Google’s ex-CEO Eric Schmidt tapped for federal biotech commission

On Dec. 30, leaders of the House and Senate Armed Services committees announced the selection of former Google CEO Eric Schmidt and 11 others to serve on a new federal commission on biotechnology.

Tasked with reviewing the biotech industry and suggesting investments that would benefit U.S. security, the National Security Commission on Emerging Biotechnology is expected to have a prominent voice on policy and federal spending in the cutting-edge industry.

The appointment, however, doesn’t require commission members to divest their own personal biotech investments — even as they help shape U.S. policy overseeing the industry. Through a venture capital firm known as First Spark Ventures, Schmidt holds stakes in several biotech companies, placing 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 Jan. 19 that he wouldn’t be involved in selecting or monitoring any federal investments in the sector and that he isn’t involved in decision-making about First Spark’s investments. The person also said he would comply with all disclosure rules.

Then, on Jan. 25, after a series of emails and conversations with CNBC about the potential conflict of interest, the person said Schmidt will donate 100 percent of the “net profits” from his investment in First Spark to charity. The person didn’t say when Schmidt made the decision to donate profits, adding that he hasn’t yet named any recipient charities.

Due to the nature of venture capital investments, it could take years before a company is sold or goes public.

“This is a potential horror show,” Walter Shaub, the former director of the U.S. Office of Government Ethics, said of the new commission. “Congress created this commission without adequate safeguards against conflicts of interest.”

Shaub, an attorney who’s now a senior ethics fellow at the nonpartisan nonprofit Project on Government Oversight, said members of the commission are exempt from criminal conflict of interest laws that might otherwise require them to recuse themselves or divest certain holdings because it was set up by Congress and not the executive branch.

“These are individuals who are going to be helping to shape federal policy on the intersection of biotechnology and national security, and it’ll be legal for them to make recommendations that benefit their own personal financial interests,” Shaub said. “Because much of the work could be classified, the public may have no way to gauge how their financial interests are influencing their recommendations.”

A spokesperson for the Senate Armed Services Committee, which will oversee the commission, said Schmidt and other members were selected by bipartisan leaders in the House and Senate and are expected to follow government ethics rules.

“Every member on this commission is required to adhere to all government ethics policies,” the spokesperson…