G. Steven Burrill, the onetime accountant who built a financial services firm focused on financing of biotech and other life sciences businesses since 1994, has been sued for fraud by a former managing director at  Burrill & Company.

The lawsuit, filed in State Superior Court in San Francisco, states that Burrill was removed on March 20 as general partner of Burrill Life Sciences Capital Fund III by 13 institutional investors who alleged the fund engaged in willful or reckless misconduct. The institutional investors included businesses such as Monsanto, Unilever, and Celgene, as well as the Oregon Investment Fund and the Treasury of the State of North Carolina.

The investors acted, according to the lawsuit, after learning that the $283 million fund had shelled out $19.2 million to “Burrill and/or various Burrill entities” over several years in excess of management fees that had been earned, “ostensibly (1) to prepay for management services not yet rendered, and (2) to fund unspecified and unauthorized loans.”

The fund also breached its fiduciary duty to Fund III and its limited partners by failing to make at least $453,929 of capital contributions that were required under the partnership agreement, according to the lawsuit, first reported by Forbes yesterday.

Ann Hanham, Ph.D., filed the suit on June 13. Dr. Hanham joined Burrill & Co. in 2000, and served as a managing director from 2002 until November of last year. In September 2013, her relations with Burrill soured after she and two colleagues discovered the alleged diversion of the $19.2 million. She alleges she was wrongfully dismissed from Burrill’s firm later that year.

“Burrill issued an ominous warning in mid-September 2013, advising plaintiff that she had just placed ‘one foot in the grave,’” Dr. Hanham’s suit states.

And rather than disclose the transactions behind the diversion, and repay the funds diverted, Dr. Hanham added, Burrill instead wrote an email to her and a colleague that said: “We can earn our way out of trouble… with a different business model… If each of u [sic] can get 2-3 transactions done in the next year, all our problems will be behind us.”

Named with Burrill as co-defendants in the suit are his Burrill & Co. LLC, another Burrill entity, Burrill Capital LLC, Burrill’s principal outside counsel Victor A. Hebert, and Helena Sen, CFO of Burrill & Co.

Burrill at deadline had not immediately returned telephone messages left by GEN at his cell phone and home office. A GEN call to Burrill & Co. connected to a recorded message stating that the number had been disconnected.

Burrill has been scheduled to deliver his annual state-of-the-industry address at next week’s Biotechnology Industry Organization (BIO) International Convention in San Diego.

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