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The Ballad of Sam and Phil

Two long-running dramas in the futures industry came to an end in July when former Refco CEO Phillip R. Bennett was sentenced to 16 years in prison for his role in the fraud that resulted in the bankruptcy of the giant commodity brokerage firm in October of 2005. Bennett was facing 130 years in prison for his role in the series of round trip loans used to hide $430 million in losses. He pleaded guilty to all counts and is helping prosecutors locate assets on behalf of Refco creditors.

Meanwhile, in upstate New York, Sam Israel III went on the lam rather than begin serving a 20-year sentence for his role in the Bayou hedge fund frauds. Three weeks after he faked suicide, Israel turned himself in to officers in Massachusetts.

"It was interesting how differently the two matters were handled," muses David A. Kettel, a partner at the law firm of Venable LLP and a former assistant U.S. attorney. The government set a very high bond for Bennett, including his Park Avenue penthouse, a house in New Jersey and millions of dollars. Six other people signed on as sureties, Kettel says. Bennett offered to cooperate but failed to work out a plea agreement.

On the other hand, Israel was never indicted, pleading guilty to 'an information,' that the U.S. attorney then signed off on. Kettel says this early cooperation likely contributed to the prosecutor's sense of security and contributed to the relatively low $500,000 bond Israel posted. Having had $100 million taken from an account at Bank of America and being ordered to forfeit $450 million, $500,000 simply wasn't enough to make Israel turn himself in, Kettel says, adding that defendants in much smaller cases have had to post much larger bonds and secure them with personal property or other assets. In addition to the original 20-year term Israel was supposed to begin serving, he now faces the possibility of 10 additional years in prison.

The suicide ruse was ironic as the Bayou fraud was revealed after investors found a suicide note/confession from Bayou CFO Daniel Marino at the Bayou offices in Connecticut after Bayou abruptly closed the fund. In January Marino was sentenced to 20 years and ordered to immediately begin serving his sentence. He was unavailable for comment.

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