Looking back at fraudsters Sam Israel and Scott Sacane

September 28, 2010   Lawrence Delevingne

In this week’s look back at the archives, AR pulled stories about two memorable hedge fund deceptions.

One Year Ago

York Capital Management and Goldman Sachs Asset Management turned to the UCITS III structure fearing that European regulations might make it all but impossible for U.S. funds to take capital from foreign investors. Using the mutual fund-like "Undertaking for Collective Investments in Transferable Securities" was a way to legally avoid any such restrictions by creating so-called passports to continue attracting overseas investors regardless of rule changes.

Today, American hedge funds are still flocking to the UCITS structure even as the long-debated European Union proposal to block investment in U.S. funds-the AIFM directive-has yet to be finalized.

 
 Sam Israel
Five Years Ago


Sam Israel III and Daniel Marino-the CEO and CFO, respectively, of the defunct Bayou Group- pleaded guilty in Federal District Court to fraud charges related to lying to investors about gains and losses in their $450 million Stamford, Conn. trading-oriented hedge fund.

Israel was later sentenced to twenty years in federal prison, but fled and faked his own suicide. After a stint on the FBI's Most Wanted fugitives list and an international manhunt, Israel surrendered himself at a Massachusetts police station in July 2008. He is now inmate No. 84430-054 at the Butner Federal Correctional Complex in Butner, North Carolina, a low security prison for male inmates. His scheduled release date is August 2027.

    --

The FTC fined Durus Capital Management founder Scott Sacane $350,000 two years after he told investors he had "inadvertently" amassed huge positions in biotech companies Aksys and Esperion Therapeutics.

Things, of course, would get worse. The U.S. Attorney's Office in New Haven, Conn. said Sacane manipulated the stocks, and the fund manager pleaded guilty in December 2005 to investment adviser fraud. He was sentenced to three years in prison, three years of supervised release, and ordered to pay restitution worth approximately $5.7 million.

-Lawrence Delevingne



Latest Poll

Will other pension funds follow CalPERS out of hedge funds?

 - 30%
 - 70%

View previous results