Disgraced (But Not Dead) Hedge Fund Trader Admits He Faked Suicide to Evade the Law

August 6, 2008— -- Disgraced hedge fund trader Sam Israel III twice tried to plead guilty today for failing to report for a 20-year sentence in federal prison and instead faking a suicide dive from a New York bridge in an attempt to cover his run from the law.

But two federal judges rejected his plea, the first for technical reasons, the second because he said Israel was not mentally competent to make that decision

During the second of his federal court proceedings Israel told Judge Kenenth Karas in White Plains that he was being weaned from painkillers and was only "about 70 percent" there mentally -- not good enough for Karas. Instead, he scheduled another hearing for Israel in September. At that time, Israel is again expected to attempt to enter a guilty plea. If the plea is ever accepted, it could mean as much as 10 years added to Israel's 20-year sentence for fraud.

Israel stayed on the lam for nearly a month after staging his jump into the Hudson River from New York's Bear Mountain Bridge. He left behind a message scrawled in the dust and pollen on the hood of his SUV that read "Suicide is Painless," a line made famous by the TV show and movie M.A.S.H.

The story of Israel's faked jump and run from the law was first reported by ABC News.

Israel, a co-founder of the hedge-fund company Bayou Group LLC until its collapse in 2005, was sentenced in April to 20 years in federal prison for defrauding investors of $400 million.

He was also ordered to forfeit $300 million after pleading guilty to defrauding investors in his now-bankrupt firm. $115 million of those funds have been restored to investors, according to the US Attorney in New York's Southern District.

At that sentencing hearing Israel had sought leniency, telling the judge, "I lied to you and I cheated you, and I cannot put into words how sorry I am."

But U.S. District Judge Colleen McMahon showed little compassion, "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."