Once-Prominent Bay Area Biotech VC, Steven Burrill, Faces Up to 30 Years in Prison
September 21, 2017
By Alex Keown, BioSpace.com Breaking News Staff
SAN FRANCISCO – Noted biotech investor G. Steven Burrill faces up to 30 years in prison for his alleged involvement in wire fraud and tax evasion.
This week, the U.S. Department of Justice charged Burrill with wire fraud, investment adviser fraud, and tax evasion in connection with an alleged scheme to siphon money from an investment fund. The charges come more than a year after Burrill paid nearly $6 million in fines and penalties to the U.S. Securities and Exchange Commission over charges he stole money from a fund he managed for personal use.
The government alleges that Burrill convinced investors to contribute funds to a fund he managed through misleading letters. In addition, the indictment alleges Burrill caused the fund, Burrill Life Sciences Capital Fund III L.P. valued at about $283 million, to transfer millions of dollars in management fees to companies he controlled. The government said Burrill filed false income tax returns “which understated his income by excluding money Burrill transferred out of the Fund and into accounts he controlled.” It is alleged that Burrill used the funds for personal expenses including lavish vacations, jewelry, gifts and expensive travel. 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.
Burrill has been advising and funding biotech companies since the founding of Cetus and Genentech (RHHBY). Over the years Burrill, who spent 28 years at accounting firm Ernst & Young, has raised more than $1 billion for the biotech industries.
Burrill is charged with 26 counts of wire fraud, one count of investment-adviser fraud, and one count of tax evasion. If convicted, he faces up to 30 years in prison and fines up to $750,000.
When Burrill settled with the SEC, he agreed to a permanent ban from the securities industry.
In addition to Burrill, the DOJ charged Marc Howard Berger with aiding and assisting Burrill in the preparation of the fraudulent tax returns. He faces up to three years in prison.
The $283 million fund was first established in 2005 and was focused on investing in drug and diagnostics companies. According to the initial complaints, Burrill was alleged to have stolen approximately $17.6 million over a five year period ending in 2013. When lawsuits were first filed against Burrill and others who were alleged to be complicit in the scheme, plaintiffs claimed the theft devastated the fund.
Burrill was alleged to have diverted cash to entities he controlled and disguised those as advances on management fees payable by the fund to the general partners for future actions.
Burrill is scheduled to make his initial appearance on Oct. 2.