In 1996 Israel founded the Bayou Hedge Fund Group, which raised $450 million from its investors and for which Israel was CEO. Bayou and Israel misappropriated these funds for personal use, running what would later be revealed as a Ponzi scheme. After poor returns in 1998, the firm founded a dummy accounting firm, which they hired to audit themselves in order to keep up appearances to investors. In 2005, Bayou was indicted. On September 29, the Commodity Futures Trading Commission filed charges against Bayou, Israel, and Bayou CFO Daniel Marino. The next year, the hedge fund filed for Chapter 11 bankruptcy-court protection. On April 14, 2008, Israel was sentenced to 20 years in prison and ordered to forfeit $300 million after pleading guilty to defrauding investors in his now-bankrupt firm.
Manhunt and arrest
Sentenced in April 2008 to 20 years in federal prison, Israel failed to report to prison as ordered on June 9, 2008. His 2006 GMC Envoy was found abandoned on the Bear Mountain Bridge on June 10, 2008 with the following written in dust on the hood, "Suicide is Painless," the title of the theme song for both the movie and TV seriesM*A*S*H. Police suspected that this was an attempt by Israel to fake his own death in order to avoid prison. Israel's girlfriend, Debra Ryan, was arrested later that same month for aiding and abetting his escape, and was released on bail. Under intense questioning, Ryan admitted to helping him escape, and that she and Israel parked an RV loaded with Israel's belongings near Bear Mountain Bridge on the day before his disappearance. The pair were featured on America's Most Wanted. Israel was eventually tracked down to a campground in Granville, Massachusetts, and surrendered to authorities on July 2, 2008. As a consequence, he was further sentenced on July 15, 2009, to an additional two years in prison while his girlfriend was sentenced to three years' probation. Israel is serving his sentence at Federal Correctional Institution, Butner Low in Butner, North Carolina; his earliest possible release date is September 12, 2027. A Dateline segment about him aired on September 5, 2008. Israel is the subject of the "Suicide is Painless" episode of American Greed on CNBC, first broadcast on February 3, 2010.
