by Guy Lawson
“I didn’t think I’d be public enemy number one,” Israel says. “I thought everything would die down. Eventually I’d be able to come back and take up my life again. Not as Sam Israel, obviously. I would move to some town in Pennsylvania, near the New York border. I’d be able to see my son. I would see Debra. I "gured no one would care about some white-collar criminal from years ago. The law had better things to do than chase me.”
As June arrived and the day drew nigh, the hood of Sam’s truck was covered with pollen from the oak trees in the driveway of the bungalow. Sam wrote the words “Suicide Is Painless” on the hood. It was a reference to a song in the movie MASH. He then bought a scooter to use for short trips and in case he needed to make himself scarce quickly. This was when his preparations became complicated.
The Saturday before Sam was supposed to turn himself in, he drove Debra Ryan to the auto-body shop where he’d parked the camper. Ryan freaked out, seeing that Sam was seriously planning to run. He asked her to help him lift the scooter onto the rack on the back of the camper. A huge "ght ensued. Sam threatened to kill himself if she didn’t help him. She didn’t think it was an empty threat. He was out of his mind with pain and exhaustion, and the prospect of twenty years in prison was terrifying. Ryan had lost a close friend to suicide, so she knew the awful guilt suffered by the survivors.
“You know they’re going to kill me in prison,” Sam said. “They tried it once, they’ll do it again.”
Ryan knew Sam was talking about the CIA—and how he believed poison had caused his heart condition. As usual, Ryan didn’t know what to believe. Sam had repeatedly told her how the Octopus disguised murders as illnesses, including his heart condition.
“I can’t go to prison,” Israel howled.
Ryan relented, hoisting the scooter onto the camper. On Israel’s last night of freedom, he paced back and forth frantically in the bungalow the couple now rented. At midnight he left the house, saying he was going to buy cigarettes. Ryan went to bed, praying that he wouldn’t run—and that he wouldn’t kill himself. At three in the morning Sam appeared in the threshold to their bedroom, sweating, desperate, pleading for her help again. He said he needed her to follow him to the rest area where he was going to leave the camper. They had another screaming argument. Why was Sam getting her involved in his troubles? Ryan demanded. Sam had said that if she loved him she would help.
Once again, she conceded.
Lying in bed waiting for the sun to rise, Sam choked up and told Ryan that he was sorry that they couldn’t have the relationship they deserved. Ryan begged Sam to reconsider his plan. If he ran, the law would come after her, she said. She felt like her entire world was collapsing. She was terri"ed for his life, and for hers. But Sam wouldn’t listen. Before dawn, he turned his back to her and left silently.
“Don’t go, don’t go,” Ryan screamed.
Driving away shaking with fear and sorrow, Israel concentrated on the speci"city of what lay ahead: the road, the bridge, the end.
POLICE DIVERS SEARCHED the Hudson River for Sam’s body in the hours after his vehicle was found abandoned in the middle of Bear Mountain Bridge. Law enforcement rapidly reached the conclusion that Israel had faked his suicide. When noti"ed, Judge McMahon was enraged. The U.S. Marshals were called in and told to make Israel a top priority. Far from drifting into obscurity, Sam had put himself on front pages all over the world. The audacity, the lack of remorse, and the sheer contempt he’d displayed seemed to capture Wall Street in the gilded age. The words “Suicide Is Painless” written on the hood of the Envoy seemed like a taunt.
Sam’s whereabouts became a subject of intense speculation in the press and on Wall Street. Was he in Cape Town? Thailand? Timbuktu? “The Search for a Missing Trader Goes Global,” the New York Times reported on June 14, 2008. The melodrama of a disgraced "nancier leaping to his death gave way to the mystery surrounding a Wall Street fraudster who’d gone on the lam. Sam was a tabloid star.
Once again, Sam had the world fooled. While the marshals scoured the planet, Sam had remained close to home. After picking up the camper, he’d made a short drive to a run-down campground in Tolland, Connecticut. Realizing that he hadn’t planned thoroughly, Sam set about attending to the details of making his new identity more authentic. He swapped his license plates with those of another camper. He went to the local department of motor vehicles and got a driver’s license application. After a couple of weeks, he relocated to a campsite in western Massachusetts, intending to return for his driving test in a few days.
