http://www.nytimes.com/aponline/health/AP-Cloning-Company-Audit.html

Audit Says Research Money Misspent

By THE ASSOCIATED PRESS

Filed at 8:16 p.m. ET

BOSTON (AP) -- Advanced Cell Technology, which is trying to clone human embryos for therapeutic uses, misspent nearly $150,000 in government grants, according to a government audit that also questions the company's financial health.

The audit by the Department of Health and Human Services alleges that the company spent money on unaccounted-for salaries and on equipment that should not have been funded by taxpayers as part of three grants totaling $1.9 million.

Company president and CEO Dr. Michael West said ACT would reimburse the grant money but denied any wrongdoing. He said in one case the company had received permission from the federal National Institutes of Health to purchase a microscope that auditors later said should not have been approved.

``If there was a mistake there, it wasn't our mistake,'' West said. ``It's the microscope that roared.''

The grants funded research in the cloning of cattle, mice and other mammals. The audit pointed out it found no evidence that federal funds were used for research on human cloning and that laboratories used for human cloning experiments were physically separate.

The federal government has refused to fund human cloning experiments, and bills being considered by Congress would ban them.

The auditors, overriding protests from West, also expressed concern about whether the company could continue as a ``going concern,'' saying ACT's independent accountants had questioned the strength of its cash and working capital positions.

``Two years later we're still here,'' West responded. ``We have every reason to believe we'll be here 10 years from now. Again, they're trying to paint ACT in a negative light, and I don't think that's fair.''

The audit was released by Rep. Joe Pitts, R-Pa., a cloning opponent, who said the NIH should delay grant payments until the company revises its accounting.

``I suppose it's no surprise that their finances are as questionable as their ethics,'' Pitts said.

``This is not about some microscope,'' West replied. ``This is a larger debate about cloning and medicine and they want to paint us as the bad guys.''

The documents released include a letter West wrote to the auditors asking that they not include the statements about the company's finances, saying the information was ``inapplicable and potentially damaging to the company if put in the public domain.''

Last summer and fall, ACT succeeded in cloning the first stages of a human embryo. The company views the practice as a potential treasure trove of treatments, yielding new tissue for patients and speeding up research.

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