SEC fines biotech manager $1m

Biotech venture capitalist Steven Burrill has agreed to settle charges with the Securities and Exchange Commission (SEC) after it accused him of siphoning money from a fund managed by his firm.

Burrill deceived investors by taking money from the Burrill Life Sciences Capital Fund III fund, terming it “advanced” management fees, and using the proceeds to buy family holidays, jewellery, gifts and private jet travel, the SEC said.

It also accused him of using some of the money to prop up other struggling businesses he owned.

According to PEI Research & Analytics, the fund is a 2005 vintage $283 million vehicle, which is partially liquidated.

The SEC said Burrill and his San Francisco-based company, Burrill Capital Management, had agreed to “disgorge” $4.785 million of investors’ money, while the regulator imposed a $1 million penalty. Burrill also agreed to be barred from working in the securities industry.

Burrill and his firm agreed to the settlements without admitting or denying the findings in the SEC’s order.

The company’s investors included state pension funds, public companies and other institutions, according to the regulator.

Director of the SEC’s enforcement division, Andrew Ceresney, said: “Even though they are exempt from registration, venture capital advisors like Burrill have fiduciary obligations to their clients that we will enforce. “Burrill spent his fund’s capital on whatever he pleased, and elevated his own interests above those of investors.”

As part of the SEC’s order, which it said constituted a settled administrative proceeding, Burrill Capital Management’s chief legal officer, Victor Hebert, and controller, Helena Sen, were described as having played “integral roles” in Burrill’s scheme.

The SEC said the pair had on at least two occasions delayed distribution of payments to fund investors so that the money could instead be used for Burrill’s personal expenses and to pay their salaries.

Hebert, who led the firm’s investment committee meetings and agreed to call in additional capital from fund investors while knowing the money would not be spent on fund-related matters, agreed to pay a $185,000 settlement to the SEC, while Sen agreed to a $90,000 settlement.

Both agreed to the settlements without admitting or denying the order findings in the SEC. They are also barred from the securities industry.