“I didn’t try to avoid people,” Sam said. “I was friendly, open. I was like my old self again—the real Sam Israel. I grew a beard and let my hair go. When people asked what I did for a living, I said I was a consultant. If they asked what kind of consultant, I’d ask what kind of consulting they needed, as a kind of joke. It was going well. I had one close call when there was a roadblock with the police, and I got scared as shit. But overall I was "ne. I was free and clear. The FBI and the marshals had no clue where I was. They had zip, nada, zilch.”
The FBI continued to question Debra Ryan. She truthfully said she had no idea where Sam was. Then she wondered aloud if Sam had met up with the CIA asset Robert Booth Nichols. She wasn’t serious. But the FBI took the suggestion deadly seriously.
Con"dential FBI "les described Nichols as armed and dangerous. If Sam was with him, then he also had to be considered armed and dangerous. The change put Israel in an entirely new kind of peril.
“One night I was in the camper watching America’s Most Wanted on TV and there was my face on television,” Sam recalled. “I knew it was bad. There was a big storm that knocked out the signal and I was sitting in the dark. I couldn’t believe that they’d put me on TV. There were murderers and rapists and terrorists on the run. They were going to put me on the FBI’s Most Wanted list? It was terrible. But on the other hand, I wasn’t too worried. The picture on TV didn’t look that much like me.
“The next day I came across an article in the newspaper about Debra. She’d been arrested. I saw her face in the paper—the look in her eyes, how scared she was. That was when I knew I had do something.
I couldn’t possibly let her take the hit for me. I loved her. I couldn’t hurt her. But that didn’t mean I had to turn myself in. By then I was so twisted, I "gured if I just killed myself—if I just ended it all—they’d let her go. My prognosis was awful anyway. I had my suicide pack—the morphine tablets and the fentanyl patches.
“I left a note in the camper and drove the scooter to a deserted area a few miles away from the campground. I found a cul-de-sac where there were no houses around. I walked into the woods. There was a covered footbridge leading over a small river. It was heavily forested so I got lost pretty quickly. After a while I found a small clearing overlooking the river just above a set of rapids. It was beautiful. I’d brought a couple of packs of cigarettes. I sat there smoking and thinking from noon until the sun started to set. It was misty at twilight, overcast. I knew it was time for me to go. But there was something about the act of putting pills in your mouth, knowing that you’re going to die—if you believe in God, like I do, it means that you know you’re not going to be with God. It was tough. But I was in an untenable situation. So I did it. I took the pills. I took my own life.
“At two in the morning I regained consciousness. Or I thought I did. I wasn’t sure. It was pitch black—complete and total darkness. I looked around and wondered if this was it—if this was the afterlife. Then I heard the sound of the rapids and the river. I realized I wasn’t dead. Or I thought I wasn’t. I was freezing because I was only dressed in a T-shirt and shorts. I started to shake and chatter. I was hypothermic. I had to leave.
But I couldn’t see where I was going. I couldn’t see my own hand in front of my face. I started to stumble through the woods. I was tripping and falling and getting cut by branches. It was terrifying.”
By dawn, Sam had made it back to the trailer park. The camper wa
s squalid, the #oors littered with dirty clothes, over#owing ashtrays, scraps of food and paper strewn everywhere. When he lay down to rest he threw up the opiates he hadn’t digested. He was now out of pain medication. He’d lost the means to end his life—as well as the means to make life bearable.
“I "gured God didn’t want me to die for some reason,” Sam said. “So I had to deal with the situation. Like Hunter Thompson said, ‘Buy the ticket, take the ride.’ I had to see what was going to happen in my life. I didn’t know if it was something good. Or something bad. I had to "nd out. I had to man up and turn myself in. I had to "nd what my purpose in life was now going to be.”
Sam drove the scooter to the nearest village. The police station was closed. He drove on to the town of Southwick. It was still morning. He sat outside and smoked a "nal cigarette. Then he entered to find a clerk behind a glass window.
