According to state court documents recently filed in California, G. Steven Burrill, the CEO and founder of Burrill & Co., a San Francisco based financial firm specializing in biotechnology and life sciences, was removed from control as general partner of Burrill Life Sciences Capital Fund III (the “Fund”), a venture capital fund, by 13 large institutional investors that asserted willful or reckless misconduct related to unauthorized payments.
According to court documents filed by Ann Hanham, a former managing director of Burrill & Co., a review of the books and records of the Fund in early September 2013 showed that the Fund paid $19.2 million to various designees and affiliates of Burrill in excess of the earned management fees. Also, the investors asserted that Burrill failed to make at least $453,929 of capital contributions that were required pursuant to the partnership agreement. In the state court documents, Hanham and two other managing directors at Burrill’s firm, Roger Wyse and Bryant Fong, state that they “discovered that a substantial portion of the money that had been raised from Fund III limited partners had gone missing.” They also state that Burrill diverted $20 million from the Fund to Burrill or related entities to prepay for management services and to fund undetermined and unauthorized loans. In the court documents, Hanham states that she demanded that Burrill disclose the transactions to investors and resign from all positions affiliated with the Fund, and that Burrill immediately return the missing funds. Burrill did not meet Hanham’s demands, and instead, according to the court documents, pressured Hanham to find other business models to generate revenue in an attempt to hide the transactions from the investors. In October, Hanham, Wyse and Fong sent a letter to the investors of the Fund informing them of the improper transactions. Upon doing so, Burrill fired Hanham. Investors of the Fund issued a notice of removal of the general partner in February, which took effect in March.
Lax & Neville LLP has extensive experience in successfully prosecuting claims on behalf of retail and institutional investors, and has successfully represented clients with claims against Burrill & Co., Burrill Capital Management Inc. and Burrill Securities LLC. Please contact our team of experienced attorneys for a consultation at (212) 696-1999.