Original subtitles

This is a CNBC original.

In this episode of American Greed, Samuel Israel III, the big money hedge

manager. Most good fraudsters and Ponzi schemers in particular are people who

strike all the right chords. Desperate to succeed. He lived through the most

decadent era in human history.

And was a creation of it and was destroyed by it. And the scam that

investors out of $300 million.

Literally within the space of minutes, I had lost $336 ,000.

It all leads to this bridge and a suicide note.

Leaving investigators with two key questions.

Where's the $300 million?

And where's the body?

This was not a person who was thinking clearly, and it was inevitable that it

would come crashing down.

June 9, 2008.

Police search the Hudson River for the body of a former Wall Street darling.

The New York State Police haven't found the body of 48 -year -old Samuel Israel.

Samuel Israel III, once the toast of Wall Street, has fallen mightily.

His hedge fund company is gone.

So is his family.

And hundreds of millions of dollars of investors' money has disappeared.

Israel's GMC Envoy was found abandoned Monday on New York's Bear Mountain

Bridge. Police find his car on the bridge. On it, a haunting message.

The word suicide is painless scrawled in pollen on the hood.

It's a startling end to a bizarre story of success, pride, and ultimately,

disgrace.

Just nine years earlier, Israel and his company, Bayou Funds LLC, are riding

high. The Dow explodes past 10 ,000.

Technology stocks are the rage.

And for savvy investors, money is everywhere.

Dow, the S &P, the Nasdaq, all three of these indices for five straight years

had posted double -digit percentage gains. So it was a good time to be on

Street. A lot of people were making a lot of money.

But things at Bayou are not as they seem.

What starts as an FBI inquiry into overseas transactions explodes into a

-blown investigation.

You quickly see that it was a massive fraud being perpetrated on Bayou's

investors.

At the center is Samuel Israel III, perhaps one of the most unlikely con

ever to take Wall Street for a ride.

It really blew up very quickly. And once the check bounced, everything just

unraveled. Now Israel's abandoned car sits on a bridge, and his body is

to be found.

It is only the latest detour in the wild journey of Sam Israel.

Born in Louisiana in 1959, Samuel Israel III grows up surrounded by money,

privilege, and power.

When he's a teen, Sam's family moves to New York, and he is exposed to a new

kind of elite.

Sam said to me, he said, the people that the Israels moved with had more money

than anyone, and he means anyone in the world.

The social circle was Sandy Weil, Larry Tisch, Alan Greenspan.

His grandfather built the commodities trading company Leon Israel and Brothers

from scratch before selling it in 1981.

Money runs in the Israel's blood.

As a young man, Sam heads to Wall Street, but he doesn't use the family

open doors.

The keys to the kingdom were offered to Sam. He didn't want them. He was

determined to make it on his own. He did not want to trade on that family

connection. That's why he became a trader in the beginning, to prove

his father.

Israel bounces around for a decade on Wall Street, learning everything that

isn't taught in business class during the rollicking greed is good decade of

80s and early 90s. So Sam was taught how to get a stock in and out, how to fill

in tickets, how to be on the floor, fight your way into a trade. But he's

told how to steal inside information, how to front run, all the scams that

basically an open joke.

They weren't considered illegal because everyone was doing it. You can't call it

cheating if everybody's cheating.

Israel is drawn to the fiercely competitive world of hedge funds and the

freewheeling lifestyle of successful managers.

Hedge funds are lightly regulated and generally invite only.

Those wealthy enough to invest accept higher risks with potentially greater

returns, regardless of what direction the market is headed.

A hedge fund is basically an investment vehicle for sophisticated investors.

During the 90s, a lot of people were jumping into them. They weren't getting

enough of a return from the index funds or the traditional mutual funds that

they invested in, and these hedge funds had some of the top traders in there

managing your money.

Such expertise comes with a steep price.

During the 90s, some hedge fund managers have been reported to make more than

$100 million a year.

You're the swanee.

You're the magician.

You're the wizard.

He wanted to be that.

These were the kinds of folks that were, you know, running companies, running

countries, running the world.

In 1996, Israel opens Bayou Fund LLC in the basement of his New York home.

He begins conducting short -term trades with the dream of making Bayou a Wall

Street darling.

I think if he'd had his ideal wish, he would have taken my money and he would

have turned it into a good investment and be strutting around Wall Street

now as one of the great hedge fund managers of all time. That's what he

Israel brings in two friends to help run Bayou.