“My name is Sam Israel. I’m a federal fugitive—a wanted man.”
The clerk looked up, skeptically. “You dangerous?” he asked.
“No, I’m white collar,” Sam said.
“Let me get a couple of guys from downstairs to talk to you,” the clerk said.
“Please do me one favor,” Sam said. “Please don’t call the press.”
The clerk looked at Sam like he was bragging, or lying, or crazy.
When two police o$cers arrived at the desk, Sam repeated his name and the fact that he was a fugitive. They clearly thought Israel was a nut. One of the policemen typed “Sam Israel” into the computer.
“Holy shit!” he said. “Everyone wants you.”
By the afternoon FBI Special Agent Carl Catauro and his partner Kevin Walsh were in Southwick to take Sam into custody.
“No matter what happens to me, every day is going to be better than living like this,”
Sam told them as they placed handcu!s on his wrists. “I don’t have to lie anymore. My conscience is free. I’m free at last.”
Epilogue
In September of 2008, I met Sam Israel for the !rst time at Valhalla State Prison outside New York City, where he was awaiting sentencing for absconding. As Sam was led into the visitors’ room wearing an orange inmate jumpsuit, it was evident how hard prison life had been on him in the weeks since he’d turned himself in. He tried to carry himself with an air of jailhouse bravado, but he appeared dazed and confused. The day before, he’d broken his hand in a !ght. Denied painkillers for his back, he’d been given psychotropic medications that badly slurred his speech and dulled his thoughts. Still, there remained a glimmer of the prankster in his eye. On the wall there was a sign saying, “Absolutely no gum or candy in this area.” As we sat alone in an interview room, Sam pulled a couple of FireBall candies from his pocket and handed me one with a wink. The act was classic Sam, I’d come to learn: devious, de!ant, impossible not to like, a boy who’d never really grown up.
I had come to discuss with Israel the idea of writing about his fraud at Bayou—at the time one of the largest in the history of Wall Street. But he told me there was another story—a story that would blow my mind. Sam took my pen and wrote the words “The Last Circle” in my notebook. He told me about Robert Booth Nichols, the CIA asset who’d been his “handler” in Europe. Then he drew a diagram to illustrate how the shadow market worked. The Federal Reserve was bankrupt, Sam said. The American !nancial system was an elaborate Ponzi scheme. It was just a matter of time until the scale of the deception on Wall Street was revealed.
Three weeks later, the global !nancial crisis struck. Sam wasn’t surprised by the catastrophic crash. Nor was he surprised by the collapse of Bernard Mado"’s multi-billion-dollar hedge fund and the many mini-Mado"s that followed. Sam was sure that there were hundreds—if not thousands—of hedge funds that were Ponzi schemes but that few would ever get caught. Countless !nancial advisors were lying about the returns they were getting on their investors’ money, Sam said, from small-time scammers in strip malls to hedge fund heroes in the skyscrapers of Manhattan.
At the time of Sam’s arrest, Bayou had been described by prosecutors as a $450
million fraud. But the number had been grossly in#ated, in much the same way the dollar value of drug busts are exaggerated to make law enforcement look good. The real loss was not much more than $75 million, if the exorbitant legal fees of $30 million for the bankruptcy attorneys were taken out. Putting money into Bayou, it turned out, really amounted to a bad investment. But such was the fate of many investments in the lost decade as people discovered the houses and shares they’d bought weren’t worth nearly as much as they’d imagined. In fact, if investors had kept their money in Bayou until the crisis of October 2008—if Sam had been able to keep the fraud alive long enough—the fund would have outperformed the S&P.
In 2009, Sam received an extra two years for absconding. Debra Ryan received three years’ probation for abetting Sam’s escape.* To serve his twenty-two-year sentence, Sam was sent to a federal prison in Butner, North Carolina, the same facility where Mado"
serves his time. Still plagued by back problems and inadequate medical care, Sam has made the best of the situation. For pleasure, he plays in a few jam bands and follows the stock market—like many of his fellow inmates. “Everyone thinks they’re a trader in prison,” Sam told me. “They all think they have a program to trade foreign exchange, or the stock market. Everyone’s got a system—some edge that’s going to let them kill the market. They have no idea how hard it is to really be a trader.”
