Conflict-of-interest allegations have derailed 10 applications by stem-cell researchers in California for multimillion-dollar grants. The state institute that finances such studies disqualified the applications this month after four university deans who sit on its governing board asked the agency to award grants to their own researchers.

The episode is a black eye for the California Institute for Regenerative Medicine, set up to distribute $3-billion in bond revenue approved by voters in 2004. The money could make California a world leader in stem-cell research.

Watchdog groups have long noted the potential for conflicts, because the board’s 29-member governing board includes 13 representatives from nine universities and four other research institutions in the state. To lessen the potential for conflicts, the institute recruited most of its peer reviewers from out of state. But the board retains final say over the grants.

A controversy arose this month because some letters of support for the grant applications were written by board members who are also deans at the University of California campuses in Los Angeles, San Diego, and San Francisco, and at the University of Southern California. In its solicitation for applications, the agency had requested the letters from either deans or department chairmen, and agency officials said that the board members should have recused themselves.

An apparently more egregious violation arose because one board member, John C. Reed, president of the Burnham Institute for Medical Research in San Diego, wrote the stem-cell institute challenging its decision to disqualify a grant application from a researcher who was not a full-time employee there. The Fair Political Practices Commission, a state agency that enforces ethics rules, is now investigating Mr. Reed’s action, and California’s auditor plans a review as well.

Mr. Reed called his letter a mistake and has recused himself from all activities of the stem-cell institute’s board during the investigation, the San Diego Union-Tribune reported.

The 10 rejected grant applications were among 58 received by the agency for the latest round of grants, of which the board approved 22 for financing during a meeting on Wednesday. The researchers whose applications were rejected because of the conflicts could reapply in January but, if successful, would not receive money for another six months. —Jeffrey Brainard