Bayou 'mastermind' gets 20-year sentence

Samuel Israel III, the former chief executive of the defunct Bayou Management LLC hedge fund, was sentenced to 20 years in jail and ordered to pay $300 million in restitution for defrauding investors out of more than $450 million. In addition, he was ordered to forfeit his interests in a Bank of America Corp. account that held a little more than $100 million, according to a Reuters report. U.S. District Judge Colleen McMahon of the U.S. District Court for the Southern District of New York, yesterday called Mr. Israel the "mastermind" of the fraud, adding that "people who commit crimes while wearing a tie do not get a break" but will be "punished severely," according to The Wall Street Journal. Mr. Israel pleaded guilty in September 2005 to charges of conspiracy and fraud in connection with stealing from Bayou investors. Mr. Israel is scheduled to report to prison on June 9. The sentencing of Mr. Israel ended the prosecution that has already sent two of his associates to jail. In January, Bayou's former chief financial officer, Daniel Marino, and James G. Marquez, co-founder of several of Bayou's hedge funds, were sentenced to 20 years and 51 months in prison, respectively. Stamford, Conn.-based Bayou was founded in early 1996 with the intention of making money on short-term trades. The company, which once managed more than $400 million in assets, fell apart in 2005 following the discovery of multiple frauds by its managers, who had signed off on reports showing that Bayou was profitable when it was not.