Furcht for help in getting payment from Dr. Furcht for sdthe research that had beeen performed for Baxter.

Auditor Willie reported the Baxter research had been completed in March 2001 and a final report by xxxxxxxxxx and Dr. Furcht was delivered to Baxter at that time. Dr. Furcht donfirmed to Auditor Willie that baxter ahd made the payment of $501,000 for the research. However, Dr. Furcht had advised xxxxxxxxxx the money was sused to offset legal expenses for patent prosecution and he claimed also to have funded over $1 million of research in xxxxxxxxx laboratory through the Universities BMEI.

Auditor Willie said he understood that both xxxxxxxxxx and Dr. Furcht had disclosed their interests in MCL to the University through the regular conflict of interest reporting process. However, neither had disclosed the Baxter agreement or the work being done at the University on behalf of MCL and Baxter. To Auditor Willie's knowledge, Dr. Furcht had participated in the Baxter research by making a presentation to Baxter about the research, securing Baxter as a sponsor and signing offf on the report of research findings to baxter. Auditor Willie reported that Dr. Furcht stands to make several million dollars if the sale of MCL is finalized.

B. Dr. Leo Furcht

Dr. Furcht was asked for an explanation of the study. He responded that xxxxxxxxxx had been trying to make blood with what xxxxxxxxxx thought were mesenchymal stem cells. In the process of trying to make blood, they made what looked like neuronal cells. All along there was interst in testing for hematopoiesis of the cells but that linate was having difficulty coming to fruition. The technology is very gray as to where it begins and ends. Therefore, a protocol was developed to study hematopoiesis, both in-vitro and in-vivo.

Dr. Furcht was asked about the findings and he responded that the work was ongoing before and continued afterward. Six months into the protocol, xxxxxxxxxx began to see spleen colonies in the in-vivo studies. These cells are now called MAPC's. The results showed limited engraftment in-vivo. With some cytokines and growth factors it could be done in vitro but the only thing xxxxx saw was the ability to form fetal hemoglobin chains and not adult cells.

Dr. Furcht was asked what the relationship was between MCL and the University. He responded that they went to PTM in 1998 or 1999 with an abstract that is the heart of the company's technology and teh University did not want to file the patent. The University had contacted Osiris and the company responded it had this and was not interested. According to Dr. Furcht, xxxxxxxxxx came to him because of his experience with patents. After the University waived its rights, he worked with xxxxxxxxxx. He was assured that the technology was waived and MCL was set up as a shell to hold the technology. MCL does not have a building or a lab, just the technology patent. Dr. Furcht said he decided to file the provisional patent and figure out other issues later.

In September 2001, xxxxxx from PTM said there was a new disclosure, different from the original that was presented to PTM. He asked if Dr. Furcht would give xxxxxx a waiver to work on that for the University. According to Dr. Furcht, what came out of that was the University accusing xxxxx of not being truthful in xxxx disclosure to PTM. Dr. Furcht felt the University understood what it lost and wanted to get it back.

Dr. Furcht said a legal debate ensued with the University from September 2001 through May 2002 as to what the MCL patent covered. It was settled that MCL owned only a small piece of the technology and the University owned the hematopoiesis work.

Dr. Furcht was asked when the research agreement was signed for the study in question. He stated the protocol was initiated in July, 2000. At that point the University had wiaved the patent and MCL thought it held the patent right.

Dr. Furcht was questioned why there were two versions of the research agreement and why on one the University was the institution and on the second MCL was the institution? Dr. Furcht stated that this was at the request of the legal people at Baxter who said the University could not enter into an IP agreement on something they did not own. The panel noted that Dr. Furcht signed the protocols as the President of MCL and as an investigator. Does he see a conflict in that? Dr. Furcht did not see one because the research was to be done in someone else's lab. The panel sated that he had control of the money and that is a PI role. He agreed that he controlled the money but said he never intended to participate in the research.

Dr. Furcht was asked to explain his relationship with MCL. He responded that the University owns 5% and some consultants own a litlle. He is the "top dog" of MCL. xxxxx has no relationship except assigning the technology. In consideration for that a royalty arrangement was made with MCL. xxxxx did not want more of a financial arrangement.

