The investors behind a $283 million venture capital fund ousted its high-flying founder, Stephen Burrill, after the fund’s manager allegedly discovered that Burrill and his company’s chief counsel and its CFO misappropriated nearly $20 million from the fund, according to a lawsuit filed in a California state court.
The lawsuit, filed by the managing director for Burrill & Co.’s Fund II and Fund III, Ann Hanham, accuses Burrill, longtime outside-counsel-turned-staff-counsel Victor Hebert and CFO Helena Sen of diverting $19.2 million from Fund III "over a period of several years, ostensibly (1) “to ‘prepay’ for management services not yet rendered, and (2) to fund unspecified and unauthorized loans," according to the lawsuit.
"[T]hese improper and unlawful transactions were undertaken by, or at the direction of, Burrill, with the knowledge and active involvement of Hebert and Sen. The improper transactions were never discussed with or approved by plaintiff," according to the lawsuit.
When Hanham and fellow managing directors Roger Wyse and Bryant Fong called Burrill on the missing funds in September 2013, he said he and Hebert were "endeavoring to repay" the money, the lawsuit alleges. But none of the missing money had been repaid by October last year, according to the complaint, prompting Hanham, Wyse and Fong to alert the Fund III advisory board that the fund didn’t have enough cash on hand to meet its intended follow-on investments, putting the investment portfolio at risk.
A few days later, Hanham alleges, a "livid" Burrill (who allegedly threatened Hanham at 1 point that she "had 1 foot in the grave," according to the suit) fired her, clawed back her October 2013 salary and conspired to stiff her on the proceeds from several Burrill & Co. transactions.
Burrill resisted the board’s Nov. 26, 2013, request to step down but was officially oustered March 20, according to the lawsuit. An entity formed by Hanham, Wyse and Fong has been running the 3rd fund since them, according to the June 13 complaint. Burrill did not respond to requests for comment from Xconomy and Forbes, which 1st reported the lawsuit. Emails and phone calls were not returned and the main phone number for Burrill & Co. seems to be disconnected, according to Forbes.
The meltdown comes 6 months after Burrill Fund IV, which originally aimed for the $500 million mark but topped out at about $200 million, split off into a separate entity called Biomark Capital, run by former Burrill associate David Wetherell, according to Xconomy.