California Sues Umbilical Cord Blood Bank

MONTEREY, Calif. (CN) - An umbilical cord blood bank went out of business without telling its customers and turned over its specimens to its medically untrained directors, California claims in court.

The Monterey County district attorney sued BioBancUSA, its founder Robert Hayner, and treasurer James Swallow, alleging violations of state Health and Safety and Business and Professions Codes.

Hayner founded the Monterey-based biotechnology firm in 2006, offering cryogenic banking of umbilical cord blood and white blood cells.

Umbilical cord blood is rich in stem cells, which can be engineered to grow virtually any tissues or organs, so people have taken to banking them in the event their children may someday need medical services, perhaps as yet uninvented.

Hayner, who holds a bachelor's degree in engineering, was CEO for flight simulation firm Carmel Applied Technologies, which was acquired by Alion Science and Technology in 2005, according to BioBancUSA's website.

Swallow was the company's CFO, according to the complaint.

"Defendants were at all relevant times engaged in the business of collecting and storing umbilical cord blood and white blood cells," the state says in its complaint.

"Defendants stored umbilical cord and white blood cell specimens in a cryogenic unit called the BioArchive, cooled by liquid nitrogen. The BioArchive unit was designed to operate robotically with computer-controlled adjustment of liquid nitrogen levels and around the clock electric monitoring."

On its website, BioBancUSA encourages potential customers to preserve their white blood cells because it "allows you to preserve your immune system in its healthy state so it can be used for future medical therapies if ever needed."

The state claims BioBancUSA laid off all its staff in July 2010 after collecting and storing specimens for 4 years, but neglected to tell its customers it had "essentially ceased operations."

The company turned over care and preservation of its specimens to Hayner and Swallow, the state says.

"Starting in or about July 2010, instead of utilizing trained medical and laboratory staff to monitor and maintain the BioArchive unit containing customer specimens, defendants Robert Hayes and James Swallow, neither of whom was medically trained or certified to work in a laboratory setting, attempted to maintain the unit themselves by occasionally adding liquid nitrogen manually," according to the complaint.

BioBancUSA's license with the California Department of Public Health Biologics was revoked in October 2010 when its medical and laboratory director resigned without appointing a replacement, the state claims.

Despite having no license or medical training, Hayner and Swallow continued caring for the specimens in the BioArchive for nearly a year before transferring them to Family Cord, a blood bank in Southern California, the states says. It says the specimens were transferred on Aug 1, 2011.

"CordBancUSA and BioBancUSA customers were subsequently notified by Family Cord of the transfer," the complaint states.

The state accuses BioBancUSA of engaging in false advertising by, among other things, advertising state-of-the-art umbilical cord blood and white blood cell cryogenic storage services on its website and enrolling new patients after it had ceased operations.

It also violated quality control policies established by the American Association of Blood Banks, such as not having enough qualified staff and failing to maintain their specimen storage equipment, the complaint states.

The state seeks $267,500 in civil penalties and $50,000 for the costs of suit, including investigation. It also seeks a permanent injunction forcing the firm to inactivate the BioBancUSA website, and "refrain from reactivating the CordBancUSA.com web site."

Monterey County District Attorney Dean Flippo filed the complaint.

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