Cancer-fighting agency funded projects of Perry contributor

One night in December 2007, Dallas businessman David Shanahan and several of his family members gathered at a home in Highland Park with a special guest, Gov. Rick Perry, to talk about cancer.

By the end of the next day, the governor had collected $50,000 for his campaign fund from Shanahan and several of his associates. Less than one week earlier, Lt. Gov. David Dewhurst pulled in $40,000 from a similar group of donors that included Shanahan.

This political gift-giving came just a month after Texas voters approved a 10-year, $3 billion program to fight cancer. Millions from that program later would flow to Shanahan’s firms.

The state created a new agency, the Cancer Prevention and Research Institute of Texas, with the lofty goal of, in Perry’s words, “finding a cure for this indiscriminate killer.”

CPRIT now faces accusations that its method for awarding grants has become compromised. Its chief scientist and dozens of others who evaluated proposals have quit amid concerns that politics has infected the agency.

Some of those scientists have warned CPRIT about shifting money from university research toward Texas companies.

“There is much more of a chance, using this mechanism, for favoritism to be given, and for politics to be inserted into the process,” said J. Wade Harper, a Harvard Medical School professor who resigned recently from CPRIT’s team of science reviewers.

This was the same “mechanism” through which a Shanahan company received its largest CPRIT award. He told The Dallas Morning News via a lobbyist that his campaign contributions had “no impact of which I am aware” on the public dollars his companies received.

But as the agency seeks to restore public confidence in its work, Shanahan’s involvement shows how one businessman with well-connected associates and new-found generosity toward Texas politicians can tap into the great CPRIT money stream.

The News’ review of one of those projects illuminates the disputes that have divided the agency most of this year. The controversies have involved angry clashes between CPRIT’s leaders and out-of-state scientists over how projects are reviewed.

In addition, a state legislator has vowed to overhaul CPRIT in the coming session, with a special emphasis on transparency in funding.

Second largest

After CPRIT was approved by Texas voters, it became the nation’s second largest source of money to fight cancer, behind only the federal government’s National Cancer Institute.

The small state agency hands out up to $300 million a year. The money goes toward cancer prevention, for university research, and to companies trying to develop better ways to treat cancer. The funding stream has also lured prominent scientists to the state. So far, CPRIT has made more than 400 awards, totaling $755 million.

Shanahan, along with other Texas businessmen, was well-positioned to benefit from the state’s new anti-cancer agency.

He is the grandson of Mary Crowley, who built a Dallas home furnishings company into a multimillion-dollar venture. Shanahan, 50, received a bachelor’s degree in electrical engineering from Texas A&M University in 1985. He then tackled several ventures, including self-storage companies and a firm that ran ranches and farms in Central Texas.

In 2004, Shanahan became president of a nonprofit group that was named for his grandmother, the Mary Crowley Cancer Research Centers. It now tests experimental treatments on cancer patients.

But his ambitions moved beyond operating the nonprofit group. He formed a small pharmaceutical company, now called Gradalis, that develops experimental cancer treatments.

Big donors

Shanahan forged ties with two heavyweight political donors and, like them, began to make campaign contributions.

He attracted investments in Gradalis from San Antonio businessman Dr. James Leininger and Jimmy Mansour, an Austin entrepreneur and investor.

Leininger and Mansour have been credited with assisting Perry’s ascent in Texas politics. The two helped guarantee a $1.1 million loan that was desperately needed by Perry in the final week of the 1998 race for lieutenant governor. Perry won and his campaign repaid the loan, but Democrats charged that Perry was beholden to the businessmen as a result.

From 1995 to 1998, Mansour was chairman of a group that tried to build nationwide support for school voucher programs. Leininger was a major donor to an affiliated group in San Antonio.

Shanahan and Leininger are board members of Virginia-based Patrick Henry College, which says its mission is to “prepare Christian men and women who will lead our nation and shape our culture with timeless biblical values.”

A veteran telecommunications executive, Mansour said he invested in Gradalis in 2006 and became a board member. Documents obtained by The News listed Leininger in 2009 as a shareholder in the privately held firm. Leininger didn’t return messages seeking comment.

