Eric Dillon, a money manager from Seattle, flew east on Aug. 16 and took a limousine to the Stamford, Conn., offices of Bayou Management LLC. The hedge-fund firm had abruptly said three weeks earlier it was shutting down its funds, but investors hadn't yet gotten their money back. Mr. Dillon had an appointment to discuss the matter with Bayou's chief financial officer, Daniel Marino.
No one responded to Mr. Dillon's persistent knocking on the entrance to Bayou's offices in a cream-colored cottage on the Connecticut waterfront, so he entered through an open back door, say the local police. On Mr. Marino's desk, he found a typed six-page letter that began, "This is my suicide note and confession," says Stamford Police Sgt. Gary Perna, who responded to Mr. Dillon's subsequent 911 call.
The letter asserted that Mr. Marino, along with Bayou founder Samuel Israel III and a former partner named James Marquez, had "defrauded all these investors" from "about 1998 to now," Sgt. Perna adds.
[...]
Mr. Marino's letter is now a key exhibit in a widening probe by federal and Connecticut law-enforcement agencies of what investigators believe may be a fraud involving hundreds of millions of dollars. Bayou claimed it had $440 million in assets earlier this year, and at one point last year put the figure at more than $500 million.
Bayou is the latest of several hedge-fund traumas in the past year that have prompted fraud investigations. While the industry doesn't appear to be rife with such problems, Bayou underscores the risks associated with these funds, after years of explosive growth in this loosely regulated corner of the investment industry. Wealthy individuals and institutions, lured by the promise of outsize returns, have flooded into the private partnerships. More than 8,000 hedge funds now oversee an estimated $1 trillion, more than double the number of funds and the sum under management five years ago.
I smell a government bailout in the works.
What's the Republican connection? Fraudmasters Marino and Israel are generous contributors to another master of fraud: George W Bush.