Investor James Marquez and accountant Dan Marino.

But Sam is unquestionably the face of Bayou.

He's a friendly, affable, self -deprecating guy.

Confidant and a popular guy.

These personality traits, along with his family name and trading experience, are

keys in convincing people to invest with Bayou. I knew that I was, to some

extent, gambling on giving my money to an individual.

I sat in my office and I cut the check, and I remember when I cut the check,

thinking this is either the smartest or the dumbest thing I've ever done.

And time will tell.

And it did.

But from the beginning, there are problems with Israel's investment

In 1996, the S &P rises 20 % and then 31 % the next year. However,

Bayou's first audit reveals a 12 % loss.

In the early years, the market's taken off.

Everybody's making money.

And here, they're trading, they're losing money.

And how are they going to explain that? There's no way in this market.

If they're losing money, anybody's going to stick with them.

In an effort to hide losses and lure new investors, Israel decides to do some

creative accounting.

Bayou begins rebating commissions back into its fund to make it appear more

profitable.

Technically, it's legal.

But it is the start of a slippery slope, one that Sam Israel will ultimately

slide all the way to the bottom on.

They do the accounting gimmick, if you will.

by rebating these commissions from securities to the fund.

And then after that, we're off to the races.

But I think that sort of sowed the seed for what was to come.

With this temporary plug in place, Bayou soon has new investors knocking on the

door and its pool of money begins to grow.

Another attraction for Bayou is that Israel doesn't charge the typical 2 %

management fee that most hedge funds charge.

In 1998, flush with apparent success,

Bayou moves from Israel's basement to the shores of Long Island Sound in

Stamford, Connecticut.

But Israel's investments continue to fail.

Either through bad luck or incompetence, Bayou cannot catch a lucky break.

Investors' money begins to trickle away.

You start losing money, especially in a market where almost everybody else is

making money.

You're not going to get any new money in there.

This was their business.

Up next, with mounting losses, Sam Israel is desperate to succeed.

How far will he go to ensure Bayou survives?

I don't think he set out from the outset to defraud people. I think he just

couldn't admit failure, and he kept digging the hole deeper and deeper.

By 1998, Sam Israel's dream is becoming a growing nightmare.

Despite a market that moves steadily higher, Israel's hedge fund company

continues to hemorrhage money.

They just had some rotten luck, made some mistakes, got behind early,

and couldn't bring themselves to just admit that it didn't work, admit

admit defeat, and get on with their lives.

The losses are relatively small at first, a couple of hundred thousand

or so.

But any loss will drive investors away.

Israel and associates James Marquez and Dan Marino search for a way to turn

Bayou around.

Sam had told us that basically you needed a, at the time, a three -year

successful track record in order to be a successful hedge funder. One of those

first three years, you weren't successful, forget it.

To cover their initial losses, they engage in accounting sleight of hand,

channeling commissions from stock transfers back into the fund without

investors.

But during their second year, they lose more than a million dollars.

And as their hole grows deeper, they can no longer hide the problem.

The hole was the amount between what they told investors what they had and

they actually had in the fund.

And they always said, we have to plug that hole, we have to plug that hole.

And that became sort of their mantra.

At the end of 1998, Israel and his partners devise a desperate plan to hide

problem. We've got to raise more funds, otherwise this thing is going to really

go down the tubes and we're going to be in jail.

They replace their independent auditing company with one more aligned to their

best interests.

One run by their own accountant, Dan Marino.

Let's create a phony accounting firm.

Dan, you're a CPA.

You incorporate it.

You do whatever you need to do to get it going.

And we'll just have to cook the books for a year or two until we can get

ourselves back on our feet.

And that's what happens.

Marino names the company Richmond Fairfield Associates, and he's soon

out financial statements exaggerating Bayou's successes and minimizing losses.

That's watershed because once you set up a phony accounting firm and they're

going to do the quote -unquote independent audit, now you've opened the

you've entered the world of criminality.

The statements attract new investors whose money is used to pay redemptions

earlier clients.

Almost by accident rather than design, Bayou has become a Ponzi scheme.

I don't think they started out with a Ponzi scheme in mind. I think what

happened was that they got caught up.

and trading losses back in the late 90s, when, again, everybody else was making

money during that period of time.