Shanahan had not been heavily involved in making campaign contributions until CPRIT was being formed. But in 2007, he and his wife, Salli, began to give thousands of dollars to candidates for Texas elected offices.

Several of their donations went to the two men who control many of the levers when state dollars are handed out for economic development programs — Perry and Dewhurst. They, along with the speaker of the House, appoint members of CPRIT’s Oversight Committee.

Since 2007, the Shanahans have made $20,000 in campaign contributions to Dewhurst and $15,000 to Perry.

Shanahan would not speak with The News. He referred interview requests to Bill Miller, one of the most powerful lobbyists and political consultants in Austin. Through Miller, he answered questions in writing.

Shanahan said he contributed to Perry and Dewhurst “in conjunction with attending cancer advocacy events.” Asked what he expected from his campaign contributions, he wrote that he and his wife “expect candidates to maintain their vision and commitment to cancer research.”

‘No connection’

Shanahan had made connections, both in business and politics. And, as the state’s new anti-cancer agency was being born, he found success in nailing down public dollars for his projects.

When Shanahan and his relatives had gathered at a Highland Park home with Perry about a month after voters approved CPRIT in 2007, Mansour was there, too. Mansour referred to the event as a “reception” and gave Perry’s campaign $25,000 the following day.

A week earlier, the same day Shanahan contributed to Dewhurst’s campaign, Mansour gave $25,000 to the lieutenant governor’s coffers.

In 2008, Dewhurst appointed Mansour to the CPRIT Oversight Committee, and Mansour was elected chairman. Mansour had contributed $40,500 to Dewhurst in the eight years leading to that appointment.

Both Dewhurst’s office and Mansour said there was no connection between the campaign contributions and the CPRIT appointment.

A Dewhurst spokesman added: “The lieutenant governor has no control or influence over which companies receive funding from CPRIT.”

The Oversight Committee members, all of whom volunteer their time, keep tabs on the agency’s operations, particularly how it apportions money.

As chairman, Mansour recruited the agency’s executive director. Emails obtained by The News show he has been deeply involved in the agency, commenting on work by Dr. Alfred Gilman, the former chief scientific officer and a Nobel laureate.

Mansour would not speak with The News. In answers to written questions, he said he was advised that as a member of CPRIT’s Oversight Committee, he could hold investments in companies that received awards, and in which his ownership was no more than 5 percent of the firm. He said that was the case with the stock he owned in Gradalis, which he decided to sell.

“While it was allowed under the law, I felt it would be better to have no such investments or further communications with the company to avoid even the perception of a conflict,” Mansour wrote.

Mansour said the sale of the Gradalis stock that he owned personally and through a limited partnership ended in what he called a “substantial loss” in 2009.

The following year, CPRIT’s oversight committee members, including Mansour, ratified a $748,905 award to Gradalis, as part of a much larger grant. Gradalis is using the CPRIT dollars to collect tumor biopsies for genetic analysis. Both Gradalis and the Mary Crowley Centers have applied for other CPRIT grants but did not receive them.

By the end of 2010, Shanahan’s firms also had been awarded money from two of Perry’s signature economic development programs — $1.75 million from the Texas Emerging Technology Fund and $3 million from the Texas Enterprise Fund. One company also tapped $4 million from a little-known fund to assist communities with military bases.

Critics have blasted some of the awards made by the tech fund and the enterprise fund as rewards for Perry’s political donors. The governor has rejected the charges, saying the programs have benefited Texas’ economy and politics don’t influence his decisions.

The News reported in 2010 that more than $16 million from the tech fund had been awarded to companies with investors or officers who were large campaign donors to Perry.

An aide said Perry knows Shanahan because he is “one of the governor’s many supporters,” but Shanahan’s campaign giving had no relation to the government awards he has received, including the two from CPRIT.

“The governor is not involved with operations or funding decisions at CPRIT,” the Perry spokeswoman, Lucy Nashed, said in an email.

A&M projects

When Shanahan turned his attention to his alma mater, Texas A&M University, he became part of what some say will be the biggest federal project in Texas since the NASA space program.

CPRIT dollars would flow to him there, too.

