Woman charged with helping hedge fund manager flee

By Svea Herbst-Bayliss

BOSTON (Reuters) - U.S. authorities arrested on Thursday the girlfriend of fugitive former hedge fund manager Samuel Israel III, accusing her of helping to stage his suicide on the day he was to report to prison for fraud.

Debra Ryan confessed on Thursday to federal authorities that she helped Israel pack a recreational vehicle with his belongings and park it at a rest stop near a highway in New York on June 9, the day he went missing.

The details are contained in a three-page complaint, filed in the U.S. District Court for the Southern District of New York, that said Ryan "unlawfully, willfully and knowingly aided and abetted" Israel's failure to show up for prison.

Israel, who engineered the $2 trillion hedge fund industry's most brazen and long-running fraud, sparked a federal investigation after his GMC Envoy was found on a bridge above the Hudson River on June 9, its engine idling and the words "suicide is painless" etched in dust on its hood.

Authorities last week ruled out suicide and have issued a "wanted" posted for the balding 48-year-old co-founder of the Bayou Group, a Connecticut-based hedge fund. He pleaded guilty in 2005 and was sentenced in April for his role in a scheme to fabricate returns and cheat investors out of $450 million.

Authorities interviewed Ryan on "numerous occasions" since Israel disappeared, the complaint said.

On the day he went missing, she told police he had left home at 9:30 a.m., saying he was driving himself to prison to begin serving his 20-year sentence. His SUV was discovered about three hours later on New York's Bear Mountain Bridge.

The next day, she told police that Israel had left a suicide note, and handed it over, the complaint said.

The complaint offers a glimpse into Israel's possible escape plans.

Two days before he disappeared, he met Ryan at an auto repair shop near Bedford, a town about 47 miles north of New York City and about 20 miles southeast of Bear Mountain Bridge, according to the complaint, which was signed by Deputy U.S. Marshal Sean McCluskey.

At the shop, she helped him attach a motor scooter to a hydraulic lift on the back of his recreation vehicle. The next day, she helped him pack it, according to her confession.

Early in the morning on the day he was to report to prison in Ayer, Massachusetts, Israel woke her up and asked for help again. As he drove the RV to a rest area near the intersection of Interstate highways 84 and 684, she followed in her own car. She then drove him to their home, the complaint said.

McCluskey said that complaint deliberately excluded some facts in the investigation because it was issued for the limited purpose of establishing probable cause.

For example, there was no mention of surveillance video from the bridge that authorities have said shows a second car pulling past Israel's SUV and stopping.

(Writing by Jason Szep; Editing by Braden Reddall)