And to hide those trading losses, the Ponzi scheme started.

Thanks to Marino's cooked books, Bayou now appears to make slow and steady

profits. This fund was making, quote -unquote making, around 10 to 15

which was just right. That sounded just right.

It was a very steady...

walk, don't run kind of fun, and all that sounded perfect to me. That's just

exactly what I wanted.

Now, with millions of dollars of investor capital, Israel promises to

steady returns for his investors, regardless of where the market heads.

His bogus weekly updates say he's well on the way.

Over a course of two and a half years, my $250 ,000 had grown to about

$336 ,000.

You know, if he had come out and said, oh, we made 50 % this year, I would have

run like mad because he was taking too much risk to make that kind of money.

This is exactly what I thought he had advertised doing and exactly what I was

looking for.

Nice, steady returns.

Most hedge funds require an initial investment of $1 million.

Bayou offers investor shares for a fraction of that.

$250 ,000, making it attractive to those who might not otherwise invest.

A quarter million dollars was still a little bit more than I wanted to put in

any one investment, but it was now in the realm of reason, which a million

dollars wasn't.

To investors in the outside world, Bayou is fulfilling all of its early

promises, and then some.

But behind closed doors, it's a much different story.

Losses continue to mount.

and the stress takes its toll on Sam personally and professionally.

Israel's marriage suffers, and recurring back pains lead to heavy use of

painkillers. Israel and fellow investor Marquez feud over market strategies.

Sam and Jim are fighting like cats and dogs at this point. They were constantly

getting in arguments amongst themselves, closed -door meetings when nobody's

around, after, you know, hours type stuff, talking about how to.

To fill the hole, fix the problem.

In 2001, Marquez leaves the company and soon Bayou is attracting more money than

ever. Many of these investors are well -heeled individuals.

But soon, Bayou is also attracting large private equity funds, pension funds,

venture capital funds, and even fund -to -fund managers from large companies and

universities across the country.

The fund.

goes from a $10 million fund to quickly up to tens of millions of dollars, and

then crosses the $100 million threshold and into the hundreds of millions of

dollars in relatively short order.

But Bayou's investing luck doesn't change.

They just keep on committing the fraud year after year after year and losing

money. By 2003, Israel's world is imploding. His dependence on painkillers

grows, and his wife leaves.

taking their two children.

Sam faces some harsh realizations.

He was not going to be the success that he hoped to be, and so he resorted to

less traditional means to achieve success, and that ultimately was his

Next on American Greed, desperate to raise money to save Bayou, see how

himself is conned in a worldwide investment scam.

Could he lose everything?

Sam wanted so much to be something that he wasn't that he was willing to destroy

himself.

By 2002, the stock market cools. The dot -com bubble bursts.

And Wall Street returns are flat or drifting lower.

Now more than ever, hedge funds are attractive to investors looking to shake

slump. Hedge funds had a bit of an advantage because a hedge fund will try

essentially outperform the market. Even if it's down, a hedge fund will try to

be down less than, you know, one of the indices like the S &P.

And a hedge fund like Bayou seems perfect.

Bayou is, by all accounts, doing great. They've got above.

Average rates of return, everybody's happy with the fund, recommending

to get into the fund.

Some serious money starts to roll in. And now instead of millions and tens of

millions, we're talking now hundreds of millions of dollars into 2002, 2003,

2004.

Flush with apparent success, Sam Israel and Dan Marino live the good life.

Marino moves to a home with six bedrooms and a pool in the wealthy enclave of

Westport, Connecticut.

He buys flashy sports cars.

Israel, separated from his wife and teenage children, rents a house from

Trump in Bedford, New York for $22 ,000 a month.

He hires Deborah Ryan, a local painter, to personalize his 13 -bedroom mansion.

Soon, the relationship becomes more than professional.

Suffering from increasing back pains, Sam begins trading from the house rather

than commuting to Bayou's office in Stamford.

There's a separate house on the property called the chapel, which is where

Israel has its trading room, a room with maybe 20 or so flat screen trading

equipment, and basically that's where Israel does its trades from.

Between 2002 and 2005, Israel and Marino, now Bayou's chief financial

receive $4 million in salary and compensation.

Later, they will claim these excesses are little more than fronts, much like

their phony accounting company that lures investors with false statements.