In 2008, the Texas A&M System hired Dr. Brett Giroir, as vice chancellor for research. He soon found his way to Gradalis, Shanahan’s company in Carrollton.

Among Giroir’s tasks was to help A&M achieve its vision of making Bryan-College Station a biotechnology hub.

A former chief medical officer at Children’s Medical Center in Dallas, Giroir had worked the previous four years as a high-ranking official at the Pentagon’s research and development arm — the Defense Advanced Research Projects Agency, or DARPA.

In March 2009, Perry announced that his alma mater would receive $50 million from the state’s Emerging Technology Fund to construct a building to manufacture pharmaceuticals. The decision ignited a furor in the Legislature because Perry didn’t follow the usual process of consulting the statewide advisory board that reviewed tech fund projects.

The new pharmaceutical facility was designed to be innovative by being flexible. Giroir said he and consultants decided to use clean rooms that could be moved around like giant air hockey pucks within the building.

The A&M System chose a new Shanahan company, G-Con — short for Gradalis-Construction — to provide the mobile clean rooms.

“There was no other supplier,” Giroir said. A&M officials would not say how much was paid to G-Con.

Shanahan’s G-Con then tapped funding from Giroir’s former employer, DARPA.

In 2010, officials announced that a G-Con subsidiary — now called Caliber Biotherapeutics — and the A&M System would receive a $40 million grant from DARPA. The money would help pay for a project to show that vaccines for infectious diseases, including influenza, could be grown in tobacco plants.

Citing a confidentiality agreement, Giroir said he couldn’t divulge results of the DARPA project but said it was completed successfully.

Caliber, on its website, lists MedCare Investment Funds as an “institutional investor.” Founded by Leininger, the San Antonio businessman and major GOP donor, the firm didn’t respond to questions about the details of that investment.

In addition to the funding from DARPA, Caliber also searched for other sources of public dollars. The company applied for CPRIT money to produce cancer-fighting drugs in plants. It failed to receive funding.

In 2011, Caliber tried again with a similar project and this time prevailed. CPRIT decided to give the firm $12.8 million.

Bill Gimson, CPRIT’s executive director, said Shanahan’s political contributions had no connection to the award. Mansour said that Shanahan’s companies received their awards based on the merits of their applications.

But the way in which CPRIT analyzed Caliber’s application, on top of other controversies over how projects are reviewed and scored, raises questions about whether the agency has clear guidelines on funding decisions.

‘Fundamental problem’

To receive funding from CPRIT, a commercial project is reviewed by two groups. One assesses the business plan. The other evaluates scientific merit.

All the scientific reviewers are from out of state. CPRIT says this is one of its defenses against cronyism.

Scores are assigned to applications. One is best; nine is the worst.

But exactly how those scores are used is murky.

The agency has made 11 commercialization awards, including the one to Caliber. The News obtained science scores given by each reviewer. Using methods provided by CPRIT, The News calculated the average science scores for each company. CPRIT confirmed The News’ calculations.

Those calculations showed that Caliber’s average science score for its plant project was 4.5.

Dr. William Kaelin, a Harvard Medical School professor and one of the scientists who stepped down from CPRIT’s team of reviewers, did not review Caliber’s proposal. But he said a science score in the range obtained by Caliber usually reflected a fundamental problem in the science reviewers’ minds.

“A four, five or six meant they really thought it had flaws, that certain things that were proposed were simply not right, they weren’t built on a solid foundation, that the logic was flawed, et cetera,” he said.

CPRIT, Kaelin added, “put together a first rate group of reviewers so if this group of reviewers said, ‘I think the science is flawed,’ I think you have to take a step back and say, then what are we trying to commercialize?”

The News requested the documents showing comments the science reviewers submitted evaluating Caliber’s proposal. CPRIT refused to release them, and appealed its decision to the state’s attorney general. The attorney general’s ruling is pending.

The News’ calculations of scores show that the other companies receiving CPRIT commercialization awards earned science scores between 2.0 and 3.8. But even the 3.8 score — better than Caliber’s — triggered a heated dispute between two high-ranking CPRIT officials.

