Bayou Hedge Fund Group
Encyclopedia
The Bayou Hedge Fund Group was a group of companies and hedge fund
s founded by Samuel Israel III
in 1996. Approximately $450m was raised by the group from investors. Its investors were defrauded from the start with funds being misappropriated for personal use. After poor returns in 1998, the investors were lied to about the fund's returns and a fake accounting firm was set up to provide misleading audited results.
In 2005, Samuel Israel III and CFO Daniel Marino pleaded guilty to multiple charges including conspiracy
and fraud
. Marino was convicted of fraud and sentenced to 20 years in prison. Israel was sentenced to 20 years prison and ordered to forfeit $300 million. At his sentencing Israel said "I lied to you and I cheated you and I cannot put into words how sorry I am."
According to federal prosecutors, Bayou had lied about its operations since the beginning, by “overstated gains, understated losses, and reported gains where there were losses.” Court documents show that Bayou never made any money. In mid-2004, Bayou sent a letter to investors, claiming that its assets valued in excess of US$450 million.
In 2004, Samuel Israel III and Daniel Marino, the CEO and CFO, respectively, stopped trading fully and spent all resources on covering losses. Over the course of six days in July 2004, Bayou withdrew about $161 million from five bank accounts. They were eventually caught, wiring US$100 million overseas.
(CFTC) filed a complaint in the United States District Court for the Southern District of New York
, alleging misappropriation and fraud involving Connecticut hedge fund manager Bayou Management, LLC (Bayou Management), its principals, Samuel Israel III and Daniel E. Marino, and Richmond Fairfield Associates, Certified Public Accountants PLLC (Richmond Fairfield).
The hedge fund filed for Chapter 11 bankruptcy-court protection in White Plains, New York
, in 2006.
Over $100 million seized by authorities after the collapse had not yet been distributed to victims as of June 24, 2008.
On 14 April 2008, Israel was sentenced to 20 years in prison and ordered to forfeit $300 million after pleading guilty to defrauding investors in his now-bankrupt firm. On 10 June 2008, it was reported by the press that Israel may have committed suicide
after a car registered to Israel was found abandoned on a bridge that spans one of the deepest stretches of the Hudson River
in New York. It was the same day that Israel was supposed to begin serving his 20-year prison sentence.
His vehicle was found abandoned on the Bear Mountain Bridge
over the Hudson River in New York with the words "Suicide is Painless
" written in the dust on his hood. Israel later turned himself in to federal authorities in Southwick, Massachusetts
on July 2, 2008. NBC
aired a Dateline
segment about him on September 5, 2008.
Hedge fund
A hedge fund is a private pool of capital actively managed by an investment adviser. Hedge funds are only open for investment to a limited number of accredited or qualified investors who meet criteria set by regulators. These investors can be institutions, such as pension funds, university...
s founded by Samuel Israel III
Samuel Israel III
Samuel Israel III is a former hedge fund manager for the fraudulent Bayou Hedge Fund Group, which he founded in 1996. He was born in Louisiana....
in 1996. Approximately $450m was raised by the group from investors. Its investors were defrauded from the start with funds being misappropriated for personal use. After poor returns in 1998, the investors were lied to about the fund's returns and a fake accounting firm was set up to provide misleading audited results.
In 2005, Samuel Israel III and CFO Daniel Marino pleaded guilty to multiple charges including conspiracy
Conspiracy (crime)
In the criminal law, a conspiracy is an agreement between two or more persons to break the law at some time in the future, and, in some cases, with at least one overt act in furtherance of that agreement...
and fraud
Fraud
In criminal law, a fraud is an intentional deception made for personal gain or to damage another individual; the related adjective is fraudulent. The specific legal definition varies by legal jurisdiction. Fraud is a crime, and also a civil law violation...
. Marino was convicted of fraud and sentenced to 20 years in prison. Israel was sentenced to 20 years prison and ordered to forfeit $300 million. At his sentencing Israel said "I lied to you and I cheated you and I cannot put into words how sorry I am."
Scandal
In 1996, investors gave the fund US$300 million. Investors were promised that the fund would grow to about US$7.1 billion in ten years. In 1998-1999 trading losses accumulated quickly. The company started a dummy accounting firm and hired it to audit themselves.According to federal prosecutors, Bayou had lied about its operations since the beginning, by “overstated gains, understated losses, and reported gains where there were losses.” Court documents show that Bayou never made any money. In mid-2004, Bayou sent a letter to investors, claiming that its assets valued in excess of US$450 million.
