The Securities and Exchange Commission has initiated proceedings against an audit partner at PricewaterhouseCoopers accusing him of not doing enough to audit a venture capital fund whose manager was stealing money.

Investment adviser G. Steven Burrill settled a case in March with the SEC that found he spent money he took from his VC fund, Burrill Life Sciences Capital Fund III, to keep his other businesses afloat, travel on family vacations and pay other unauthorized personal expenses.

The SEC’s Enforcement Division alleges that PwC auditor Adrian D. Beamish failed to flag the millions of dollars taken from Burrill Life Sciences Capital Fund III in related party transactions under the guise of “advanced” management fees. Beamish, who is based in San Jose, Calif., allegedly failed to determine whether the fund’s adviser, Burrill, had proper authorization and rationale for taking the money. Beamish also allegedly failed to ensure that the transactions were properly disclosed in the fund’s financial statements, according to the SEC.

PwC plans to dispute the case. “Mr. Beamish will contest the SEC's charges with PwC's full support,” said a statement from the firm forwarded by PwC spokesperson Caroline Nolan. “The payments to the fund manager challenged by the SEC were repeatedly and accurately disclosed, year after year, in financial statements provided by the fund to its highly sophisticated investors.”

The SEC contends otherwise. “Auditors perform a critical check on fraudulent conduct, especially when related party transactions are involved,” said Jina L. Choi, director of the SEC’s San Francisco Regional Office, in a statement. “We allege that Beamish’s repeated failure to exercise professional skepticism prevented him from recognizing that Burrill was stealing investor money from the fund.”  

The SEC said its administrative proceedings against Beamish will determine whether he should be suspended from appearing or practicing before the SEC as an accountant, including auditing public companies. A public hearing has yet to be scheduled with an administrative law judge.

Register or login for access to this item and much more

All Accounting Today content is archived after seven days.

Community members receive:
  • All recent and archived articles
  • Conference offers and updates
  • A full menu of enewsletter options
  • Web seminars, white papers, ebooks

Don't have an account? Register for Free Unlimited Access