I guess you can convince yourself of anything, but the fact is they were

Porsches and Bentleys and Ferraris and living in beautiful homes in some of the

most exclusive suburbs of New York and sort of living the life.

But the life is a lie.

On paper, Bayou is worth hundreds of millions of dollars.

But the reality is much different.

I think they said they had $410 million and maybe they had $125 million by the

time the fund collapses.

Israel, handicapped by back pain and medications, spends most of his time at

Trump House.

Israel wasn't sleeping at night. Part of it was his drug dependency, his

substance abuse problem and his back problems.

A significant part was the lie that he was perpetrating. It takes a really

special kind of individual to commit a crime like this and be able to sleep at

night. Worried that the flat market might tempt investors to pull their

and cause Bayou to collapse, Israel embarks on a wild investing spree to

his company.

What he did was threw good money after bad and tried to reverse.

the trading losses that he had incurred, and he kept digging the hole deeper and

deeper.

Desperate to infuse money into Bayou, Israel begins looking for nontraditional

venture capital investments, including movies and fashion lines.

But few pan out, and the money continues to disappear.

They invested close to $40 million in maybe a dozen to 15 different venture

capital deals throughout these years.

Unfortunately, it was similar to their trading expertise.

They didn't pick very wisely in their venture capital investments either.

As the venture capital investments fail, Israel's strange saga takes a wild turn

as his desperation grows.

At some point in 2004, Sam makes a friend who claims he can solve all of

problems for a slight fee.

This individual was a pretty shadowy figure. He had actually told Sam that he

was an ex -CIA officer.

He was involved in black operations.

A lot of super secret spook stuff, which Sam just, he

bought hook, line, and sinker. This man tells Israel about a shadow world of

secret government projects.

Some humanitarian, some black ops.

all financed by select or prime banks and invite only to exclusive investors.

The man sweetens the pot.

He tells Israel about a mysterious Federal Reserve box he has that contains

unimaginable wealth.

Even better than the background story is the incredible rate of return promised,

Sam. You send over $150 million, you can generate up to 100 % return within a

couple weeks' time.

Israel is essentially singled out for the super -rich man's equivalent of a

Nigerian email scam.

Israel pays the man $10 million to get him in. In return, he is offered a

fascinating bit of collateral.

The so -called Federal Reserve Box, supposedly from World War II, that

more than $100 million in Federal Reserve bonds.

This individual told Sam, I have this.

Super secret box.

I'm going to give you this thing. You can't tell anybody about it. It could

destabilize the U .S. economy if you told anybody about it. Of course, it's

good to be true.

The catch?

The Federal Reserve issues notes, not bonds.

The box is an elaborate hoax.

One FBI agents have heard of but never seen until now.

So somebody went through a lot of work to create this fraudulent box, too.

Steal $10 million from Mr. Israel.

The scam Israel falls for is well known to federal investigators.

They are called prime bank frauds or high -yield investment frauds. The lure

Sam is simple and impossible to resist.

The final last chance to dig himself out of Bayou's bottomless hole with

guaranteed 100 % returns on his investment.

If you make it 100 % every two weeks on $120 million, it's not long before

you're at that $450 million mark that you're supposed to be at.

And then we'll go legit from there.

Thinking that he is investing in a super -secret program, Israel wires $150

million, essentially all the remaining Bayou money, to a bank in London.

That was beyond a Hail Mary.

That's like a guy who's got one chip left.

And, you know, what the hell? I'll just throw it. I know I'm done, so I may as

well just see. You know, nine red.

Spin them.

But the transaction is so large and unexpected, the bank sends the money

You know, years earlier, he would have laughed at somebody telling him you can

have 100 % return within two weeks' time.

But I think it is desperation, and maybe with the combination of the painkillers

he was taking at the time.

I think he lodged such with reality a bit.

Israel tries again.

This time he wires $120 million to Hamburg, hoping to jump on another

prime bank opportunity.

German authorities promptly contact the FBI.

Again, the large transaction is a red flag.

We begin an investigation.

Initially, frankly, we were looking at it as...

potential money laundering situation.

Ironically, when agents first interview Israel, everyone believes that he is the

victim. But the more questions the agents ask, the more they realize there

something else going on besides the prime bank fraud.

This doesn't make sense.

I mean, this is a sophisticated investor, a guy who knows Wall Street.

engaging in this? What's the need to earn 100 % every two weeks?

