Hedge-Fund Fraud's Guilty Plea Ignored

In this Sept. 29, 2005 file photo, Samuel Israel III, the founder of Bayou hedge fund, leaves federal court in White Plains, N.Y. after pleading guilty to conspiracy and fraud charges for his role in a scandal that allegedly cost investors about $450 million.
AP Photo/Adam Rountree
A hedge-fund swindler accused of faking his own suicide tried to plead guilty Wednesday for going on the run, but his case was postponed for six weeks after he told the judge that his drug therapy was affecting his ability to think clearly.

If his guilty plea is ever accepted, Samuel Israel III, 49, could have as much as 10 years added to his 20-year sentence for bilking investors out of hundreds of millions of dollars.

Israel tried to plead guilty before a federal magistrate judge Wednesday morning, but she refused and an afternoon session with U.S. District Judge Kenneth Karas was scheduled.

Karas asked Israel several questions meant to make sure that a defendant entering a guilty plea knows what he is doing. When Karas asked about medications, Israel said he was being weaned off the painkiller fentanyl — which had been prescribed after several back surgeries — with methadone.

When the judge asked him to rank his clear-mindedness on a scale of 1 to 100, Israel, wearing an untucked brown T-shirt and a salt-and-pepper beard, said, "About 70 percent." He professed his desire to go ahead with the plea, saying, "I certainly can understand what's going on here."

"I would not say I'm guilty of something because I'm drugged up if I'm not guilty," Israel insisted. But he also said he was "a little shaky."

Karas said, "Seventy percent is not a number that makes me feel comfortable," and Israel's lawyer, Barry Bohrer, acknowledged that he would not want to try a case in front of jurors who were 70 percent clear-minded.

The parties agreed to return to court Sept. 16, when the withdrawal from fentanyl should be complete.

Israel disappeared June 9, the day he was supposed to report to a federal prison hospital in Ayer, Massachusetts. He left his SUV on a bridge north of New York City with the words "Suicide is Painless" etched into the dust on the hood.

He then took off in a camper vehicle and apparently spent the next few weeks at a Massachusetts campground while police and federal agents, not fooled by the fake suicide, searched for him. While he was missing, his girlfriend, Debra Ryan, was arrested and charged with aiding and abetting his failure to surrender. Her case is pending.

On July 2, Israel drove up to a Massachusetts police station and surrendered.