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Man Questioned in Fund Manager's Disappearance

CNBC.com
Thursday, 12 Jun 2008 | 3:33 PM ET

U.S. Marshals are questioning a man in connection with the disappearance of convicted hedge fund millionaire Samuel Israel, according to a report from WNBC.

Law enforcement sources told WNBC that investigators want to know if the man acted as a getaway driver on the Bear Mountain Bridge Monday, the day Israel vanished.

Investigators said it is too soon to know if the man is linked to Israel. But Marshals are investigating his whereabouts Monday.

This could be the first big break in the investigation into whether the convicted Bayou Hedge Fund swindler is running from the law.

Investigators still have not ruled out a suicide and continue to search the Hudson River for a body. But this latest lead gives investigators added concern that Israel faked his own death in order to try to run from the law.

Police thought Israel, who was scheduled to begin serving a 20-year prison term for fraud June 9, may have plunged to his death after finding his abandoned car on the Bear Mountain Bridge in New York.

The words "suicide is painless'' were written on it. The phrase was the title of the theme song from the television show ''M+A+S+H.'' But with no body found, other government agencies quickly jumped on the case and are now broadening their search for the man who engineered the $1.8 trillion hedge fund industry's most brazen and long-running fraud.

Israel, 48, and his partners pocketed millions as investors in his Bayou Group hedge fund lost more than $400 million over eight years, court papers show.

The bridge where Israel's car was found crosses one of the deepest parts of the Hudson River and police said it could take a few days for a body to surface and wash ashore.

Suspicions that Israel may have staged his death mounted because there were no witnesses, and video cameras along the bridge's spans showed the car traveling on the bridge but were not clear on what happened next. The FBI now has the tapes.

Israel, who once hinted at suicide in a letter to the judge sentencing him, pleaded in April with U.S. District Judge Colleen McMahon for a lighter prison term because he suffered debilitating back pain and was addicted to pain killers.

McMahon was not moved and sentenced Israel to 20 years but let him stay free on bail from April to June so that the federal prison system would be able to prepare to take care of his needs.

Israel was scheduled to serve his time at Federal Medical Center Devens, located 40 miles outside of Boston, which houses offenders who need long-term medical or mental health care.

If Israel is on the run it would not be the first time for a hedge fund manager to have escaped. Kirk Wright, who recently hanged himself in his jail cell after having been convicted of cheating professional football players, was missing for months. Also Michael Berger, another hedge fund manager who lost millions, was arrested last year in Europe after having evaded authorities for years.