Bayou's wild money ride ends abruptly in June of 2005, when nearly $100 million

ends up in New Jersey in the hands of yet another prime bank scammer. The

is invested in some bogus Arizona gold mines, and the Arizona attorney general

seizes it.

Sam Israel III has run out of time and options.

And that's when everything happened really fast.

On July 27, 2005, Israel sends a surprise letter to investors.

He's shutting Bayou down.

It's been a great run, but I regret to tell you that I'm going to close down

fund. I'm getting divorced.

I want to spend more time with my kids, but I just don't want to do this

anymore. So thanks for the memories, and the checks will be in the mail.

But Bayou has no money to send.

What's left has been frozen by the Arizona attorney general.

When the checks don't arrive, investors begin flooding Bayou's office with phone

calls. I call Bayou. They've always been very prompt. Just rings off the hook.

It goes to voicemail, and the voicemail box is full.

And I think, this can't be good.

There is no one to explain what has happened.

I just want to know where the money was.

But nobody had any idea. Any of it was left. I mean...

in a practical manner, appear to be gone. Just gone.

Meanwhile, investigators have made a startling discovery.

Richmond Fairfield Associates, the independent accounting company that

Bayou, is in reality run by Bayou's own CFO, Dan Marino.

So now we're going off in two directions. Bayou, the victim, and Sam

possibly as the perpetrators of the fraud.

Coming up.

With his company disintegrating and authorities closing in, Israel is left

the reality that his dream is dead.

Once a high -flying toast of Wall Street, now in free fall.

Is there only one way out?

The collapse of Bayou's hedge funds in the summer of 2005 is as spectacular as

it is unexpected.

Literally within the space of minutes, I had lost $336 ,000.

I mean, I woke up and that was part of my net worth.

And by 3 o 'clock in the afternoon, the best anybody could tell me was it was

gone.

Investors have received a letter from Sam Israel telling them that Bayou's

are shuttered. but that their money is coming soon.

One Seattle money management firm receives a check for $53 million from

When they deposit the check, it bounces.

They're very upset, and they decide to fly to Connecticut to see what's going

on. Finding the company deserted, the representative makes a surprising

discovery in CFO Dan Marino's office.

There on Dan's desk and computer was this...

Suicide note and confession letter, basically spelling out the fraud that

Sam, and Jim Marquez had committed.

In six pages, it details how Israel and Marino have used Bayou to build

investors of over $300 million in less than a decade.

Within short order, Marino is found healthy and alive and very talkative. He

confirms that everything Bayou has claimed.

is nothing but a lie.

So you're looking at approximately $150 million in assets, whereas the

investors think and have been told via the independently audited financial

statements that there is $410 million.

So they're short about $300 million.

This is massive.

And as you were going through the numbers, it was ballooning and

was daunting.

With few options, both Israel and Marino begin cooperating with authorities.

Sam, in particular, seems glad the sham is over.

He said, every day I spend in jail, guys, I'll be a free man compared to

this lie for this many years.

In a storage locker, investigators find letters from former Bayou employee James

Marquez that explain his involvement in the fraud.

U .S. Marshals are brought in to determine what Bayou's remaining assets

be. Aside from the money already seized in Arizona, very little remains.

We identified approximately $43 million in assets in about 25

to 30 different cases that may be viable.

I'm not sure what happened to the rest of the money. There is no indication

any of that missing money actually exists.

Israel moves from his Trump estate with girlfriend Deb Ryan to a much smaller

house in Armonk, New York.

He is charged with misrepresentation of Bayou funds and mail fraud.

He eventually pleads guilty, as does Dan Marino.

Israel's family pays the $500 ,000 bail, and Israel surrenders his passport.

But even after it has all fallen apart, Israel clings to the story that they

were only trying to do the right thing all along and offers this as defense for

his actions.

He told Kevin and myself he felt bad for all the investors, that he had done

this to all of them. You know, not his intent when he started.

He went down a path and just couldn't work his way out of the forest from the

path he took.

But investors paint another story, one of greed.

and of a man who coolly swindled hundreds of millions of dollars from

trusted him.

This wasn't somebody who had just strayed off the path for a day or two

of, as soon as they got caught, said, oh, you know, what was I thinking? This

was a guy who thought about committing fraud over a long period of time and

it a lot of thought on how to do it well.

