Swindler who faked death surrenders in Southwick

Judge rejects request to go to medical center

Email|Print|Single Page| Text size + By David Abel and Todd Wallack
Globe Staff / July 3, 2008

Hedge fund swindler Samuel Israel III rode a scooter to a police station yesterday in Southwick, where he surrendered after a three-week federal manhunt that began with his faked suicide in New York.

A US District Court judge later ordered Israel, who disappeared June 9 after pretending to jump off a bridge, to return with federal marshals to New York. He will face charges of failing to surrender after being sentenced to 20 years in federal prison for his role in persuading investors to pour $450 million into his risky hedge funds.

Standing before Judge Michael A. Ponsor in a blue T-shirt, shorts, and a cap, and with a thick, graying beard, the 49-year-old cofounder and chief executive of the now-collapsed Bayou hedge funds pleaded to be sent directly to Federal Medical Center Devens in Ayer.

That is where he was due to report the day he faked his suicide, leaving his car on a New York bridge with the phrase "suicide is painless" written in the dust on its hood.

Being extradited to New York, Israel said, would keep him from the needed medical care he would receive at Devens, which holds inmates with long-term medical or mental health issues.

"I'm not a danger to the community . . . but what I did is bad enough," Israel told the judge after removing his brown cap. "I have significant medical issues . . . If I was going to flee, I wouldn't have turned myself in."

He said he required daily medical attention for his back, a pacemaker, and an addiction to painkillers. "If I could just go where I should have gone . . . to start throwing me around the system wouldn't be best," he said.

Ponsor told Israel he had no choice but to send him back to New York.

"There isn't the slightest possibility that I or any judge would release you at this point," he said. "You could be at Devens if you wanted to be. You're not there because of your own conduct."

In a brief statement after court, Israel said the only reason he turned himself in was that authorities had arrested Debra Ryan, his girlfriend, who lived with him in Armonk, N.Y. Two weeks ago, Ryan was charged with aiding and abetting Israel's escape. A criminal complaint alleged that she helped him attach his scooter to a recreational vehicle, pack his belongings, and arrange his getaway in the recreational vehicle, which he parked at a rest stop near Interstate 684.

"She had nothing to do with it," Israel said from the backseat of a maroon vehicle before marshals whisked him away. "That's the reason I'm here."

In a news release, officials from the US Marshals Service said Israel turned himself in at about 9:15 a.m. Shortly before that, they learned from Israel's mother that he would surrender in Southwick.

"When he turned himself in, it was due to the massive pressure placed on Israel by diligent investigators in the Marshals Service and by our partners nationwide," John F. Clark, US Marshals Service director, said in a statement.

It is unclear why Israel decided to surrender in Southwick, a rural Springfield suburb with just under 10,000 residents.

Officer Paul Miles of the Southwick Police Department told the Associated Press that Israel "was polite, very contrite, and a perfect gentleman at all times."

On the day Israel was to report to prison, police found his abandoned GMC Envoy on Bear Mountain Bridge, which spans the Hudson River between Rockland and Orange counties in New York. In addition to the ominous message on the hood, police also found a bottle of pills and his keys in the sport utility vehicle.

Authorities began to suspect that Israel was on the lam when they could not find his body. The phrase "suicide is painless" was also the title of the theme song of the long-running TV show "M*A*S*H." In the film version, the song was played during a fake suicide.

Prosecutors accused Israel and two partners at his Stamford, Conn.-based hedge fund of persuading investors to pour more than $450 million into the fund by hiding its mounting losses. The hedge fund collapsed in 2005. The losses totaled $300 million.

Ross B. Intelisano, a lawyer with Rich & Intelisano in New York, which represents 20 investors who lost a combined $25 million, said the investors were pleased to learn of Israel's surrender.

"This will hopefully be the last chapter in this case, and they are looking forward to seeing him serve a long, long time in prison," he said.

The government has recovered about $115 million to help repay investors.

Intelisano said Israel "has been cooperating with the government" to recover some of the money and limit investors' losses. But it is unclear whether he has stashed away additional money that has not been found. "If there is anything else out there, having him still alive and in jail will help the government if there are any funds to be recovered," he said.

Ron S. Geffner, a partner with Sadis & Goldberg LLP in New York, which also represents investors who lost money in the hedge funds, said Israel made a lot of bad decisions.

"Some people seem predetermined to make wrong decisions," Geffner said. "Sam seems to be at the extreme end of that spectrum. He seems to make all the wrong decisions."

He added: "It's good to see he will start paying his debt. Unfortunately, he may not pay enough."

Israel and his partners have been ordered to pay $300 million in restitution to investors.

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