In 2004, Samuel Israel III and Daniel Marino, the CEO and CFO, respectively, stopped trading fully and spent all resources on covering losses. Over the course of six days in July 2004, Bayou withdrew about $161 million from five bank accounts. They were eventually caught, wiring US$100 million overseas.
Aftermath
In 2005, it was discovered that Bayou capital was responsible for one of the most publicized hedge fund frauds in history. On September 29, 2005, the Commodity Futures Trading CommissionCommodity Futures Trading Commission
The U.S. Commodity Futures Trading Commission is an independent agency of the United States government that regulates futures and option markets....
(CFTC) filed a complaint in the United States District Court for the Southern District of New York
United States District Court for the Southern District of New York
The United States District Court for the Southern District of New York is a federal district court. Appeals from the Southern District of New York are taken to the United States Court of Appeals for the Second Circuit The United States District Court for the Southern District of New York (in case...
, alleging misappropriation and fraud involving Connecticut hedge fund manager Bayou Management, LLC (Bayou Management), its principals, Samuel Israel III and Daniel E. Marino, and Richmond Fairfield Associates, Certified Public Accountants PLLC (Richmond Fairfield).
The hedge fund filed for Chapter 11 bankruptcy-court protection in White Plains, New York
White Plains, New York
White Plains is a city and the county seat of Westchester County, New York, United States. It is located in south-central Westchester, about east of the Hudson River and northwest of Long Island Sound...
, in 2006.
Over $100 million seized by authorities after the collapse had not yet been distributed to victims as of June 24, 2008.
On 14 April 2008, Israel was sentenced to 20 years in prison and ordered to forfeit $300 million after pleading guilty to defrauding investors in his now-bankrupt firm. On 10 June 2008, it was reported by the press that Israel may have committed suicide
Suicide
Suicide is the act of intentionally causing one's own death. Suicide is often committed out of despair or attributed to some underlying mental disorder, such as depression, bipolar disorder, schizophrenia, alcoholism, or drug abuse...
after a car registered to Israel was found abandoned on a bridge that spans one of the deepest stretches of the Hudson River
Hudson River
The Hudson is a river that flows from north to south through eastern New York. The highest official source is at Lake Tear of the Clouds, on the slopes of Mount Marcy in the Adirondack Mountains. The river itself officially begins in Henderson Lake in Newcomb, New York...
in New York. It was the same day that Israel was supposed to begin serving his 20-year prison sentence.
His vehicle was found abandoned on the Bear Mountain Bridge
Bear Mountain Bridge
The Bear Mountain Bridge is a toll suspension bridge in New York State, carrying U.S. Highways 202 and 6 across the Hudson River between Rockland and Westchester counties...
over the Hudson River in New York with the words "Suicide is Painless
Suicide Is Painless
"Suicide Is Painless" is a song written by Johnny Mandel and Mike Altman , which is best known for being featured as the theme song for both the movie and TV series M*A*S*H. The actual title is "Song from M*A*S*H" ". Mike Altman is the son of the original film's director, Robert Altman, and was 14...
" written in the dust on his hood. Israel later turned himself in to federal authorities in Southwick, Massachusetts
Southwick, Massachusetts
Southwick is a town in Hampden County, Massachusetts, United States. The population was 9,502 at the 2010 census. It is part of the Springfield, Massachusetts Metropolitan Statistical Area.- History :...
on July 2, 2008. NBC
NBC
The National Broadcasting Company is an American commercial broadcasting television network and former radio network headquartered in the GE Building in New York City's Rockefeller Center with additional major offices near Los Angeles and in Chicago...
aired a Dateline
Dateline NBC
Dateline NBC, or Dateline, is a U.S. weekly television newsmagazine broadcast by NBC. It previously was NBC's flagship news magazine, but now focuses on true crime stories. It airs Friday at 9 p.m. EST and after football season on Sunday at 7 p.m. EST.-History:Dateline is historically notable for...
segment about him on September 5, 2008.
External links
- http://en.epochtimes.com/news/5-10-9/33130.html
- http://www.onwallstreet.com/cecredits/ce_article.cfm?fp=20051001026
- Forbes.com We Wuz Robbed! Daniel Fisher with Lea Goldman, 12.12.05