Marquez pleads guilty and is sentenced to 51 months because He left Bayou

the worst of the damage was done.

For two and a half years, both Israel and Marino continue to cooperate with

authorities. Each hopes for a lenient sentence.

But the courts don't look kindly on criminals who swindle people out of big

money.

Israel and Marino are sentenced to 20 years in prison in order to pay $300

million in restitution.

It was a very harsh sentence. Keep in mind that it comes on the heels of

companies like WorldCom and Enron collapsing because of accounting fraud.

And in fact, the judge who sentenced Israel told him, just because you wear a

tie when you're committing a crime, it doesn't mean that you get any kind of a

break. For 48 -year -old Sam Israel, the pressure is too much.

I think over the course of getting sentenced and having to report to

I think it was a tremendous weight for him to bear.

All of Sam's connections, all the people he knows, all the money they have, none

of it can help him now.

The judge gives Israel eight weeks to set his affairs in order.

As the days approached for him to surrender to serve a 20 -year sentence,

panicked, and he thought it was something that he couldn't do.

On June 9, 2008, Israel is finally scheduled to report to prison.

He never arrives.

Israel disappeared the day he was supposed to begin serving a 20 -year

at a federal prison in Massachusetts.

Police find his GMC Envoy abandoned on the Bear Mountain Bridge, 40 miles north

of Manhattan.

The words, suicide is painless, scrawled on the hood.

Inside the SUV are Israel's keys and a prescription for pain pills.

It looks like Sam Israel has killed himself.

But there is always another twist in the saga of Sam Israel, and this story

isn't over yet.

This was not a person who was thinking clearly. This was not a person who was

thinking rationally.

And this was someone who panicked.

June 2008, three years after Bayou Hedge Fund Group collapses and more than $300

million of investors' money disappears, the story shifts to a bridge spanning

the dark waters of the Hudson River.

Sam Israel Duther, Bayou's fund manager, has apparently jumped to his death

rather than face a 20 -year prison sentence.

It's 156 feet above the waterline, so if you did jump off that bridge, it's very

unlikely that you'd survive.

But when divers fail to find the body, investigators doubt that he really

himself. Common sense would tell you if he jumped off a 150 -foot bridge, there

would be some type of body that was found somewhere up or down the Hudson

Investigators quickly mobilize a nationwide manhunt.

The goal is to find Israel before they can flee the country.

The first break comes quickly.

Surveillance video shows as Israel's car pulls to the side of the bridge, it is

not alone.

Another vehicle had pulled in. You could see it was a bit rainy that the vehicle

may have picked him up and then drove off.

Investigators track the vehicle down and confirm what they already suspect.

Sam Israel is still alive and on the run.

U .S. Marshals reach out to family and friends of Sam.

including his mother, Ann, who now lives in Chicago.

The longer Sam runs, the harder it is to find him.

As long as you don't stand out, don't do anything illegal, don't garner any

attention, it's not hard to disappear.

The United States is a big place. The world's a big place.

Investigators lean on Deb Ryan, Israel's girlfriend.

At first, she denies knowing anything. But after 11 days of questioning, she

finally admits she helped Sam.

stash a recreational vehicle and a blue motor scooter at a rest stop in New

York. She'd helped him out, basically, stashing the RV at the rest stop, helped

him pack his clothes in it the night before.

So at this point, she was arrested for aiding and abetting Sam in his run.

Hoping to squeeze Israel, agents put out alerts on campground websites across

the country.

The story is featured on America's Most Wanted.

In Chicago, U .S. Marshal Ed Farrell spends weeks convincing Sam's mom, Ann,

that her son should turn himself in.

She was very concerned about the fact that if her son was caught, he would be

killed. And we told her, you know, that could all be avoided if you can get him

to surrender himself to the police.

Ann does offer Marshall's insight into her son's character.

We had asked her about him committing suicide if it was something he could do.

He said, my son has always kind of had a problem with the truth.

He doesn't always tell the full truth.

Authorities fear Israel has left the country.

In truth, he hardly leaves the state.

For weeks, he holds up in Granville, Massachusetts, at the Prospect Mountain

Campground, living under an assumed name.

He was David Clapp, with a K, K -L -A -P -P.

He signed with that name and everything. He paid by cash, so there was no credit

card for us to check that name on or anything like that.

Sam Israel, a .k .a. David Clapp, keeps a low profile at the campground.

