Police Investigating Possible Suicide by Hedge Fund Cheat

June 9, 2008 — -- Disgraced, physically incapacitated, and suffering from depression, hedge fund trader Samuel Israel III, failed to show up to begin a 20 year federal prison sentence today on charges of defrauding investors of $400 million, officials said. New York State police now are investigating whether he committed suicide after a car registered to him was found abandoned at the Bear Mountain Bridge along with a rambling suicide note, other officials confirm.

Israel, a co-founder of the hedge-fund company Bayou Group, was sentenced in April to 20 years in prison and ordered to forfeit $300 million after pleading guilty to defrauding investors in his now-bankrupt firm.

US District Judge Colleen McMahon said to Israel at his sentencing, "You were, in every meaning of the sense, a career criminal. You ruined lives. Financial fraud, white-collar crimes are every bit as heinous as every other type of crime and they will be punished severely."

Israel apologized at his sentencing saying, "I lied to you and I cheated you, and I cannot put into words how sorry I am," but that didn't protect him for a 20 year sentence.

Lawyers for Israel had sought leniency, noting he's had numerous back operations and is addicted to painkillers. The judge had no compassion in her voice when she said, "He suffered from these ailments while he did the crime. He can deal with them while he does the time."

Israel's sentence was the final in a string of prosecutions that stemmed from Bayou's collapse. After the firm filed for bankruptcy in May 2006, lawsuits against the firm were filed which claimed that Bayou operated a Ponzi scheme, essentially that it paid old investors money from new ones.

A car registered to Israel was found earlier today at the Hudson River crossing near West Point and two sources said that a suicide note was also found. Contacted by ABC the New York State Police said the matter is currently under investigation but nothing has yet been confirmed. No body has yet been found.

Joe Torres at WABC contributed to this report.