Israels Girlfriend Charged With Helping Him Become Fugitive

Date: Friday, June 20, 2008
Author: Karen Freifeld, Bloomberg.com

(Bloomberg) -- Samuel Israel, the convicted co- founder of the bankrupt hedge fund Bayou Group LLC, fled with the help of his girlfriend who was charged with aiding his failure to surrender, according to the U.S. Attorney's office.

Debra Ryan was arrested yesterday and appeared in U.S. District Court in White Plains, New York, said Herb Hadad, a spokesman for U.S. Attorney Michael J. Garcia in Manhattan. She was released on a $75,000 bond, Hadad said.

Ryan admitted she met Israel at an auto-repair shop in Bedford, New York, on June 7 to help him attach a motor scooter to a hydraulic lift on the back of a recreational vehicle, according to the federal complaint. On June 8, she helped Israel pack the recreational vehicle, prosecutors said.

On June 9, the day Israel was scheduled to report to federal prison in Massachusetts to begin serving a 20-year sentence for his role in a $400 million fraud, Ryan, ``in her own car, accompanied Israel, who was driving the RV, to a rest area off of Interstate 684,'' according to the complaint. ``After Israel parked the RV in the parking lot of the rest area, Ryan drove Israel back to their home. Israel failed to surrender later that day.''

Interstate 684 runs north-south through Westchester and Putnam counties in suburban New York. The rest area is near the intersection of interstates 684 and 84.

Police found Israel's car on an upstate New York bridge spanning the Hudson River at about 12:30 p.m. on June 9. Scrawled in the dust on the windshield were the words ``suicide is painless,'' the title of the theme song of the movie and television series ``M*A*S*H.

Rest Area

The rest area is about 24 miles (39 kilometers) from Armonk, New York, where Israel lived with Ryan, and about 32 miles from the Bear Mountain Bridge where his GMC Envoy sport utility vehicle was found.

Investigators dismissed the possibility that he killed himself and on June 16 declared him a fugitive.

On numerous occasions from June 9 to June 19, Ryan ``denied any knowledge of Israel's whereabouts'' in law enforcement interviews, according to the complaint. On June 10, Ryan said she located a suicide note from Israel and gave the note to the New York state police.

Ryan appeared before Chief U.S. Magistrate Lisa Margaret Smith, prosecutors said. Her next court date is scheduled for July 11. If convicted, Ryan faces a maximum sentence of 10 years in prison, according to prosecutors.

Paul Davison, Ryan's attorney, didn't immediately return a call seeking comment.

Wanted Poster

The U.S. Marshals Service released a poster yesterday saying it is looking for a white 2007 Coach Freelander recreational vehicle with the New York license plate EEN-4973. The vehicle has a hydraulic lift on the rear that might be carrying a blue 2005 Yamaha scooter, according to the poster.

Israel should be considered ``armed and dangerous'' and has been known to use the aliases Sam Ryan and David S. Clapp, according to the poster.

Israel, 48, pleaded guilty in 2005 to securities fraud. His sentence was among the longest for a white-collar offender in the seven years since Enron Corp. collapsed, according to data compiled by Bloomberg. Others included former WorldCom Inc. Chairman Bernard Ebbers, who received a 25-year sentence for fraud, and former Enron Chief Executive Officer Jeffrey Skilling, who got a 24-year term.

Fugitive Executive

As a fugitive, Israel joins the ranks of former executives such as Jacob ``Kobi'' Alexander, the former chief executive officer of Comverse Technology Inc. who fled the U.S. for Namibia rather than face stock-options backdating charges.

In addition to the prison term, Israel was ordered at his April sentencing to forfeit $300 million. Bayou filed for bankruptcy in May 2006.

With James Marquez, Israel founded Stamford, Connecticut- based Bayou in 1995. After the company lost money in 1998, Marquez and former Chief Financial Officer Daniel Marino created a sham accounting firm to serve as the fund's external auditor, Israel admitted in court papers. Rather than disclose modest losses, Bayou reported profits, according to Israel.

Israel described himself as a short-term stock trader, with turnover of about 200 percent a month, according to a presentation given to potential investors in 2002. He aimed to make 1 percent to 3 percent a month and positioned his portfolio with 50 percent of its assets wagering on falling stocks and the other half on shares he expected to rise, according to the presentation.

Fund's Collapse

The scheme collapsed when Seattle-based Silver Creek Capital Management sought to withdraw $53 million from the fund in August 2005.

Prosecutors said Bayou's losses topped $400 million.

Israel's family moved to Harrison, New York, when he was 16. He attended Tulane University without graduating, according to court filings, and began working as a messenger on the New York Stock Exchange floor for Frederic J. Graber & Co in 1982. Israel, whose salary as a messenger was $16,500, worked his way up to trader.

The cases are U.S. v. Ryan, U.S. District Court, Southern District of New York (White Plains), and U.S. v. Israel, 05cr1039, U.S. District Court, Southern District of New York (Manhattan).

To contact the reporter on this story: Karen Freifeld in New York State Supreme Court at kfreifeld@bloomberg.net.