U.S. senator concerned about finances at UC San Francisco medical school

A powerful U.S. senator has demanded more information about the financial health of UC San Francisco’s medical school, raising questions about whether the entire University of California system may be mismanaging federal research funds.

Sen. Charles E. Grassley of Iowa, top Republican on the Senate Finance Committee, has requested that UCSF supply documentation on the amount of federal funds it has received during the last five years, including details of an external financial review performed by the accounting firm KPMG.

“If the financial integrity of UCSF is questionable,” Grassley wrote in a letter to the university, “I am worried that similar problems regarding taxpayer dollars may also exist at other campuses within the UC system, such as UC Berkeley, UCLA and UC Davis.”

Grassley has interjected himself in a long-running and nasty dispute between the medical school and its former dean, David A. Kessler. Kessler, who headed the Food and Drug Administration during the Clinton administration, was fired by UCSF in December 2007 after repeatedly complaining that he had been misled about the school’s finances.

Kessler since has sued the University of California in a federal whistle-blower action, seeking reinstatement to his former position, his lost pay and benefits, and punitive damages. He also is party to a UC administrative review of his firing.

Grassley raised the questions about the medical school’s finances in a letter to UC President Mark G. Yudof, expressing “grave concern” about Kessler’s allegations of poor accounting practices. Grassley’s interest was spurred, he wrote, by the hundreds of millions of dollars UCSF receives in federal research funds each year.

The letter was sent in April.

In 2008, UCSF received $444 million from the National Institutes of Health, with $383 million going directly to the medical school -- which placed it first among similar public institutions receiving NIH support. The school recently formed a task force to seek a large chunk of the $10.4 billion NIH received as part of the federal economic stimulus bill passed by Congress earlier this year.

Kessler, who made headlines as FDA chief because of his tough stance against the tobacco industry, was the object of an intense courtship by UCSF in 2003. Almost immediately after he was hired as dean, according to his lawsuit, he discovered what he said were “major discrepancies” between what the school represented as revenue and what actually was available to be spent.

Kessler said in his suit that he was fired because he brought his concerns to the attention of university officials and members of the Board of Regents, even engaging an outside lawyer to analyze the school’s finances and accusing officials of a “cover-up.”

Kessler alleged that he was told by Richard C. Blum, now chairman of the Board of Regents, that raising “the financial stuff [was] the cancer” and that “if you piss people off for the right reason, [they’re going] to figure out some way to get back at you.”

UCSF has maintained that Kessler was fired for performance-related reasons, not for complaining about the medical school’s accounting practices -- although the university is treating him as a whistle-blower and handling his complaint through administrative channels. Kessler’s lawsuit has been stayed pending the outcome of the administrative review.

The university conducted an internal audit of the school’s finances and then brought in KPMG to review that audit. Although UCSF has maintained that the audit showed the school to be in good fiscal health, Grassley noted in his letter that KPMG concluded that in several instances, the school’s accounting methodology was not “repeatable.”

The UCSF medical school has a $1.25-billion operating budget. Last month, Kessler’s interim replacement, Sam Hawgood, warned that the school was going to suffer a $170-million hit because of rising costs and sinking revenues.

“The University of California has received the letter and has been providing information to Sen. Grassley in response,” said Chris Harrington, a university spokesman.

“The university has explained that Dr. Kessler’s allegations have been exhaustively and repeatedly investigated at the university’s expense, and that those investigations have found no evidence whatsoever of any inaccuracy in the books and records of the UCSF School of Medicine,” Harrington said.

Kessler declined to comment, citing the ongoing administrative review.

Grassley’s letter asked UCSF to detail the funds it has received in the last five years from NIH, the National Science Foundation, the Department of Energy and the Department of Defense.

He also sought to interview officials from KPMG about the firm’s review of the school’s books. If Grassley is unsatisfied with the school’s response, he could request a detailed audit of UCSF by the U.S. Government Accountability Office.

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joliphant@latimes.com