US venture exec sent to jail

Mary Ann Gray, former executive director of the Mid-Atlantic Venture Association, was sentenced yesterday to two years in federal prison for embezzling more than $400,000 from the organisation during her tenure.

Gray pleaded guilty to one count of mail fraud in 2003. She had served as MAVA’s director for more than 10 years, eventually resigning in early 2002 after she was caught misappropriating MAVA funds for her personal use. Gray was charged in a civil lawsuit that same year, and she and her husband were ordered to pay $175,000 in restitution.

MAVA represents almost 400 venture capitalists from 135 firms in Maryland, Virginia and Washington DC, managing a total of more than $10 billion in capital.

According to prosecutors in the trial, Gray used MAVA checks to pay for personal expenses, such as decorating her house, hiring a nanny, paying for a vacation home on Martha’s Vineyard and charging clothes and groceries to her credit card.

In Gray’s guilty plea, she also admitted to allegedly embezzling more than $23,000 from a telethon account at the Johns Hopkins Children Center, her former employer, and using the money for personal expenses, such as home decorating.

In addition to two years in prison, Gray also faces two and a half years of probation and will pay restitution of $402,000.

Gray’s sentencing is the second high-profile case of VC-related fraud within the last two months. At the end of January, Pamela Torkelsen, a former manager of Pennsylvania-based SBIC-backed venture fund Acorn Technology Fund, pled guilty to fraud at her firm as well. She and others stole Acorn’s funds by routing money through a false entity and making the money appear to be used for salaries or shareholder distributions. She faces up to 10 years in prison, a $250,000 fine, and must pay more than $2.5 million in restitution to the Small Business Administration and the federal government.

In another case of recent private equity fraud, Todd Berman, the co-founder of buyout firm Chartwell Investments, in December pleaded guilty to charges of stealing more than $3.6 million from the firm for his personal use. He’s set to be sentenced this month.