The Wall Street Journal reports that Daniel Marino, who founded the Connecticut hedge fund firm with Samuel Israel III, pleaded guilty to felony counts of conspiracy, investment advisor fraud, mail fraud, and wire fraud.
As part of his plea agreement, according to the Journal, Marino agreed to forfeit all claims on $100 million in Bayou assets seized by Arizona authorities in May (See CT Unveils Hedge Fund Commission ), as well as his $3 million home in Westport, Connecticut , a bank account, and all interests in two side businesses – IM Partners, a venture capital firm he started with Israel, and IMG LLC.
In a civil suit filed September 1 by US Attorney David Kelley, it is alleged that the company had “overstated gains, understated losses, and reported gains where there were losses” since 1998 (See Bayou Funds Sued For Fraud ). The suit also claims Bayou created a bogus accounting firm, Richmond-Fairfield Associates, to certify its false financial statements.
In a six page “suicide note and confession” found on Marino’s desk by an investor, Marino details the fraud in a year-by-year account and confirms the creation of the bogus accounting firm.Israel III is expected to also plead guilty.
Separately, the Securities and Exchange Commission on Thursday brought civil charges against Israel and Marino.
The SEC said it alleged that beginning in 1996 and continuing to today, “Israel and Marino have defrauded investors in the funds and misappropriated millions of dollars in investor funds for their personal use.” The Commodities Futures Trading Commission is expected to also file lawsuits in the alleged fraud, a law enforcement official said, according to WSJ.