Israel Faked Suicide to Avoid 20-Year Term for $450 Million Fraud
By Holly Watt
Washington Post Staff Writer
Thursday, July 3, 2008; Page D01
A hedge-fund manager who faked his own suicide and went on the run after being convicted of defrauding investors of millions of dollars turned himself in yesterday at a police station in Massachusetts.
Samuel Israel III walked into a police station in Southwick, Mass., yesterday morning while talking on a cellphone with his mother, who had helped negotiate his surrender, said Frank Dawson, public information officer for the U.S. Marshals Service in Boston.
"We expected him to give himself up; we just were not sure where it would be," Dawson said. "He knew that we were close to catching him. His mother was communicating with the authorities."
Wearing a T-shirt and shorts, Israel appeared yesterday without a lawyer before Judge Michael Ponsor at the district courthouse in Springfield, Mass., where he was ordered back to New York to face additional charges related to his escape.
Israel, 48, in April had been found guilty of bilking investors in the Bayou Management hedge fund of more than $450 million. He was sentenced to 20 years in prison.
After the conviction, defense lawyers persuaded Judge Colleen McMahon to allow Israel, who suffered from severe back pain, time to undergo spinal surgery.
But Israel allegedly fled hours before he was due to arrive at the federal prison in Ayer, Mass. His sport-utility vehicle was found June 9 on the Bear Mountain Bridge 150 feet above the Hudson River, about 40 miles north of New York City. The engine was running, and "Suicide is painless," the title of the theme song for the "M.A.S.H." television show, was scratched in the dust on the car's hood.
When Israel's body was not found after a lengthy search, the federal authorities launched a nationwide manhunt. Nine days after his disappearance, the U.S. Marshals declared him a fugitive and described him as "armed and dangerous."
Police said Israel had originally intended to give himself up in nearby Granville, Mass., but the police station there was closed. He left the recreational vehicle he had been using and took a motor scooter to Southwick.
Israel's hedge fund imploded in 2005 after he ran it for nine years from a beachfront cottage in Stamford, Conn. His company made millions in commissions on trades that lost money for the investors. The fraud involved announcing nonexistent profits and providing fake audits that made the fund appear to be outperforming the market.
Israel was sentenced to five years for investor adviser fraud, five years for conspiracy and 20 years for mail fraud, sentences comparable to the 25-year terms meted out to former WorldCom chairman Bernard J. Ebbers and the 24 years given to former Enron chief executive Jeffrey K. Skilling.
Yesterday, federal prosecutors announced that more than $115 million seized from Israel's company would be available to pay back victims of the fraud.
Two colleagues, Daniel Marino and James Marquez, were also given prison terms.
Israel's girlfriend, Debra Ryan, was arrested two weeks ago and charged with aiding and abetting his escape. Ryan could face 10 years in prison.
A secretary for Israel's lawyer, Lawrence S. Bader, said he would not comment on the case.
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