Steven Burrill has landed in a fresh tub of hot water over allegations he embezzled millions of dollars from a biotech fund he ran--a year after one of his former staffers filed suit claiming that more than $20 million was diverted, which in turn prompted the fund's institutional investors to boot the venture exec out of his management role.
Burrill Life Sciences Capital Fund III L.P. is claiming in a San Francisco court that Burrill, companies he ran and close colleagues grabbed more than $17 million from the fund between 2007 and 2013, in some cases extracting the cash as advance payments for work that had not yet been done. Their actions, according to the fund's investors, cost the group $30 million in losses.
Burrill cut a big figure in the Bay Area biotech hub, the partners contend.
"Burrill was also a fraudster," the suit goes on. "Shortly after his company assumed the helm of the Fund as its General Partner, he started looting the Fund's cash and diverting it to entities he wholly owned or controlled. At first he did so under the guise of "advancing" management fees payable by the Fund to the General Partner in the future – advances that were not authorized by the Fund's governing Second Amended and Restated Limited Partnership Agreement. Eventually, he abandoned any pretense of these transfers being related to management fees; he and his cohorts recorded many of the transactions on the Fund's books simply as "transfers" of money to his wholly owned entities…."
Altogether, the limited partners allege that Burrill stole a minimum of $17,637,759. Millions more were lost when added contributions needed to support portfolio companies weren't available, stripping them of their interest. And Burrill allegedly did it with the help of two close associates, but was undone after three staffers blew the whistle on the scheme.
Those accusations echo charges in a lawsuit filed last summer claiming that Burrill and colleagues diverted millions in cash and then scrambled to hide it from investors.
Burrill had been a high-profile figure in the biotech world prior to his sudden fall from grace last year. His presentations at BIO's annual meeting drew big crowds while he frequently prognosticated on the state of the industry. But he's gone quiet over the last year, regularly filing for continuations in the suit he faces. Nevertheless, Burrill was named one of the top 100 visionaries in biotech by Scientific American just days ago, and not for the first time.
Burrill's old Burrill & Co. has gone dark over the past year, replaced by Burrill LLC, which touts the venture exec's role in raising $1.3 billion in life science investments. Burrill did not return a message on LinkedIn from FierceBiotech.
Longtime R&D exec Dr. Ann Hanham joined Burrill back in 2002. In her lawsuit against Burrill, filed June 13, 2014, in California state court in San Francisco, she says everything went well until late 2013, when she and two colleagues, Roger Wyse and Bryant Fong, found that $20 million from Burrill's Fund III had been "diverted to Burrill and/or various Burrill entities over a period of several years, ostensibly to 'prepay' for management services not yet rendered and to fund unspecified and unauthorized loans."
Investment committee chair Victor Hebert and CFO Helena Sen, two executives at the firm, were also named in the original suit and the follow-up action by investors.
The suit is numbered CGC 15 546718. You can read it here.