The U.S. Securities and Exchange Commission (SEC) has announced proceedings against a PricewaterhouseCoopers audit partner who served as engagement partner for the independent audits of a venture capital fund.
The Enforcement Division of the SEC alleged that Adrian D. Beamish, based in San Jose, California, failed to scrutinize millions of dollars taken from Burrill Life Sciences Capital Fund III in related party transactions under the guise of “advanced” management fees.
Beamish allegedly failed to determine whether the fund’s adviser 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.
The owner and principal of the investment adviser, G. Steven Burrill, settled an SEC case earlier this year that found that he spent the money he took from the fund to keep his other businesses afloat, travel on family vacations, and pay other unauthorized personal expenses.
Jina L. Choi, director of the SEC’s San Francisco Regional Office, commented:
Auditors perform a critical check on fraudulent conduct, especially when related party transactions are involved. We allege that Beamish’s repeated failure to exercise professional skepticism prevented him from recognizing that Burrill was stealing investor money from the fund.
Going forward, the administrative proceedings against Beamish will determine whether he should be suspended from appearing or practicing before the SEC as an accountant, which includes not participating in the financial reporting or audits of public companies. This will be scheduled for a public hearing before an administrative law judge, who will prepare an initial decision stating what, if any, remedial actions are appropriate.