US judge refuses ex-hedge fund managers plea

Date: Thursday, August 7, 2008
Author: Martha Graybow, Reuters

WHITE PLAINS, N.Y., Aug 6 (Reuters) - Former hedge fund manager Samuel Israel, who faked his own death to avoid going to prison, agreed on Wednesday to plead guilty to jumping bail, but a judge refused to accept his admission.

In the latest twist in a sensational case involving a $450 million investor scam, U.S. District Judge Kenneth Karas said he was concerned that the methadone treatment Israel was taking to be weaned off opiates could be clouding his judgment.

"This is too important for anyone to go through while you are undergoing this weaning process," the judge said at the court hearing in White Plains, a suburb of New York City.

Israel, 49, said he wanted to enter a plea to the bail jumping charge, but the judge delayed a hearing on the matter until September 16.

Earlier on Wednesday, Israel appeared before U.S. Magistrate Judge Lisa Margaret Smith, who said the formal plea should be before Judge Karas.

In court, Karas asked Israel whether he was fully capable of understanding what was happening.

Israel, bearded and dressed in a baggy brown tee-shirt and light pants, replied that he thought he was only 60 to 70 percent aware and still asked the judge to go forward.

"I don't think you should put it off -- it's fine," Israel said.

He said he has been taking the methadone while in custody to wean him off opiates he administered to reduce pain from a series of spinal surgeries.

Israel, who ran the Connecticut-based Bayou hedge fund, pleaded guilty in 2005 to charges of conspiracy and fraud for cheating investors in a $450 million scam. He and several of his partners fabricated portfolio returns and concocted a phony accounting firm to keep the ruse going for years.

The new charge of failing to surrender to start his sentence carries a maximum penalty of 10 years in prison.

In June, Israel sought to dupe police into believing he had committed suicide when he abandoned his car on a New York bridge above the Hudson River with the words "suicide is painless" written in the dust on the hood.

But no body was found, and police quickly labeled him a fugitive. Israel had been expected to report to a low-security Massachusetts prison on June 9.

After hiding in a mobile home, Israel surrendered to authorities in Massachusetts on July 2 and was transferred back to New York. He has remained in a federal holding facility since.

The former fund manager, who has a pacemaker and once battled an addiction to painkillers, was sentenced in April, but had been allowed to remain out on bail until June so that the prison could get the medications he needed ready. (Editing by Lisa Von Ahn, Leslie Gevirtz)