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Swindler Israel Gets Two More Years for Bail-Jumping

Date: Thursday, July 16, 2009
Author: Reuters.com

Hedge fund swindler Samuel Israel was ordered on Wednesday [July 15] to serve two more years behind bars for a wild escapade in which he faked his own death in an attempt to avoid a 20-year prison sentence.

Mr. Israel's vanishing act in June 2008 sparked an intense manhunt, after his abandoned car was found on a New York bridge with a suicide note scrawled in dust on the vehicle's hood Previous Reuters Story. He surrendered after less than a month on the run.

The two years in prison will be in addition to the two decades Mr. Israel, 49, already is serving for bilking Bayou Management LLC hedge fund investors out of about $450 million.

At a court hearing in the New York City suburb of White Plains, Mr. Israel apologized to U.S. District Judge Kenneth Karas and said he staged his death and fled because he had been terrified of the long prison term he was due to start.

"When I heard the 20-year sentence I was in a state of shock and I was scared of spending the rest of my life in jail," he told the judge. "Running was a mistake and I do regret it," said Mr. Israel, sporting a scruffy beard and dressed in a crumpled white shirt and brown pants instead of a jail uniform.

Mr. Israel was sentenced in April 2008 after pleading guilty in 2005 to fraud following Bayou's collapse. He and several partners fabricated portfolio returns and invented a phony accounting firm to give clients the illusion the fund was successful. The Bayou fraud was one of the biggest U.S. investment scandals before the $65 billion Bernard Madoff investment swindle unfolded late last year.

Mr. Israel has already served about one year of his fraud sentence and has been held in a Westchester County, N.Y., correctional facility. He recently lost an appeal challenging that sentence as too harsh.

Mr. Israel's disappearance last year came just as he was set to report to prison in Massachusetts. He had been out on bail while the prison prepared for his medical care.

When he did not arrive and his car was found abandoned on a bridge but no body was found, police labeled him a fugitive. After hiding in a mobile home, he turned himself in.

Mr. Israel could have had as much as 10 more years added to his sentence for bail-jumping. His lawyer, Barry Bohrer, argued for a one-year sentence, saying Mr. Israel has serious health problems and any additional prison time may mean he will have an effective life sentence.

Mr. Israel has a pacemaker and has battled an addiction to pain killers.

Judge Karas said Mr. Israel's actions showed "a chronic willingness to take advantage of people for his own gain" and that the swindler "was thumbing his nose at the system."

Last month, Mr. Israel's former girlfriend, Debra Ryan, was sentenced to three years' probation, including four months of house arrest, for helping him flee Previous Reuters Story. She was also ordered not to have any contact with him.

By Martha Graybow, reporting by Chavon Sutton