Hedge fund founder Israel loses health bid to leave prison

NEW YORK Thu Aug 7, 2014 3:35pm EDT

NEW YORK Aug 7 (Reuters) - Former hedge fund manager Samuel Israel, who faked his own suicide to avoid prison after running a $450 million fraud, on Thursday failed to persuade a judge to shorten his 22-year sentence or set him free because prison officials are unable to treat his worsening health.

U.S. District Judge Colleen McMahon in Manhattan said the Bayou Group LLC founder's claim of inadequate care by the Federal Bureau of Prisons, which led to an alleged "near death experience," was not a legal basis to reduce his sentence, and that even if it were, he waited too long to sue.

McMahon in 2008 had sentenced Israel to 20 years for fraud; another judge later added two years for bail jumping.

"The driving consideration for the court in sentencing defendant to 20 years in prison was that he was the mastermind behind a $450 million Ponzi scheme," McMahon wrote.

"I may have taken Mr. Israel's medical needs into account when I gave him as little as 240 months; I assuredly would never have given him less, regardless of my perception of the quality of the BOP medical care," she added.

Shane Landry, a lawyer for Israel, did not immediately respond to requests for comment.

Israel, 55, pleaded guilty in 2005 to defrauding Bayou investors. He sparked a manhunt in June 2008 when his GMC Envoy was found on Bear Mountain Bridge north of New York City, with the words "suicide is painless" scrawled in dust on the hood.

He surrendered the following month, and is now housed in the same Butner, North Carolina, complex as Bernard Madoff.

In seeking a shorter sentence, Israel claimed he nearly died last year because prison officials had waited until after he had fallen, hit his head and lost consciousness to replace a battery for his pacemaker.

Israel also claimed to have been denied treatment for chronic pain linked to a degenerative spinal condition.

McMahon said if Israel wants to challenge his medical care in court, he should do so in North Carolina.

Israel is not eligible for release until Sept. 12, 2027.

The case is U.S. v. Israel, U.S. District Court, Southern District of New York, No. 05-cr-01039. (Reporting by Jonathan Stempel in New York; Editing by Leslie Adler)