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Hedge-fund swindler on lam surrenders to police

A hedge fund swindler who set off a national manhunt when he faked his suicide to avoid reporting to prison surrendered Wednesday to small-town police in Massachusetts.

U.S. Marshals said his own mother helped broker the surrender. Authorities suspect he had been hiding out in RV parks and highway rest areas for three weeks.

Samuel Israel III, 48, walked into the police station in Southwick, Mass., at about 9:15 a.m. wearing a colored T-shirt and shorts, identified himself and said he was a fugitive wanted by the federal government, officials said.

“He was polite, very contrite and a perfect gentleman at all times,” said Southwick police officer Paul Miles.

Israel later appeared in federal court for a brief hearing in Springfield, Mass., where a judge ordered him sent back to New York. Already facing a lengthy prison term for conspiracy and fraud, Israel was charged Wednesday with failing to surrender to serve a federal sentence.

Israel disappeared June 9 just hours before he was to report to prison to begin serving a 20-year sentence for his role in the collapse of the Bayou hedge funds.

Israel's SUV was found abandoned on a bridge over the Hudson River north of New York City with the words “Suicide is Painless” – the title of the theme song for the television show “M*A*S*H” – scrawled in dust on the hood.

Prosecutors said he and two other men scammed investors into putting $450 million into the funds by announcing nonexistent profits and providing fake audits, and made millions in commissions on trades that lost money for the investors. The collapse of the funds prompted calls for stricter oversight.

Almost as soon as Israel's SUV was found on the bridge, its key in the ignition, authorities suspected he had faked his disappearance. No body was found beneath the 150-foot-high bridge.

Officials said Israel fled in an RV with a scooter and other belongings. He was thought to be staying at RV parks, campgrounds or highway rest areas. His girlfriend, Debra Ryan of Armonk, was arrested 10 days after his disappearance and charged with aiding and abetting his escape.

Ryan could face as many as 10 years in prison if convicted.

In a separate development, federal prosecutors announced Wednesday that more than $115 million is available to pay back victims of the Bayou fraud. The money includes whatever was forfeited by Israel and his co-defendants as part of their sentences, plus interest. The total loss to investors was about $300 million.

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