Hedge Fund Reader : The absconding Bayou Group founder may serve prison for 20 years

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October 01, 2005

The absconding Bayou Group founder may serve prison for 20 years

The incidents of the Stamford, Connecticut-based hedge fund, the Bayou Group had all the ingredients of a Hollywood Drama. The plot thickened with every aspect of the human-side – greed, lies, deceit, and finally confession. The conspiracy of the absconding Mr. Samuel Israel III, founder of the Bayou Group from the investors with their money was unraveled when he was convicted by Magistrate Judge Mr. George Yanthis of the U.S. District Court in White Plains. Along with him was Mr. Daniel Marino, the company's CFO who fake suicide note was discovered by the police from his apartment some time back. The two men are charged under three counts of felony for duping investors under: investor adviser fraud, mail fraud and conspiracy to commit fraud. The mail fraud the most serious of them carries a possible 20-year prison sentence, fines and restitution, for stating profits for years when the fund was never in black for the entire duration. The convicts had inflated their earnings and booked profits of $43 million when the incurred losses to the tune of $49 million in 2003, and took $29 million in commissions that year. And to top its all they also set-up a phony New York City accounting firm in 1999 called Richmond-Fairfield Associates for cooking up audit reports. This drama is turning sour for the founder and the CFO, after taking their investors for a ride. The Journal News.com Reports:

Ross Albert, a former federal prosecutor and now a securities lawyer in Atlanta, said it's near certain that Israel and Marino, will spend time in prison. "Generally the way people implicated in these types of frauds avoid prison, if at all, is by providing information on higher-ups," he said. "But as we've seen with Enron and WorldCom, that usually just gets you a discount (a shorter sentence), not a get out of jail free card."