There was nothing suspicious about him at all. Like, he was a very personal,

very likable guy.

Didn't look anything like the pictures. He looked a lot skinnier.

He had a beard.

Curiously, the man who has spent years racked with back pain takes up jogging

during his stay.

He would come back from running. He would come in, buy Gatorade, buy

always made jokes about why was he buying cigarettes, just coming back from

run, that it was kind of he should choose one or the other.

But even here, off the grid, the circle slowly tightens around him.

He's just flicking through channels one night, and on comes America's Most

Wanted. And there is his face staring back at him. On the hunt for an accused

swindler. And Sam thinks, damn, they're not just going to let me go.

And he learns that his girlfriend, Deb Ryan, is facing charges for aiding and

abetting. This freaks him out.

On July 2nd, U .S. Marshal Ed Farrell gets a surprise call from Sam's mother,

Ann. She said that Sam was on his way to surrender himself to the police

department. Ann didn't admit it on the phone, but I believe Ann is the one that

talked him into surrendering himself.

Israel climbs on his blue scooter and sets off to turn himself in.

He stopped at the Granville Police Department. It's a part -time police

department. The chief wasn't on duty at that time.

He came down the hill further and was familiar with Southwicks, so he turned

himself in here.

Israel walks in and announces his identity.

He came into this lobby and said he was wanted for white -collar crimes.

He was brought into the back of our building to the booking area, at which

the officer put him into the computer and found out exactly what he was wanted

for. I called Southwick, and I got some sergeant on the phone. I said, hey, I'm

Ed Farrell with the Marshal Service.

I said, do you got a guy named Sam Israel there?

He said, absolutely.

He's standing right in front of me. I said, don't let him go.

Israel's plan for escape ends like so many of his other grand schemes, in

disarray and failure.

The RV is seized.

What authorities find inside gives a clue to Sam's intentions.

Books on how to escape the country.

A laminator and materials for making fake IDs.

A global positioning system.

A stamper with the seal of the state of South Carolina.

And all suggest that Sam is hoping to remain at large indefinitely.

But other items suggest Israel's mental capacity is afraid, perhaps by stress

and pain drops, and that his plans are mostly delusional.

Here we have a special forces ID for David Sam Clapp,

with various weapons qualifications on the back.

And also here is his...

Military Assistance Command Card, which states that the bearer of this document

is acting under the direct orders of the President of the United States and

therefore do not detain or question him.

In June 2009, Deborah Ryan is sentenced to probation for her role in aiding

Israel in its escape.

Sam faces an additional 10 years on his original 20 -year sentence.

When he appears in court, he seems disoriented.

He didn't carry any of that swagger that you'd expect from anyone who promoted

himself as some kind of whiz kid investor.

He talked a lot about his physical ailments, how he had had 12 spinal

he had two rods in his back and ten screws in his back, and that he suffered

great deal of pain and that he didn't want to cause any more harm to his

or embarrassment to his family. He was rather devastated by what had happened,

what he had done to his life, what he had done to his family's life.

Eventually, Israel is given two extra years on top of his 20 -year sentence.

As a federal prisoner, he has no chance of parole.

His $500 ,000 bail is forfeited because he ran, becoming the last money Israel

loses.

Ironically, his own family had put that money down years before when he was

first arrested.

It's another example of how he didn't...

think things through and how he wound up hurting some of the people he loved the

most.

Today, what remains of Bayou is locked in bankruptcy and court proceedings as

former investors try to reclaim what few assets still remain.

There's a lot of very sophisticated, very competent people working on it,

lawyers. They will do what they do. And someday I may see a check.

And that may be a long time from now.

And many of the questions that swirl around Sam Israel and Bayou are still

unanswered. How did Israel let Bayou spin so far out of control?

And how did he allow himself to be fooled by con artists that promised him

impossible? He has been absolutely forthright in recognizing that what he

wrong, recognizing that he has to pay a penalty for it.

And he's got to live with the crushing failure here, not just in a business

sense, but in a personal sense.

Sam ought to be down in Washington testifying before the Senate Finance

Committee about finance fraud and how to catch it.

Sam knows how to cheat.

Israel's a crook. I mean, he didn't go in it to steal, but fraud is fraud. And

he took my money, and my money is gone, and he swindled me.

There's no way to put a nice spin on that.