The former head of California's stem cell agency, which is handing out $3 billion of voter-approved funds for research, has joined the board of a major grant recipient one week after leaving his post.

Alan Trounson, the former president of the California Institute for Regenerative Medicine, has joined the board of StemCells Inc., the recipient of $19.4 million from the agency.

The agency has been grappling with potential conflicts of interest, some of which are built into its governance under Proposition 71, approved by voters in 2004. CIRM paid $700,000 for a report last year making recommendations on how to mitigate conflicts.

Trounson's move has reignited debate over the issue.

"The announcement raises serious and obvious concerns on a number of fronts," Chairman Jonathan Thomas wrote to his colleagues on the CIRM board. "Under state law, however, it is permissible for Dr. Trounson to accept employment with a CIRM-funded company. Nonetheless, state law does impose some restrictions on Dr. Trounson’s post-CIRM employment activities.

Board members will be forbidden to discuss the company with Trounson for one year after his departure, Thomas wrote.

Randy Mills, Trounson's successor as agency president, said in a statement Wednesday that "in the interests of transparency and good governance we will be conducting a full review of all CIRM activities relating to StemCells Inc.”

"We take even the appearance of conflicts of interest very seriously," Mills said in the statement.

Not only board members, but CIRM employees are being reminded of the conflict of interest rules.

Emails sent Tuesday evening to Trounson were not returned. StemCells Inc. declined to comment.

Trounson received an annual salary of $490,000 at CIRM. In calendar year 2013, StemCells Inc. board directors from outside the company received from $60,800 to $99,800.

StemCells Inc. is testing a treatment for spinal cord injury using adult human neural stem cells. It's also testing the cells for PMD, or Pelizaeus-Merzbacher Disease, a fatal childhood neurological disease; and for dry age-related macular degeneration.

Like many biotechs, StemCells Inc. is losing money while it develops its products. For the first quarter of 2014, the publicly traded company reported losing $7.6 million, or 14 cents per share. In the same quarter a year earlier, StemCells Inc. lost $6.4 million, or 17 cents per share.

As of March 31, StemCells Inc. reporting having $26.5 million in cash and equivalents. A year earlier, the company had $17 million.

Thomas and Mills said CIRM didn't receive advance notice of Trounson's appointment, announced Monday.

The news, first reported Monday by the California Stem Cell Report, struck the stem cell community as a bombshell. Jeanne Loring, a stem cell researcher at The Scripps Research Institute in La Jolla, said she sent messages of protest to the agency.

"This is the second time in just a few weeks that members of CIRM management have found employment in the institutions that they promoted for funding," Loring wrote to the agency. "I'm outraged by this behavior and concerned about the negative impact on CIRM. Is there anything that can be done?"

In early June, Natalie DeWitt, who worked for Trounson at CIRM, joined Stanford University’s Baxter Laboratory for Stem Cell Biology. One of the officials at Baxter had applied for a grant from CIRM, and Stanford itself has received $280 million of CIRM grants.

Another stem cell researcher, Paul Knoepfler of UC Davis, also expressed dismay.

"Many of us stem cell folks in California, including those of us like me who are very pro-CIRM, are scratching our heads today about this and asking 'why?' CIRM is at a particularly sensitive point in its life history and the last thing it needed was this kind of thing," Knoepfler said to U-T San Diego by email.

"I cannot speak for CIRM of course, but I'd imagine that many of the folks there are very upset about what happened," Knoepfler wrote. "The most puzzling thing is that these negative consequences should have been completely obvious in advance and yet the decision was made anyway, which true or not gives the impression of being very brazen. It just wasn't necessary or prudent to do it this way and it raises doubts. The bottom line is that this move hurts both CIRM and the California stem cell community of researchers and advocates."

John Simpson, a frequent critic of the agency's conflicts of interest, said Trounson's appointment was unseemly. It provided an example of the revolving door between private and public entities that is fertile ground for conflicts, he said.

"There are specific prohibitions if you are a member of a public agency and then you go into a private company, you can't go back and lobby for a specific time," said Simpson, of Santa Monica-based Consumer Watchdog.

Simpson said two years would be an appropriate period to forbid lobbying.

Certain conflicts were built into the agency, established by the amendment to the California constitution passed by voters. For example, many governing board officials are required to represent prominent biomedical institutions that conduct stem cell research — the very institutions that apply for and receive grants.

A January 2013 report from the Institute of Medicine recommended numerous reforms, such as that CIRM forbid board members from institutions eligible for funding from voting on any grants to any such institutions, and instead abstain. That recommendation was adopted. The report cost CIRM $700,000.