Risk & Compliance

Biotech Investor Accused of Stealing $18M

A controller and chief legal officer also played 'integral roles' in the scheme, says the SEC.
Matthew HellerMarch 31, 2016

A biotech venture capitalist has agreed to pay more than $5.7 million to settle charges that he stole $18 million in investor funds to prop up ailing businesses he owned and finance his lavish lifestyle.

The U.S. Securities and Exchange Commission said Steven Burrill took the money from Burrill Life Sciences Capital Fund III and tried to hide the theft by telling investors the transfers were for “[advance] management fees.” The $283 million fund was managed by his Burrill Capital Management (BCM) firm.

Burrill used about $4.6 million of the money to pay for his cash draws and personal expenses, including family vacations to St. Barts and Paris, jewelry from Tiffany & Co., and gifts and travel for his girlfriend, the SEC said in an administrative order.

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The agency also alleged BCM’s chief legal officer Victor Hebert and controller Helena Sen “played integral roles” in Burrill’s scheme, on at least two occasions delaying payments to investors so the money could instead be used to continue paying Burrill’s personal expenses as well as their own salaries.

“Burrill spent his fund’s capital on whatever he pleased, and elevated his own interests above those of investors,” Andrew J. Ceresney, director of the SEC’s Enforcement Division, said in a news release.

To settle the charges, Burrill agreed to pay disgorgement of $4.785 million and a $1 million penalty and agreed to be permanently barred from the securities industry.

According to Forbes, Burrill “has been a fixture in the San Francisco biotech investing community for decades.” He formed Fund III in 2006 to invest in life sciences companies but, in late 2007, began to face cash flow shortages.

“Burrill instructed Sen to take $400,000 from Fund III to make up the cash shortfall and to treat the transaction as an ‘advance on management fees’ that the [fund’s general partner] expected to earn in the first quarter of 2008,” the SEC said.

From that point forward through July 2013, Sen allegedly acted under Burrill’s directive to cover cash deficits by taking money from Fund III. She and Hebert agreed to settle the charges against them by paying penalties of $90,000 and $185,000, respectively.