Dr. Furcht asked who funded the study in question. He responed that Baxter funded it and that he has no relationship with Baxter.

Dr. Furcht was asked why the parallel research agreement between MCL and the University was not made. He sated that Baxter wanted the agreement with MCL because MCL owned the cells. The panel aked is there documentation sating that Baxter knew they would have to license from the University if the research was successful? He stated that the Company owns only the abstract.

The panel noted that if subsequent to the interim report Baxter wanted the technology, MCL would have had to go to the University. At the time the interim report was done in March 2001, why woul Baxter think they had to go to the University to license the technology from the study? Dr. Furcht stated it was novel research outside the original grant. Part of the gray area was the ongoing negotiations. It took from October to June 17 to finalize an agreement with Athersys.

Dr. Furcht was asked where the money is now. He responded we settled to the degree that patent lawyers could agree with who owned what. As part of that deal, he said he wantted to make it look like the University had licensed the technology. The University got equity and royalties. Dr. Furcth said we structured it to have sub-licensing and will close on acquiring the technology. When that happens the first phas of money will come in. Part of that deal was to close the book on money owed to the University. Athersys acquires MCL assets and liabilities.

Dr. Furcht sated that the Baxter project is done and Baxter paid the money to MCL, but that a final report was never issued. Dr. Furcht was asked again why he was listed as an investigator. He responded that it was Baxter's document.

RELEVANT PROVISIONS OF THE REGENT'S POLICY

There are several provisions of the Regents policy that are relevant to this inquiry. They include the definitions of business interest and significant financial interst, disclosure requirements, enforcemt through disciplinary action, research activities constitution moderate to high potential for conflict, and department head review responsibilities. These provisions are referenced in the conclusions section below and excerpted verbatim in Appendix B.

CONCLUSIONS OF INQUIRY

1. Dr. Furcht had a business interest and a significant financial interest as defined under the Regents Conflict of Interest Policy. His business interest was an executive position as founder and president of MCL, and his financial interest was chief equity holder in the company. See definitions of "business interest" and "significant financial intest" in Appendix B, item 1.

2. Dr. Furcht's involvement in research conducted at the University under the Baxter research agreement constituted a moderate to high potential for conflict of interest under the Regents Policy. Although not part of the day to day research activities in xxxxxxxxxx laboratory, Dr. Furcht participated in Baxter research in several keey ways: he contacted the funding agency, negotiated for external support, facilitated the use of University facilities for the resarch project; identified himself as an investigator on the research agreement with Baxter, presented research results to Baxter, submitted a written report about the project with his name included on the report, and controlled the funding of the project at the University. Thus, Dr. Furcht participated in the evaluation or development of of stem cell technology owned by MCL in which he had a business interest and a significant financial interest in the form of equity in the company. Appendix B, item 2.

3. Dr. Furcht was required to disclose his involvement in the Baxter project prior to undertaking this activity at the University. Prior disclosure of a potential conflict of interest is a key requirement of the Regents policy. Appendix B, item 3.

4. Dr. Furcht failed to make a prior disclosure of his involvement in the Baxter project and therefore, violated the Regents policy. Failure to file a required disclosure may be the baseis for discipline of an employee under the enforcement section of the policy. Appendix B, item 4.

5. Dr. Furcht's violation of the conflict policy was a serious violation by a senior University official which the panel believes warrants both corrective and disciplinary action against Dr. Furcht. There were a number of factors leading the panel to this conclusion:

a) First, Dr. Furcht did not have a reasonable basis for believing he was in compliance with the conflict policy. Dr. Furcht's participation in the project as outlined in paragraph 2 above (e.g. obtaining research funding, identifyig himself as an investigator, presenting research results, controlling th project funds, etc.) is typical of the actions performed by a principal investigator. The fact that Dr. Furcht did not also perform the day to day research activities in the laboratory doe snot render him exempt form the conflict policy. Dr. Furcht was in a position to influence the design, conduct and/or reporting of research conducted at the University in which he had a business and financial interst and thus was subject to the restrictions of the conflict policy.