Dan Marino is housed in a penitentiary in Kentucky. Marino’s bitterness about his plight is heightened by his estrangement from his family and lack of connections to the outside world. As I completed this book, Marino e-mailed me to say he’d met another inmate who had access to the shadow market. “His company is building a pipeline in Russia,” Marino wrote. “He says the bonds are very real. He uses many of the same terms Sam used. He says part of the pro!ts have to be used for humanitarian purposes.
He says the CIA uses the process to support black ops. He wants me to be the broker for the next trade, when he is released next month. I am not sure what to make of this.”
I sent Marino a copy of The Myth of Prime Bank Investments. Still an obscure, rarely prosecuted crime, prime bank fraud continues to mutate into new forms and claim new victims, from high–net worth Babbitts to get-rich-quick dreamers. As I discovered on my trips to Europe to report this book, the bond promoters Sam had encountered continued to deceive people who believe in the myth of high-yield investments. When I met the ODL broker Tim Conlan in London, he told me that he was working on transactions that involved “paper” that was going to fund projects in eastern Europe. Conlan had been trying for years to make a trade—and had never succeeded, to his continuing mysti!cation. He said that Philip Winsler-Stuart—one of the brokers involved in the ODL initiatives—had succeeded in making a trade. “He’s retired to the Caribbean,”
Conlan said with evident envy. “He actually did the transactions in the shadow market, so he has been able to move to the islands.”
As further proof of the wretched lure of the shadow market, George Katcharian had earned a place on the Most Wanted list in the United Kingdom for investment fraud.
One victim lost nearly $20 million. In April 2012, Katcharian was captured and returned to the United Kingdom to face charges in a case involving more than $30
million. The attorney Jan Heger has also !nally been stopped. In 2008 Heger was charged with fraud for promoting investments in nonexistent gold mines in Ghana—a scheme much like the one he tried to get Sam to invest in. Heger had stolen nearly $1
million from his clients—a sum that didn’t include the money he scammed from Sam.
Heger ran from the law but was arrested in Bangkok and extradited to the United States.
In June of 2009, two Japanese nationals were stopped crossing from Italy into Switzerland carrying a false-bottomed suitcase containing $134.5 billion in Federal Reserve bonds. Law enforcement declared the bonds to
be phony. The New York Times ran an article titled “Mystery of Fake U.S. Bonds Fuels Web Theories.” But Sam believed that the bonds were real. It was how the world economy actually functioned as nations transferred sovereign wealth hidden in Swiss vaults. He told me that he had been o"ered the same bonds. They were authentic, Sam said, but the Fed claimed they were frauds because it wasn’t willing to honor obligations undertaken decades earlier and now lost in the pages of history. The Japanese men were never charged with a crime and the Italian authorities refused to identify them, or reveal what came of the bonds—only underscoring the mystery of Yamashita’s gold.
Which led to the !nal mystery of the Octopus. Under an agreement negotiated with the government Robert Booth Nichols was supposed to surrender $5 million in cash in February of 2009. That month Nichols was in Switzerland, accompanied by an old friend of Sam’s from Wall Street who had fallen under his spell and handed over $1
million to the con man for a dubious investment in a water puri!cation plant in Alabama. The purpose of their trip can only be guessed at. But not the outcome.
According to the o$cial report, Nichols died from a heart attack in his !ve-star Swiss hotel room. It appeared that decades of smoking and drinking had !nally caught up with the sixty-four-year-old man. But the timing was suspicious, as were the circumstances. There was also a blow to Nichols’s head, for example. And Sam’s stockbroker friend had arranged for Nichols’s remains to be immediately cremated in Switzerland—an act that triggered still more conspiracy theories. The FBI obtained a death certi!cate from the Swiss authorities, legally putting the matter to rest. But did the spy really die? When I contacted Sam’s friend to ask about Nichols’s sudden demise, the man’s voice trembled with fear. He begged me to not include his name in this book.
Nichols had terri!ed him. The Octopus had terri!ed him. Nichols “died” as he lived: shrouded in mystery.