Sentencing of hedge fund co-founder delayed

NEW YORK - A former top aide to famed investor and political activist George Soros will not be sentenced until at least Tuesday on charges that he conspired to defraud investors in the hedge funds he co-founded.

U.S. District Court Judge Colleen McMahon yesterday delayed the sentencing of James Marquez, 59, who co-founded the Bayou hedge funds in Stamford, Conn. The judge wants to give prosecutors and defense lawyers a chance to settle disagreements on certain facts.

The judge scheduled a hearing in her Lower Manhattan courtroom at which the sides will have that discussion. They may also speak before the hearing in order to settle their differences, which relate to issues the defense raised in a brief last week.

Marquez, of Greenwich, Conn., started Bayou with Samuel Israel III, who lived for a time in a Mount Kisco mansion he rented from Donald Trump for $32,000 a month.

Marquez pleaded guilty in December to persuading people to invest in the funds by telling them the funds were profitable when they were in fact losing large sums of money.

He left Bayou in 2001 after five years.

Neither lead prosecutor Margery B. Feinzig nor defense lawyer Bradley D. Simon would specify what the disagreements are.

In the brief, Simon argued that Israel and Daniel E. Marino, Bayou's chief financial officer, were "significantly more culpable" than Marquez in the fraud. During the time Marquez was at Bayou, Israel was the sole owner and the investor losses amounted to only about 2 percent of the eventual total loss incurred in the $350 million fraud, he said.

He said prosecutors were ignoring and misrepresenting evidence of Marquez's involvement.

Simon also argued that Marquez's history of mental illness should allow him to get a lighter sentence. He said a government psychiatrist found Marquez suffers from a disorder that makes it difficult for him to reason.

Marquez suffers from bipolar disorder, according to filings by his attorneys.

Prosecutors want the judge to sentence Marquez to 51 to 60 months in prison. Simon has asked for a sentence that does not include prison time. He has suggested that Marquez should be sentenced to home detention and to perform community service.

Israel and Marino have also pleaded guilty and are awaiting sentencing.

Marquez did not speak during the brief hearing.

The Bayou case led to calls for stricter regulation of hedge funds.