Chief scientific officer Gilman asked Mansour and Gimson, CPRIT’s executive director, why CPRIT’s reviewers were recommending a grant to Kalon Biotherapeutics, which received the 3.8 science score. Gilman characterized that score as “rather average” and recommended that Kalon not receive an award of nearly $8 million.

But Gimson said he was “not inclined to second guess” the reviewers. Kalon received the award.

Gimson later told The News there is no minimum score a company must earn to qualify for funding. He called the science score “an extra piece of information” that is considered along with the business score and detailed research into the company.

A final decision on funding is made by CPRIT’s Oversight Committee.

CPRIT’s general counsel would not comment on Caliber’s score. An agency spokeswoman said Caliber’s project received funding based on reviewers’ recommendations.

Caliber’s CPRIT contract says the company will attempt to use tobacco plants to make a better version of the blockbuster drug Rituxan, which is used to treat lymphoma and leukemia.

Experts interviewed by The News said Caliber’s project is plausible but has many hurdles. No drugs produced this way have ever hit the market, although companies are still trying.

Giroir acknowledged the challenges facing Caliber. “There are risks in all product development,” he said.

The biggest opportunities for Shanahan’s companies, G-Con and its subsidiary, Caliber, may be on the horizon.

In June, the federal government announced that it had chosen the A&M System as one of three sites for bio-security centers intended to defend the nation against emerging infectious diseases, including pandemic influenza and chemical, biological, radiological and nuclear threats.

The team led by the A&M System, with pharmaceutical giant GlaxoSmithKline as the principal subcontractor, includes Caliber. G-Con is a potential vendor.

It’s too early to say how much work Caliber and G-Con could get from the 5.5-year, $285.6 million project, Giroir said.

A federal official has credited the use of the mobile clean rooms as among the reasons why the U.S. Department of Health and Human Services chose the A&M System as one of the three sites.

Giroir said of G-Con: “They were in the right place at the right time, but they also had done technological innovations that no one else had done.”

‘Evil people’

How much CPRIT should invest in for-profit companies has become a growing source of tension.

Last May, Gilman, CPRIT’s chief scientific officer, announced he would step down. The move revealed infighting within the small state agency.

Referring to “some really evil people on the oversight committee” without naming them, Gilman identified one faction as the “we should spend much more money on commercialization people.”

The agency has devoted about 75 percent of its fund to research, 15 percent to commercialization, and 10 percent to prevention.

Some business owners have said CPRIT should devote a much higher percentage of its funding to commercialization projects.

They include Matt Winkler, an Austin entrepreneur who has received funding from CPRIT for two of his firms.

“The time it takes for basic research to end up in the clinic is typically longer than 10 years,” he said. “So making further investments in basic research, I don’t think it’s a good return.”

While government routinely funds university research, one reason it jumps into commercialization is that investors can be reluctant to dive into projects that can take several years.

“It’s a competitive world, and if your state wants to attract that talent and industry to the state, that’s another motivation right there,” said Robert Patino, director of technology transfer at the Southern Illinois University School of Medicine in Springfield.

The controversy is expected to continue into next year’s legislative session. Backers of CPRIT may square off against a diverse group of critics, from tea party Republicans who are expected to question why Texas taxpayers are bankrolling science, to Democrats weary of what they often call “crony capitalism.” A state audit is under way, with results expected by January.

State Rep. Garnet Coleman, D-Houston, said he will introduce legislation to overhaul CPRIT, and will work with Republican legislators to get it approved. He said he had “serious concerns,” when the Legislature debated the creation of CPRIT in 2007, about politics potentially infecting the award-making process.

Gilman’s resignation — combined with controversy over the agency recommending a $20 million grant for a Houston incubator without a scientific review, and the recent resignations of out-of-state science reviewers — shows that “my initial unease with the agency was justified,” he said.

Saying the rules governing CPRIT are “loosey-goosey,” Coleman said the public should know all the details of how the agency decides who gets money. To accomplish that, the process should be put into state law, he said.

Coleman said the problems that have plagued the tech fund and enterprise fund now have spread to CPRIT.

“It’s not new,” he said. “The difference is this is a boatload of money.”

Staff writer Holly K. Hacker contributed to this report.

jdrew@dallasnews.com; sgoetinck@dallasnews.com

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