March 31, 2016
By Alex Keown, BioSpace.com Breaking News Staff
SAN FRANCISCO – Noted Bay Area biotech investor Steven Burrill paid nearly $6 million in fines and penalties with the U.S. Securities and Exchange Commission over charges he stole money from a fund he managed for personal use.
Under terms of the deal Burrill, 71, will permanently be banned from the securities industry, Forbes reported this morning. The SEC said Burrill took investor money from the Burrill Life Sciences Capital Fund III and tried to hide the theft by telling investors the transferred funds were for advanced management fees, Forbes noted. Burrill neither admitted nor denied the charges. On at least two instances Burrill delayed distribution of payments owed to fund investors so money could instead be used to continue paying for his personal expenses, the SEC said.
The SEC said Burrill will return the $4.785 million he took for personal use and will pay an additional $1 million penalty. The SEC said Burrill used the money to finance a lavish lifestyle, including trips to exotic locations, jewelry, private jets and other items, the San Jose Mercury News reported this morning.
Burrill has been advising and funding biotech companies since the founding of Cetus and Genentech . Over the years Burrill, who spent 28 years at accounting firm Ernst & Young, has raised more than $1 billion for the biotech industries.
“Even though they are exempt from registration, venture capital advisers like Burrill have fiduciary obligations to their clients that we will enforce,” Andrew J. Ceresney, director of the SEC’s enforcement division, said in a statement. “Burrill spent his fund’s capital on whatever he pleased, and elevated his own interests above those of investors.”
Burrill is still fighting another lawsuit, which was filed July 6, 2015 in San Francisco Superior Court. That lawsuit alleges that Burrill, along with former Burrill & Co. chief legal counsel Victor Hebert and former chief financial officer Helena Sen stole more than $17.6 million from Burrill Life Sciences Capital Fund III L.P. over a five year period end in 2013. The plaintiffs claim the alleged theft “devastated” the fund, causing more than $30 million in investment losses—losses that have yet to be stanched. Fund III, the fund in question, was worth $238 million and was focused on investing in drug and diagnostics companies, according to the lawsuit. The fund was first established in 2005. According to the lawsuit, plaintiffs, who include the Treasury of the State of North Carolina, Oregon Investment Fund, Unilever, Monsanto and Celgene , allege Burrill diverted cash to business entities he controlled. The transferred monies were initially classified as advances on management fees payable by the fund to the general partners for future actions. Further, the lawsuit alleges Burrill abandoned any pretext of the funds being management fees and simply transferred the monies to entities he controlled or owned, which includes Burrill Capital LLC and Burrill Capital Management Inc. The lawsuit alleges the transfers were done with the full knowledge of Hebert and Sen.
Burrill is no stranger to lawsuits. In 2014 Burrill was Burrill was sued by Ann Hanham, who worked at Burrill & Co. for 13 years as a managing director of two of the biotech funds. In her lawsuit, Hanham alleged Burrill transferred about $20 million to subsidiaries he owned or controlled. Hanham was terminated by Burrill & Co. weeks after reporting problems with the fund, that lawsuit noted.
The Mercury News reported Burrill is currently running Burrill LLC, which operates “an advisory and financial services firm, an incubator and a media company, all dedicated to the biotech and life sciences fields.
