The fracas over Virginia Commonwealth University’s contracts with Philip Morris USA isn’t going away. Anti-tobacco activists who track Philip Morris’ every move won’t let it. Blogs around the country have picked up on the front-page New York Times article that highlighted controversial restrictions on academic freedom contained in the agreements. Like it or not, VCU is in the national spotlight.

The issues can sound arcane to outsiders, and it’s easy to blow off the entire controversy as an academic tempest in a teacup. But the questions raised by the New York Times and by follow-up reporting locally (See “VCU and the Evil Weed“) cannot be ignored. The business community in particular has a stake in understanding just exactly what is going on.

VCU is one of Richmond’s most important institutions. It is an economic engine: not just for the thousands of local residents it educates, not just for the urban re-development that it has generated on all around its campus, but for the research it conducts, the intellectual property it creates and the Knowledge-Economy businesses that spin out of the university directly or the Virginia Biotechnology Research Park located nearby.

VCU is Richmond’s gateway into the burgeoning life sciences industry. In 2006, according to the National Science Foundation VCU accounted for $149 million in Research & Development expenditures in 2006 – most of it in life sciences — ranking it 104th among the 640 institutions of higher education tracked. That’s up from $80 million in 1999. In a highly competitive environment VCU has gained a modest amount of ground compared to peer institutions. While R&D spending nationally increased 73.5 percent over that seven-year span nationally, VCU bolstered R&D expenditures by 87.1 percent.

As important as the R&D expenditures, which are largely restricted to university labs, is the potential to convert the science into business opportunity. That’s the role of the biotech park, which has built a cluster of life science tenants, including 44 private companies, four VCU research institutes, four state labs and five not-for-profit organizations. At long last, the 13-year-old biotech park is achieving national name recognition and critical mass. The park has incubated 63 companies (19 from VCU), of which 31 have graduated from the park. With the park on the radar of start-up financiers and venture capitalists, tenants have raised tens of millions of dollars in early phase financing in recent years. Three companies have gone public. Now, the park is assembling new capabilities to take technology created at VCU or in the park and commercialize it locally.

Richmond is on the verge of breaking through from a third-tier center of life science entrepreneurship into a respectable second-tier city. But the goal of evolving the Richmond life sciences community to the next level hinges upon the credibility of VCU as a research institution.

In that regard, the university’s close association with Philip Morris USA is a mixed blessing. On the one hand, Philip Morris aims to recruit world-class researchers to its $350 million research facility at the biotech park, and it is broadening its scope of R&D into areas that could potentially increase the understanding of health processes, particularly at the biochemical level, and lead to beneficial new products. On the other hand, Philip Morris bears the legacy as one of the most reviled corporations in America, with a reputation not only as a company that manufactures a product that kills people, but as a company that perverted science to evil ends.

An argument can be made that the current leadership at Philip Morris is genuinely trying to put its tainted past behind it and conduct the company as a responsible corporate citizen. (See “Prospering in Adversity.”) That proposition is, to put it mildly, controversial. For legions of skeptics around the country, Philip Morris can no more escape its past than the German people could escape collective guilt for the Holocaust until the country had thoroughly and convincingly repudiated the Nazi era.

That’s why any academic institution, such as VCU, must approach research relationships with Philip Morris very, very carefully. It’s entirely possible that the tobacco giant has turned a new leaf, so to speak. I personally see no reason why VCU should not engage with the “new” Philip Morris. But the VCU administration cannot be naïve. To borrow a phrase from Ronald Reagan, it is essential to “trust but verify.”

Unfortunately, it turns out that VCU signed contracts with Philip Morris that restrict academic freedom to some degree. Because Philip Morris has not fully regained its credibility in the scientific marketplace, such breeches are understandably perceived in the academic community and the R&D world with suspicion, and in some quarters interpreted in the worst possible light.

Building R&D programs at American universities is all about the human capital. It’s all about recruiting big-name scientists with established reputations who have locked onto big-dollar funding sources from the corporate world or federal government. If the Philip Morris brouhaha gets any bigger, and if VCU gains a reputation as a company that sacrifices academic standards, the university could find its ability to compete for top scientific talent to be severely compromised.

The impact would be visible only to a few Richmonders. Instead of landing Scientist A, VCU may find that it can only recruit Scientist B, who isn’t quite as renowned and can’t pull in quite as many research dollars. But the effect would be real nonetheless.

Additionally, any stain on VCU could spread to the Biotech Park at the very moment that the park has become increasingly successful in recruiting promising new tenants, like the eight Israeli life science companies that have announced in the past year an intention to set up U.S. operations there. If the Biotech Park suffers recruiting fall-out, the Richmond economy loses one of its greatest potential contributors to economic growth and prosperity.

So, those are the stakes. It’s easy for the controversy to get caught up in a tug-of-war between those who hate VCU President Eugene Trani and those who love him, or between those who loath Philip Morris and those who feel compelled to defend it. What we, as Richmonders, need is a dispassionate analysis of the facts. How restrictive are the Philip Morris research contracts, and are those restrictions tolerable or benign? The findings don’t affect only VCU and Philip Morris. They affect us.

The task force recently set up by Trani to “review the guidelines and policies regarding corporate sponsorship of research at VCU” is the logical place for such an appraisal to take place. It is absolutely critical for the credibility of VCU – and critical for those elements of the Richmond business community who want to see VCU and the life sciences sector prosper – that this task force be beyond reproach. The Richmond region cannot afford for the task force to issue a report on Oct. 1 that is assailed by critics as flawed from the inception. The time to ensure the future credibility of the task force is now.

Trani has ordered that the task force be comprised of six representatives: two nominated by Frank Macrina, vice president of research, two by the vice president of health sciences, and two by the president of the Faculty Senate. The entire process – who gets appointed, the setting of an agenda, the compiling of documents, the testimony of witnesses – needs to be entirely transparent to the public. We cannot afford to have the impartiality of this inquiry impeached in any way. VCU and Richmond have too much riding on it.

(Cross-posted with R’Biz.)