Investors remove VC founder from fund

Investors expelled Burrill & Co founder and chief executive G. Steven Burrill from the firm’s $283 million venture-capital fund after claims of fraud and misconduct related to unauthorized payments, according to reports.

In documents recently filed in a California state court in San Francisco, seen by Forbes, former Burrill & Co managing director Ann Hanham alleges that $19.2 million in unauthorized payments were made to Burrill or his affiliates from the fund.

The firm was unavailable to return a request for comment by press time.

Hanham, who was fired in November, along with fellow managing directors Roger Wyse and Bryant Fong, discovered the missing cash and requested that Burrill return the funds, first verbally, and then in writing. Hanham, Wyse and Fong then told the fund's advisory committee in late October, which resulted in firing Hanham and withholding portions of her salary, shares of investments owed to her and other payments, the lawsuit said.

In March, the advisory committee reportedly fired Burrill and brought back Hanham to run the fund along with Wyse and Fong. Hanham is alleging wrongful termination, breach of contract, fraud and civil conspiracy, among other claims.

The lawsuit comes at a time when the industry is under increased scrutiny from US regulator the Securities and Exchange Commission (SEC) for malpractice regarding fees and expenses.

In April, the SEC first leaked reports suggesting that private equity firms were taking advantage of LPs through egregious fees. The SEC’s chief inspector Andrew Bowden suggested at PEI’s Private Fund Compliance Forum last month that the regulator had found irregularities at around half of newly-registered firms recently inspected.