The U.S. Securities & Exchange Commission charged a PricewaterhouseCoopers auditor for failing to detect the millions siphoned from the namesake venture capital fund of once-renowned biotech investor Stephen Burrill.
Adrian Beamish, a PricewaterhouseCoopers audit partner who served as engagement partner for the Burrill Life Sciences Capital Fund III, allegedly failed to scrutinize the “advanced management fees” withdrawn from the fund by Burrill, the SEC said.
Beamish allegedly failed to determine whether Burrill had “proper authorization and rationale” for taking the cash and allegedly failed to ensure that the transactions were properly disclosed. Burrill is barred from the securities industry after paying nearly $6 million in March to settle SEC charges that he looted the fund to cover losses in other businesses and pay for his lavish lifestyle.
Beamish faces an administrative hearing to decide whether he should be suspended from practicing before the SEC, which would preclude him from plying his trade with public companies.
“Auditors perform a critical check on fraudulent conduct, especially when related party transactions are involved,” Jina Choi, director of the SEC’s San Francisco office, said in prepared remarks. “We allege that Beamish’s repeated failure to exercise professional skepticism prevented him from recognizing that Burrill was stealing investor money from the fund.”
In the settlement earlier this year, Burrill and his firm Burrill Capital Management agreed to disgorge the nearly $4.8 million prosecutors claimed he siphoned off for personal use, plus a $1 million fine. The firm’s former chief legal officer, Victor Hebert, and former controller Helena Sen agreed to pay civil fines of $185,000 and $90,000, respectively, and are also barred from the securities industry.
The scandal erupted in 2013, when the fund’s managers allegedly discovered that Burrill, Hebert and Sen misappropriated some $18 million, according to a lawsuit filed in a California state court in 2014. Burrill resisted the board’s pressure to step down, but was officially ousted in March 2014, according to the lawsuit.
“Burrill spent his fund’s capital on whatever he pleased, and elevated his own interests above those of investors,” SEC enforcement chief Andrew Ceresney said last March in announcing the settlement. “Even though they are exempt from registration, venture capital advisers like Burrill have fiduciary obligations to their clients.”