Bayou Management, the collapsed Connecticut hedge-fund firm, never made a profit despite years of sunny reports to clients, and it mostly stopped trading securities in mid-2004 as its founders tried desperately to recoup losses with fanciful bets totaling $150 million -- all that was left of the $450 million it had collected from investors, authorities said.
Those details emerged as Bayou Management's two founders, Samuel Israel III and Daniel Marino pleaded guilty in federal court in White Plains, N.Y., yesterday to criminal-fraud charges.
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Both were released on a $500,000 bond. Mr. Marino faces as much as 50 years in prison, while Mr. Israel faces as much as 30 years. Sentencing was set for Jan. 9.
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The investigation was aided by a six-page "suicide note and confession" found on Mr. Marino's desk by a Bayou investor last month that provided a year-by-year account of the fraud and implicated both Messrs. Israel and Marquez, Stamford police say.
The scandal, which also has prompted civil lawsuits by investors, has raised questions about the investment advisers who steered clients' money toward Bayou.
How "independent" were those advisers? What about E. Lee Hennessee, a North Carolina Republican and yet another fervent Bush supporter who supposedly "vetted" Bayou for investors who invested tens of millions into the fraudulent fund? Shouldn't she, and the fees she took for such criminally negligent advice, be a part of this grand scheme of larceny?
Regular readers know that I harbor a special hatred for white-collar criminals. Their unique leverage over our lives, especially in a Shangri-La Ownership Society, makes them them deserving of extraordinary punishments and sentences that never seem to materialize. If a guy robs me at gunpoint for the fifty bucks in my wallet, he could go to jail for a substantial amount of time. But Ken Lay pumps up his worthless Enron stock, thereby decimating the life savings of thousands of employees and other shareholders in 401(k) and pension plans, and in over four years he has yet to go to trial.
I could get more excited about a death penalty if it involved the Lays, Marinos, Israels and Hennessees of the world. Not because they're Republicans, but because their actions are born of egomaniacal greed and are unquestionably evil.
