G. Steven Burrill was sentenced yesterday to 30 months in federal prison, nearly a year after he pleaded guilty to charges that he fraudulently siphoned money from a life sciences investment fund he managed and evaded federal taxes.
Under a plea agreement with federal prosecutors, Burrill was ordered to surrender to authorities on March 4 to serve his prison sentence, consisting of concurrent terms on one count each of investment-adviser fraud and tax evasion. After his prison time, he will be placed under supervised release for three years.
Burrill was also ordered to pay a “special assessment” of $200. Federal courts require such payments of anyone convicted of a crime, ranging up to $100 per felony count.
The plea agreement followed a status hearing on Burrill’s case by District Judge Richard Seeborg in U.S. District Court for the Northern District of California in San Francisco.
Judge Seeborg scheduled for January 22 a restitution hearing, with each party in the case required to submit a 10-page argument by January 15.
In a sentencing memorandum filed November 29, Burrill sought a sentence of a year and a day, plus three years of supervised release that included 18 months of home confinement and 1,000 hours of community service, citing his status as a first-time, non-violent offender and asserting that he accepted responsibility for his actions.
Burrill faced up to 30 years in federal prison and up to $7 million in fines after he was indicted in September 2017. He was charged with 26 counts of wire fraud and one count each of investment adviser fraud and tax evasion, in what federal prosecutors alleged was a scheme to siphon more than $18 million from the $283 million investment fund Burrill Life Sciences Capital Fund III, most of whose capital had been committed by limited partners.
Investors have received more than $12 million in legal settlements, according to the sentencing memorandum.
In their 34-count indictment, federal prosecutors alleged that from December 2007 through October 2013, Burrill induced the limited partners to contribute capital to the fund through false and misleading letters, then caused the fund to transfer millions of dollars in management fees to companies he controlled—money exceeding the management fees due and allowable under the fund’s governance agreements.
“Sometime after he started up Burrill Life Sciences Capital Fund III in 2006, the economy was hit with a once-in-a-generation economic downturn, and his businesses began to falter. Faced with worsening market conditions, Mr. Burrill tried to cut corners, at times foregoing his own draws to keep the businesses afloat,” Burill’s attorney Rees F. Morgan of the firm Coblentz Patch Duffy & Bass wrote in the sentencing memorandum.
“He crossed a line when in December 2007 he began to take management fees from Fund III before those fees were due. By 2013, he had taken approximately $8 million more than he was entitled to take over the life of the management agreement. And although he largely used those advance fees to cover payroll and business expenses to try to keep the business going and he intended to pay back the Fund and believed he had the resources to do so, Mr. Burrill acknowledges that what he did was a crime,” the sentencing memorandum added.
Burrill pleaded guilty to investment-adviser fraud and tax evasion in December 2017.
Burrill’s accountant, Marc Howard Berger, was convicted by a federal jury in July on three counts of aiding and abetting the filing of a false tax return. Last month, Judge Seeborg denied motions by Berger for acquittal or a retrial on the charges that he willfully assisted in the preparation of three false Form 1040s for Burrill for 2011, 2012, and 2013.
In March 2016, Burrill and his financial services firm reached a settlement with the U.S. Securities and Exchange Commission related to the same activity.
Burrill and Burrill Capital Management agreed to repay $4.785 million, plus pay a $1 million penalty, to settle federal charges that he siphoned money from a fund managed by the firm. Burrill also agreed to be barred permanently from the securities industry.
The SEC said an investigation found that Burrill took money from his Burrill Life Sciences Capital Fund III under the guise of “advanced” management fees. The investigation also resulted in charges for Burrill Capital Management’s chief legal officer Victor A. Hebert and controller Helena C. Sen. They agreed to pay penalties of $185,000 and $90,000, respectively, and are also barred from the securities industry.
Burrill, a onetime audit partner, in 1994 established a financial services firm bearing his name that focused on the financing of biotech and other life sciences businesses.