b) Second, as a department head with administrative and oversight responsibilities under the conflict policy, Dr. Furcth is expected to know and understand the requirements of the policy. Dr. Furcht is responsible for reviewing and approving the REPA forms for each academic employee in his department and is the primary administrator responsible for determining the appropriate course of actdion for those external realtionships that create a minimal to moderate potential for conflict. See Appendix B, item 5. Dr. Furcht either knew or should have known that his participation in the Baxter project performed at the University using technology owned by MCL created a sizeable potential for conflict of interest.

c) Finally, as the President and chief equity holder of MCL, Dr. Furcth had extensive business and financial interests in the MCL technology evaluated under the Baxter agreement. Dr. Furcht described himself as the "top dog" of MCL. In fact, it appears Dr. Furcht stands to personally gain several million dollars from the pending sale of MCL to Athersys. When an individual holds interests in an outide company as extensive as Dr. Furcht's interests, there is a concern under the conflict policy that those intestes could give rise to an actual conflict of inteerest where the employee compromises his or her professional judgment in carrying out University responsibilities. Based on the magnitude of Dr. Furcht's intest in MCL it is highly unlikely the University would have permitted any involvement by him in the Baxter project performed at the University had he complied with the conflict of interest policy and disclosed this activity prior to undertaking the project.


6. The panel recommends the following corrective and disciplinary action to address Dr. Furcht's violation of the conflict of interest policy:

a) As correcdtive action, Dr. Furcht re-takes the Reponsible Conduct of Research (RCR) course - Parts 1 and 2 to help assure he satisfies University requirements related to any future research in which he participates at the University; and

b) As disciplinary action, Dr. Furcht at a minimum should not be allowed to perform the conflict of interest responsibilities of a department head. Based on Dr. Furcht's own serious violation of the conflict policy, the panel does not have confidence he can carry out the administrative and oversight responsibilities specified in paragraph 5(b) above that are required of a department head under the conflict policy. Further, since responsibility to monitor conflict of interst is such an important part of a department head's duties, the Panel believes that Dr. Furcht's removal as Department Head may be warranted.

7. The panel believes that it has all the necessary facts to reach a conclusion about Dr. Furcht's conduct under the conflict of interest policy and to recommend appropriate action as outlined above. However, the panel acknowledges that the decision whether to proceed to a full investigation rests solely with the Dean of the Medical School.

8. On a related issue, the panel recommends that the Dean consider undertaking an investigation to examine whether Dr. Furcht committed misconduct under Section 10 of the Faculty Tenure Code. This section includes the following ground as a basis for suspension, termination, or other disciplinary action against a faculty member:

"Egregious or repeated misuse of the powers of a professional position to solicit personal benefits or favors." Faculty Tenure Code, Section 10.21(c).

Several of Dr. Furcht's actions raise questions about possible misuse of his professional position. In particular, further review may be needed to determine whether Dr. Furcht misused his faculty and/or department head position in ways such as the following:

a) To arrange for research to be conducted at the University to personally benefit him and his commercial interests;

b) To delay or avoide addressing xxxxxxx concerns about payment of research fees for the Baxter research performed in xxxx laboratory;

c) To direct the use of University funds to cover research performed in xxxxxxxx laboratory that served the commercial interests of Dr. Furcht and MCL; and

d) To manipulate and mislead xxxxxxxx into performing research at the University that personally benefited Dr. Furcht and his commercial interests.

SUBMITTED BY:

Robert Cipolle
Professor of Pharmacy and Chair of AHC Conflict Review Committee

Frances Lawrenz
Professor of Educational Psychology and Member and Interim Chair of the Provost's Conflict Review Committee

Anne Taylor
Associate Dean of the Medical School and Member of the Resarch Relationshiops Review Panel

Post a comment

(If you haven't left a comment here before, you may need to be approved by the site owner before your comment will appear. Until then, it won't appear on the entry. Thanks for waiting.)