Samuel Israel: Hedge Fund Scammer Tells Judge He Tried Suicide - Private Equity and Hedge Funds * US * News * Story

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CNBC ON DIGG

Hedge Fund Swindler Tells Judge He Tried Suicide

Topics:Crime | Economy (Global) | Economy (U.S.) | Hedge Funds

By: CNBC.com | 03 Jul 2008 | 04:27 PM ET

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Hedge fund swindler Samuel Israel III faced a fresh charge of bail jumping on Thursday and was ordered to jail immediately, one day after his mother convinced him to end a high-profile run from justice.

Israel, who faked his own death nearly four weeks ago to avoid a 20-year prison sentence for cheating investors out of $450 million, was denied bail by Judge Colleen McMahon in federal court in Manhattan, who originally sentenced him in April. He will likely face additional prison time for having failed to show up at a Massachusetts prison on June 9. The unsympathetic judge replied that Samuel Israel III, who scammed nearly half a billion dollars from investors, must forfeit his $500,000 bail.

McMahon originally sentenced Israel in April but allowed the man who engineered the $2 trillion hedge fund industry's most brazen scam ever to remain free for weeks so that prison officials could get the medications he needs ready.

Flanked by two lawyers, the 48-year old co-founder of Bayou Group hedge fund was dressed in a blue T-shirt and sweatpants and smiled and waved to someone in the courtroom.

One of Israel's attorneys, Barry Bohrer, told CNBC Thursday that Israel is sorry for his actions; the lawyer also cited psychological problems suffered by the disgraced hedge fund manager.

"Mr. Israel deeply regrets his recent conduct and is profoundly sorry for the pain that he caused his family and loved ones," Bohrer said. "He also regrets the consequences that flowed from his conduct, including the work and expenses undertaken by local and federal officials.

"His medical conditions, including his history of psychological instability, are well documented, and we are currently reviewing the circumstances underlying his conduct over the past several weeks."

Suicide Attempt

Israel, who has a pacemaker and was addicted to prescription pain killers to relieve chronic back pain, told the court he tried to commit suicide by swallowing pills two days ago. "I thought it was better to do myself in than to turn myself in."

"I ate the balance of my fentanyl patches because I thought it was better to do myself in than to turn myself in," Israel said. "I woke up battered and bruised and I realized God didn't want me to do that and I turned myself in."

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When that attempt failed however, Israel said he thought God had wanted him to surrender. This and his mother's pleas, made him leave the campground where he had been hiding out in a mobile home and ride his blue scooter to the nearest police station in Southwick, Massachusetts, officials have said.

Last month Israel briefly duped police into thinking he had killed himself by having abandoned his car on a New York bridge above the Hudson River with the words "suicide is painless" scrawled on the hood in dust. With no body however, police quickly realized that Israel was a fugitive and spent thousands of hours searching for him around the country.

"Stand up Mr. Israel," McMahon sternly told the defendant, who had abruptly sat down while she was speaking. "If you can ride a motorcycle, Mr. Israel, you can stand up in my courtroom."

Israel got the 20-year sentence in April for conspiracy and fraud. McMahon refused to refer him to the prison medical facility to which he had been assigned before he fled.

The massive manhunt ended Wednesday, when Israel rode a scooter to surrender at a Massachusetts police station.

He could face an extra 10 years if he is convicted of a new charge of failing to report to prison.

"It was thrown in my face the last time," she said. "I'm now out of it." A grand jury is expected to hand up an indictment in the next 30 days, and the 48-year old co-founder of hudge fund Bayou Group did not enter a plea on Thursday.

-- Wire services contributed to this report.

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