Institutional Investor Fraud Leads to Criminal Indictments

A federal grand jury has indicted two men for their alleged involvement in a nearly $230M institutional investor fraud scam involving biotech companies. G. Steven Burrill, the owner and CEO of Burrill & Company, and Marc Howard Berger are the two defendants named in the criminal indictment. Burrill is charged with 26 counts of wire fraud, one count of investment adviser fraud, and one count of tax evasion. Berger is charged with multiple accounts of aiding in preparing fraudulent tax returns.

According to the criminal indictment, Burrill sent letters that were false and misleading to persuade limited partners to give capital to the fund. He also allegedly moved millions of dollars in unnecessary management fees to companies under his control, as well as submitted the allegedly fraudulent tax returns.

It was in March of last year that Burrill settled civil charges brought by the US Securities and Exchange Commission accusing him of taking funds from the Burrill Life Sciences Capital Fund III in order to maintain his expensive lifestyle and keep some of his other businesses in operation. The regulator claimed that Burrill took from the Fund III and pretended that these were management fees he was issuing to himself in advance. He then allegedly went on to spend the money on vacations, jewelry, private planes, and other expenses.

To settle the SEC’s institutional investment fraud case, Burrill and his Burrill Capital Management agreed to disgorge $4.785M in investor funds and pay a $1M penalty. He also agreed to be barred from the securities industry for good.

Institutional investors were the ones who backed the fund. In 2015, one of the investors, a venture capital firm, sued Burrill and his Burrill & Co. investment firm, accusing him and others of embezzling over $17M from the fund and causing over $30M in investor losses. Also, that year, Ann Hanham, formerly a Burrill managing director, sued him, contending that $19.2M in unauthorized payments had been issued.

Burrill & Co had initially raised $283M for the Fund III, which started investing in companies, including pharmaceutical entities, in 2006. After looking into the fund’s books, investors removed Burrill as the fund manager last year.

Investment Fund Manager Ordered to Serve 12 Years in Prison Over $96M Ponzi Fraud

In other institutional investment fraud news, Brian R. Callahan, who pleaded guilty to securities fraud and wire fraud in a $96M Ponzi scam in 2014, has been sentenced to 12 years behind bars and three years of supervised release. He also must pay almost $67.6M in restitution.

Court filings note that between 12/2006 and 2/2012, Callahan raised over $118M from at least 40 investors for four investment funds. He told them their money would go to securities such as hedge funds and mutual funds. Instead, he misappropriated almost $96M and ran a Ponzi scam.

Not only did Callahan divert millions of dollars to buy a 116-unit beachfront residency and resort in New York, but also, he commingled the investment funds’ monies, paid investors “redemptions” as part of his Ponzi scam, and funded his lavish lifestyle. He sent bogus account statements to investors to make it appear as if their investments were doing well.

At The SSEK Partners Group, our investor fraud lawyers work with high net worth individual investors and institutional investors. Contact us today.

Long Island Investment Fund Manager Sentenced to 12 Years’ Imprisonment For $96 Million Ponzi Scheme, Justice.gov, September 15, 2017

Bay Area Defendants Charged In Alleged Multi-Million Dollar Investment Fraud And Tax Evasion Scheme, Justice.gov, September 18, 2017