Bayou creditors sue Goldman Sachs for $20M

Creditors of Bayou Management LLC, run by former fugitive from justice Samuel Israel III, have sued Goldman Sachs Group Inc. for $20 million, according to a report in The New York Times. The Stamford, Conn.-based hedge fund defrauded investors out of $300 million. New York-based Goldman was responsible for taking custody of securities and providing reports on Bayou’s investments. The suit was filed as a private arbitration case in federal court in May, weeks before Mr. Israel faked his own suicide and fled. He later turned himself into the authorities. It claims that Goldman provided monthly statements to Bayou outlining its losses — more than $88 million between August 1999 and August 2005 — but that Goldman knew that Bayou was reporting significant gains to investors. Calls to Goldman were not returned.