Fugitive Hedge-Fund Swindler In Federal Custody

Jul 1st, 2008
MSNBC
By: reuters
 
Boston - Fugitive former hedge fund manager Samuel Israel III surrendered to police in Massachusetts on Wednesday, ending a federal manhunt after he staged his own death to avoid a 20-year prison sentence.

“He surrendered at 9:30 this morning,” said Peter Coe, dispatcher with the Southwick police, who referred further questions to U.S. marshals, who also confirmed the arrest.

Israel gave himself up in Southwick, a town in the state’s Pioneer Valley about 100 miles southwest of Boston.

Israel, who engineered the $2 trillion hedge fund industry’s most brazen and long-running fraud, sparked a nationwide manhunt after his GMC Envoy was found on a bridge above the Hudson River on June 9, its engine idling and the words “suicide is painless” etched in dust on its hood.

Authorities ruled out suicide and issued a “wanted” poster for the balding 48-year-old co-founder of the Bayou Group, a Connecticut-based hedge fund. He pleaded guilty in 2005 and was sentenced in April for his role in a scheme to fabricate returns and cheat investors out of $450 million.

Ten days after he disappeared, authorities arrested Israel’s girlfriend on charges of aiding and abetting his disappearance. She was accused of having helped Israel pack his belongings in a recreational vehicle, attach a blue motor scooter to the back and drive him on the day he vanished.

The collapse of Israel’s Bayou Group hedge fund still ranks as the $2 trillion industry’s longest running fraud where Israel and his partners fabricated performance numbers and made up a fake auditor to sign off on the data.