Leaders of the House and Senate Armed Services Committees on December 30 selection announced former CEO of Google Eric Smith and 11 others to serve on a new federal commission on biotechnology.
The National Security Commission on Emerging Biotechnologies is expected to be a leading voice on policy and federal spending in the cutting-edge industry, along with reviewing the biotech industry and suggesting investments that benefit US security.
However, the appointment doesn’t require commission members to divulge their own personal biotech investments — even as they help shape US policy overseeing the industry. Through a venture capital firm known as First Spark Ventures, Schmidt holds stakes in several biotech companies, putting him in a position to potentially profit if those companies are the beneficiaries of a new wave of federal biotech spending.
A person familiar with Schmidt’s thinking, who asked not to be identified, told CNBC on January 19 that he would not be involved in selecting or overseeing any federal investment in the area and that he would be involved in making decisions about First. Not included. Spark Investments. The person also said that he would comply with all disclosure rules.
Then, on January 25, after a series of emails and conversations with CNBC about a possible conflict of interest, the person said that Schmidt would donate 100 percent of the “net profits” from his investment in First Spark to charity. The person did not say when Schmidt decided to donate the profits, saying he had not yet named a recipient.
Due to the nature of venture capital investing, it can take years for a company to be sold or go public.
“It’s a potential horror show,” Walter Schaub, former director of the US Office of Government Ethics, said of the new commission. “Congress created this commission without adequate safeguards against conflicts of interest.”
Schaub, an attorney who is now a senior ethics fellow at the nonpartisan nonprofit Project on Government Oversight, said commission members are exempt from criminal conflict of interest laws, otherwise they would be prohibited from reusing or Some holdings may need to be divested because it was established by Congress and not the executive branch.
“These are individuals who are going to help shape federal policy at the intersection of biotechnology and national security, and it would be legal for them to make recommendations that benefit their own personal financial interests.” “Because most actions are classified, the public may have no way of predicting how their financial interests are influencing their recommendations.”
A spokeswoman for the Senate Armed Services Committee, which would oversee the commission, said Schmidt and the other members were selected by bipartisan leaders in the House and Senate and are expected to follow government ethics rules.
“Each member of this commission is required to adhere to all government ethics policies,” the spokesperson said. “The commission itself is designed to prevent undue influence, and Congress will exercise careful oversight over the course of the commission’s work.”
The incoming chairman of the commission, Dr. Jason Kelly, doesn’t plan to leave his role as CEO of Ginkgo Bioworks, a Boston biotech company that specializes in genetic engineering.
“Jason is serving on this commission in his personal capacity,” said Joseph Friedman, an executive at Ginkgo Bioworks. He did not say whether Kelly plans to divest any potential equity in the company. “I would also note that, in general, we at Ginkgo regularly implement measures to maintain our status as a trusted partner of the US government.”
A person familiar with his thinking said Schmidt’s decision to donate his profits to charity “reinforces that he volunteered for these roles for all the right reasons.” “The primary objective is charity,” the person said.
But Schaub said that even if Schmidt gave First Spark’s net profits to charity, it would not be enough to address the problem. “Saying he will donate any profits won’t change anything,” he said. “You either have a financial interest in the government work you do or you don’t.”
The Pentagon is already deeply invested in the biotechnology sector. In September, for example, the White House announced that the Defense Department would invest $1 billion in bioindustrial domestic manufacturing infrastructure over five years to encourage the development of the US manufacturing base. The new federal commission will have the possibility to drive such investments within two years of its lifetime.
This is not the first time Schmidt has participated in an influential Washington commission. In October, CNBC reported that Schmidt and his affiliated entities made more than 50 investments in artificial intelligence companies while he was chairman of a federal commission on AI from 2018 to 2021. There was no indication that Schmidt broke any ethical rules or did anything illegal. presiding over the commission. And CNBC is unaware of any instance in which Schmidt abused his position on a prior commission for personal financial gain.
Still, at the time, Schaub called Schmidt’s AI arrangement “absolutely a conflict of interest,” and said it was “not the right thing to do.”
Schmidt’s biotech investments are relatively recent. Schmidt, who serves as a strategic advisor and non-managing partner, was a co-founder of First Spark in 2021. The firm’s investments are heavily concentrated in the biotech sector: in cutting-edge companies such as Walking Fish Technologies, which focuses on cell engineering; Vitara Biomedicals, a newborn-care venture; and Valitor, which specializes in protein-based drug therapies. Representatives for the three companies did not respond to requests for comment.
CNBC attempted to reach First Spark executives via LinkedIn for comment, but did not receive a response. The firm’s website does not provide a telephone number or email address.
CNBC attempted to reach other members of the commission to determine how they would handle potential conflict of interest issues. A spokesman for Representative Ro Khanna, who was named to the commission, said the congressman owns no personal stocks, and that his wife’s assets are in a diversified trust managed by an outside financial advisor. Qualified miscellaneous trusts eliminate conflicts and are therefore a suitable instrument to avoid any potential conflicts, said Khanna’s spokesperson.
Don Meyrieux, the former CIA deputy director for science and technology who will serve on the commission, told CNBC that he has no personal investments in the biotech space.
“As you know, the commission is not yet fully established,” she said in a message via LinkedIn. “All Commissioners shall file all disclosure forms required for service on the Commission and shall work with the Government Ethics Counsel to consider any potential conflicts of interest based on the expected work of the Commission.”